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The Tourism and Catering Industry – Sector overview

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The Tourism and Catering Industry – Sector overview Serbia

1.     Introduction

1.1.   Brief history of the sector

The tourism and catering industry is highly influenced by global trends characterized with worldwide competitiveness, increasing use of high technology, and high importance of promotion and marketing. Tourism is among the top 5 industries in the world, and the top service industry in the world, based on the worldwide turnover of all service industries. Since it is labor intensive, tourism is the largest employer in the world. It is characterized by a high percentage of small and medium enterprises. The world tourism industry in 2003 was worth $514.4 billion, with Europe having the largest portion with $281.9 billion. Central and Eastern Europe participates with only $25.5 billion.

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Although former Yugoslavia was in the group of 25 leading tourist destinations in the world, Serbian foreign tourism was never much developed. In 1989 it absorbed only 3% of total foreign guest nights in Yugoslavia. In the same period Serbia captivated only 12% of the total number of guest nights in Yugoslavia, with the majority of them being domestic tourists.

During the 90’s, due to war, political turmoil and a negative image of Serbia, foreign tourism drastically eroded and completely stopped at one moment. Domestic tourism was reduced significantly for the same reasons.

With the democratic changes in 2000, the number of foreign tourists is increasing steadily. With an increase in living standard of Serbian residents, domestic tourism started with a rapid increase.

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1.2.   Importance of the sector, GDP, export, employment

Serbia’s GDP in 2003 according to World Bank[1] estimates was $19.2 billion. Real GDP growth rate estimate was 3%. Production growth rate in 2003 recorded a fall of 3% from 2002, for the first time since 2000. Serbia’s foreign trade deficit was $4.5 billion, with $3.4 billion of total export and $8 billion of total import, according to official statistics.


Total employment, according to official statistics was 1,611,632 in 2003. The official unemployment rate in Serbia for the last 3 years was around 30%. It is expected that the real unemployment is much lower, around 15%, due to the grey economy which is not registered by the official statistics. The real employment is different than the official because of employment in the grey zone. The grey economy has a decreasing trend as a large number of private companies started registering their employees due to labor market control.

The tourism and catering industry’s importance in the overall economy is medium to low, based on official data. However, official industry statistics are not based on the Tourism Satellite Accounts (TSA) method which takes into account all areas affected by tourism and catering such as transportation, entertainment, retail, museums, rent-a-cars etc. Therefore, according to official statistics in 2003, the tourism and catering industry participated with 3% in the GDP of Serbia and accounted for approximately 3.43% of total employment. Tourism and catering share of total GDP, based on the official statistics, shows an increasing trend in the period 1998-2002.

The two most important indicators for measuring the tourism and catering industry are guest nights and arrivals. The total number of guest nights in 2003 was 6.7 million, out of which only 12% were realized by foreign guests. Total guest arrivals in 2003 were 2 million guests. From this total number of guests only 17% were foreign guests. Therefore, this is the main indicator that Serbian tourism is dominated by domestic tourists. However, the increasing trend of foreign tourists as a share of the total number of tourists is visible, as the number of foreign tourists almost doubled in the period 2000-2002.

The Serbian trade balance for the tourism industry at the end of 2003 was positive, at $16 million, with exports at $158 million and imports at $143 million, according to the Ministry of trade, tourism and services. Even though tourism in Serbia is still in a nascent phase, this is one of the few industry sectors that recorded a trade balance surplus. This is mainly due to the large number of business travels, and to the fact that the ability of Serbian citizens to travel abroad is limited with their low purchasing power. The official statistics does not take into account domestic tourist traveling abroad independently (not through travel agencies) and foreign and domestic tourists who stay in unreported accommodation capacities. The total export of services in tourism has recorded a tremendous increase in the period1999-2003, and reached $160 million in 2003, according to official statistics. One of the reasons why it doubled each year from 1999 until 2003 is a very low starting position of tourism exports and the lack of foreign tourists during the 90’s because of sanction, political turmoil and war conflicts.


The total number of officially registered tourism and catering companies in Serbia in 2003 was 3,782. From the total number of registered companies, 258 were state owned, 3,321 were private and 190 were mixed companies.


In 2003, employment in tourism was 25,143 and in catering it was 30,166 employees, according to official statistics. With the improvement of rural and mountain tourism, there are strong potentials for employment or extra-income increase in rural areas. Only a small share of total employment in tourism is not officially registered. It is expected that, with the pending privatization, the number of redundant employees will increase. However, it is expected that the industry will be able to absorb these to some extent.


2.     Company and investment analysis


2.1.   Main breakdowns into sub-sectors and description

The Serbian tourism industry is officially divided into the following two sub-sectors:

  • Tourism (travel agencies and other services)

  • Catering which includes

    • Accommodation services and

    • Food services.


Besides the afore mentioned sub-sectors there are a number of other industries affected by tourism, that are not officially included in the tourism and catering industry, such as transportation, cultural manifestations, museums, galleries, retail etc. 


In addition to the previous industry segmentation, tourism can also be divided, based on thematic tourist attractions, into: urban tourist centers, mountain resorts, spa resorts, cultural heritage, cultural events, hunting etc. These are also the main industry products offered to tourists.


Tourism relates to the sale of travel packages to customers – tourists and groups of tourists, by tourist agencies and tour operators. Tourist agencies (so-called “sub-agents”) do not organize travel packages, but only sell packages organized by tour operators. On the other hand, tour operators organize travel packages and sell them to both tourist agencies and tourist.


Accommodation covers hotels and other types of accommodation like motels, campgrounds and lodging (renting private rooms). Hotels in Serbia include hotels in cities, spas and other hotels. The hotel star rating system is not harmonized with international standards. The quality of hotels, motels and lodging is generally poor compared to international standards. Approximately 70% of hotels are with three and less stars. The majority of hotels were built before 1985 and only a small number of hotels managed to improve their quality and facilities, but only in a fraction of their facilities (usually renovated several rooms, one floor, etc). However, several new quality hotels have been built recently, and it is expected that significant funds will be invested in renovation of newly privatized hotels over the next year. In Serbia there are only two hotels, the Hayat Regency and Hotel Mladost – Best Western, which are members of multinational hotel chains, and are officially certified to reflect the quality of those brands.


Food services include restaurants, cafes, buffets, bars, fast food shops etc. They offer a variety of food services while some of them are specialized in only serving beverage and alcohol like bars and cafes. Private ones are usually modern and with quality equipment, but many still have patchy service quality standards rendered.


It is worth mentioning, according to tourist attraction segmentation, several important attractions which are the main tourist destinations i.e. tourist products: urban centers- Belgrade, Novi Sad and Nis, mountain resorts- Kopaonik and Zlatibor; spas Vrnjacka, Niska, Mataruska; nature- Dunav river cruises; cultural events- Exit, Dragacevska truba, FEST, Belef, Bemus; hunting sites- Deliblatska pescara etc.  


2.2.   Structure of the sector, size distribution of firms, dominators, private or public

The tourism sub-sector is characterized with a large number of small tourist agencies and tour operators, while only one tour operator is a large company. Only 11 tourist agencies/tour operators are actively involved in the export and sale of domestic tourism to foreigners. Others are oriented towards selling foreign destinations and domestic destination, both to only domestic customers.


In 2003, the total capacity in Serbian tourism industry was 95,634 beds, out of which 46,393 in hotels and motels, and 39,241 of other types of accommodation. In the case of other types of accommodation, the largest share belongs to rented private rooms. Further capacity breakdown of this industry is: 261 hotels with 34,661 beds; 91 motels with 4,377 beds; 22 spas and health centers with 6,404 beds. Spas and health centers are identified independently from hotels because of the legal framework under which they operate (for details on spas’ legal issues see section 3.4). Majority of hotels are state owned. They are parts of large state owned companies, or independent state owned enterprises. The privatization process related to hotels in Serbia faces many challenges, which is why there are significant hotel capacities that are still state owned (for detailed explanations see section 3.4). There are no hotel chains, except for the two hotels: The Hayat Regency Hotel Belgrade and The Best Western which recently acquired Hotel Mladost. Only approximately 10% of total capacities are in the grey zone and they are mainly located in rural areas.


In 2002, according to official statistics, there were 2,232 restaurants, 3,315 cafes, 3,025 buffets, 2,533 nightclubs etc. The majority of them are privately owned. State owned restaurants and cafes are usually organized as restaurant chains.


Tourist attractions segmentation on spas, mountains, and other attractions is actually the basis for packaging of tourist products.


Serbia has 53 thermal localities with more than 1,000 sources of cold and hot mineral water. Since 2003, the Association of Serbian Spas, which encompasses 26 municipalities with 50 member entities, is a member of the European Spas Association ESPA.


There are 16 mountains for sports, recreation, relaxation and nature tourism. Mountain resorts’ capacity is 21,280 beds. Kopaonik, the major ski resort, has 44km of ski trails and 20 chair lifts. Also, there are five national parks: Djerdap, Sara, Kopaonik, Fruska Gora and Tara; eight nature reserves; and ten caves. In addition to this, numerous villages offer rural tourism experiences.


Major administrative centers are Belgrade, Novi Sad, and Nis and their capacity is 11,809 beds. Belgrade and Novi Sad are also major urban tourist centers with variety of cultural events, cultural heritage, festivals and interesting night life. Tourist packages offering visits to these two main urban centers are called “city breaks”.


2.3.   Main competitive advantages and disadvantages

The main advantages are:

  • Strategic location on the crossroads of Europe and Asia; and East and South Europe and ease of packaging with other nearby destinations

  • Naturally friendly and helpful people

·         Many natural and cultural resources potentially valorised through tourism (lakes, mountains, Danube river, long and turbulent history, etc.)

·         World trend in growth of special interest tourism segments which Serbia can offer (spas, bird watching, skiing, faith tourism, hunting, etc.)

·         Value for money services and shopping at international standards

·         Many international air routes and existence of national carrier

  • Historically a convention center of Europe (potential for re-establishing the high-yield segment of business tourism)


The main disadvantages are:

  • Lack of top European and international attractions

·         Pollution of the environment and poor facilities such as toilets

·         High air fares and lack of charter flights/low cost airlines

  • Lack of trained and skilled staff at all levels

  • Limited understanding of competition and its impact

  • Weak standard of service generally, lack of customer and market oriented business thinking

·         Inadequate quality of hard and soft infrastructure (roads, road signage accommodation capacities, convention/conference centres of international quality, information and reservation systems for visitors)

·         Generally low standard of accommodation from an international perspective, and shortage of appropriate accommodation for visitors

  • Negative image due to recent past (political turmoil, war)

  • Lack of clarity and unified vision about how Serbia wants to position itself

·         Slow privatization process in tourism industry


2.4.   Investment environment, events, trends, incentives

The investment environment in the tourism and catering industry is strongly dependent on the country’s investment environment and the sector’s investment environment.


Transition countries’ experience shows a cyclical character of structural reforms in their economies. Serbia and Montenegro is a country in transition, experiencing the same pattern during the last 4 years. In the first 3 years of democratic changes the country was on the fast track of structural reforms. In 2003, European investors ranked Serbia among the top 25 investment opportunities globally.[2] Although the political changes in 2000 have led to reintegration of Serbia in the international community, a large bulk of structural reforms are yet to be undertaken.


The investment environment in Serbia is showing positive signs. The country has secured Standard & Poor’s single B+ long-term credit rating and a B short-term rating.[3] One of the main positive sides of the Serbian investment environment is a stable monetary policy and ongoing compliance with the IMF country program.


Major laws which will foster investments in Serbia have been passed, such as the new Company law, Bankruptcy law, Labor law. New Law on business registration will reduce the time for registration of companies from 44 days to only 5 days and introduce online registration. The Serbian reform oriented labor law is one of the most liberal labor regimes in the region. Additionally, Civil procedure act and Law on enforcement procedure will speed up court procedures.


Serbia is among the countries with the lowest corporate profit tax rate in Europe with 10% profit tax rate. Main incentive for investing on this market is its favorable location regarding proximity to EU markets, regional SEE free trade zone and free trade agreement with Russia, coupled with a tax holiday for a period of five and ten years depending on invested amount, tax credits, carry forward of operational and capital losses for ten years. For details on foreign investment incentives see Appendix 1 – List of investment incentives.


Serbia has a favorable strategic position in the center of the SEE Free Trade Area with its 60 million consumers. Besides Southeast Europe, a free trade agreement is also in affect with the Russian Federation, enabling duty-free access to a market of 150 million consumers. Located on the intersection of major transport corridors, it is connecting the EU, South East Europe and Asia, by air, rail, road and water.


GDP in Serbia and Montenegro is showing a positive trend. EBRD[4] projections for Serbian real GDP growth rate in 2004 are 5%. It is a positive sign that recession in Serbia and Montenegro and trend of decreasing growth is over. In 2003 real GDP growth rate was 3%. At the same time inflation for 2004 is expected to be in low double digits (around 13%), exceeding projected limits mostly due to growth in oil and metal prices on the world markets, but also to budget deficit and growth in salaries. In 2003 Serbia had $1.36 billion (current price) of net foreign investments[5].


State owned hotels have strong potential for investments in their privatization. However, there is a major problem related to restitution to former owners, and related nationalization of those hotels, that the state has not resolved yet. Also, hotels which are part of large socially owned companies cannot be privatized individually, but those companies must be firstly restructured prior to their privatization, or the authorization from the relevant ministry for their privatization must be obtained.


Some of the major Belgrade hotels like Hotel Moskva, Hotel Majestic, and Hotel Balkan have a strong potential for investments. The majority of their shareholders are small shareholders and minority is in state ownership, which makes them very good acquisition targets.


In recent years an increasing trend of small private hotels and lodging facilities is visible, with a strong potential for further development.


With an aspiration to foster tourism development in Serbia and build a Serbian brand in tourism, SEDP works closely with Tourism Organization of Serbia, tourist associations and a large number of industry players. As the result of this cooperation, SEDP funded and conducted a Product development strategy – an overall framework for the development of 5 tourism products: congress tourism, spas, wine and food tourism, and two pilot cases in eco tourism. In addition, research on customer perceptions on 3 key markets for Serbian tourism is expected to be finalized by the end of February 2005: domestic, British and German markets. SEDP financed a study on hotel investment opportunities in Belgrade.  SEDP cluster specialists provided support to tourist organizations in their joint exhibit at the World Travel Market fair. At the moment, SEDP experts are building a new website for Tourist Organization of Serbia which will be introduced soon. There is ongoing communication with cluster members and targeted cluster meetings to discuss burning topics.  Another aspect of SEDP efforts is oriented towards convention tourism development. The idea is to establish a Convention Bureau of Serbia, which would promote the lucrative sub-segment of convention tourism in Serbia and would become a member of the International Congress and Convention Association (ICCA), IACVB etc.


With the increase in living standard, domestic tourism is expected to continue with its increasing trend. Also, with the improvement of Serbia’s image and promotion of Serbia as tourist destination, it is expected that the number of foreign tourists will continue to increase in the future.


Main incentives for investing on this market are the quality natural resources, particularly spas, beautiful sceneries and uninhabited nature, and cultural heritage. In addition to increasing numbers of domestic tourists, Serbia has a favorable location regarding its proximity to EU markets and potentials for attracting foreign and particularly European tourists.


2.5.   Foreign players

Foreign players in the case of tourism are foreign investors in Serbian tourism and foreign destinations offered to Serbian tourists. Currently there are no significant foreign investments in Serbian tourism. Foreign destinations and the number of Serbian tourist traveling abroad have a considerable share of total Serbian tourists. It is expected that in the future, overall influence of foreign players on Serbian tourism market will strengthen, through an increase in foreign investments in tourism facilities and to some extent domestic tourists traveling to foreign destinations, which is dependant on their living standard.


Large international hotel chains do not have a strong presence in Serbia yet. However, with the regulation of legal issues related to privatization of large state owned companies, which have the ownership over a significant number of Serbian hotels in privatization, and the regulation of land ownership issues, an opportunity for large investments in tourism sector will materialize. So far, only two hotel chains, The Hayat Regency Hotel, Belgrade and The Best Western, opened hotels in Serbia. A construction company, The Grading Invest, which is currently building The Ivanium Center with 40 rooms plus business center in downtown Belgrade, is exploring the potential international hotel chain companies which would be interested to manage the Center. 


Additionally, only two foreign hotel investors, besides afore mentioned hotel chains, invested in hotels in Serbia. One of them is the Israeli-Serbian joint venture constructing a 200-room luxury hotel near Kalemegdan, and the second is a foreign investment in The Le Petit Piaf, a four-star hotel with seven rooms located in Skadarlija. It seems that two additional hotel projects will be constructed in the New Belgrade area.


The only foreign investment in tourist agency/tour operator in Serbia was the privatization of the largest Serbian tour operator The Putnik Company in addition to The Srbija Turist Company.  They were privatized by The Uniworld Company from the USA.


3.     Input markets and production


3.1.   Raw inputs, access, reliability, quality, logistical issues

The tourism industry has a high quality of natural resources which is the main input and starting point for the development of domestic tourism. There is a large number of different natural resources that can be further developed such as thermal resources for spa tourism; mountains with beautiful sceneries for winter tourism, as well as for hiking, biking and other active sports; rivers and untouched nature for rafting and camping etc.


Although the quality of natural resources is very good, their access is questionable particularly in rural areas. Serbia needs to further develop its transportation infrastructure, particularly road and rail infrastructure.


3.2.   Human capital and labor costs and issues, knowledge base, management, faculties

The tourism industry has a sufficient labor force, but only in number, and particularly in rural areas where it is usually a source of extra income. However, the problem in tourism is a lack of quality labor force, particularly outside large urban centers. Depending on the location and educational level, there is a problem of foreign languages knowledge.


The official net average salaries in 2003 for hotels and restaurants were CSD 7,991 (approximately EUR 110) and CSD 13,326 (approximately EUR 190) for travel agencies monthly. However, the net average salary for hotels is approximately EUR 170 and for travel agencies is approximately EUR 220 monthly, data based on interviews with industry participants. This discrepancy is largely due to the grey economy.


A large number of educational centers for tourism exist in Serbia. However, their knowledge needs to be updated and improved, particularly the knowledge of foreign languages as well as the development of customer centric trainings and on-site training programs.  


3.3.   Technology and state of the asset base

Technology and state of the asset base in Serbian tourism needs much improvement. There is a strong need for the introduction of more comprehensive online information systems and online booking through the internet, which does not exist in Serbia, to some extent due to restrictive banking procedures.


The majority of hotels does not have a computer booking system for booking reservations but rely on telephone, fax or e-mail reservations. On the other hand, all hotels use computers. The majority of hotels’ asset base is of poor quality, with investments performed 20-30 years ago. The star rating system is based on domestic standards, and does not fulfill the criteria of most international star rating systems. During the last five years, hotels were refurbished in segments, usually several rooms, a floor or a dining room etc, due to a lack of funds. However, private hotels are usually very well equipped, with modern and well furnished facilities.


Generally, restaurants are much better equipped than hotels and their service is much better. The main reason for that is because they are mainly privately owned.


3.4.   Regulatory and intellectual property issues

A number of regulatory issues are related to the adoption of Law on tourism which is in the procedure at the moment. This Law will regulate all major regulatory issues in tourism such as the obligations of the organizers of travel tours, the insurance of the travelers and travel packages, special requirements for tourism activities that should be met by business associations, the funding mechanism for subsidies in tourism, the regional organization of the tourism industry, etc.


Besides the general importance of the Law adoption for the tourism industry, it will also be a precondition for the adoption of many by-laws as well as the adoption of a globally harmonized star rating program for accommodation of visitors.


Along with the necessary introduction of a star rating system, a quality system related to the quality of service rendered, tidiness and fulfillment of other customer requirements also needs to be introduced and implemented.


A major regulatory issue is related to the privatization of hotels. The restitution to former owners, for hotels nationalized after the World War II, has to be resolved. This problem has not been resolved yet. Also, hotels which are a part of large state owned companies cannot be privatized individually, according to the current legal regulations. State owned companies must be firstly restructured or an authorization has to be obtained from the relevant Ministry, in order for the parts of the company, like hotels, to be sold separately.


There are two regulatory issues related to spas. Firstly, spas are built on thermal water sources, which are actually natural resources, for whose exploitation necessary approval from the state, such as concessions, needs to be obtained. Also, for Greenfield investments on these sites the same authorization must be obtained. The second issue is related to rehabilitation centers which are under the authority of the Ministry of Health. Therefore, their authorization for the privatization of those centers must be obtained, in the case that the pending Law on Spas even allows their privatization.


A major regulatory issue related to hunting tourism is the fact that Serbia and Montenegro is not included in the EU “third countries list” permitting the import of game meat. As a consequence, the illegal export of game meat from Serbia is widespread. SEDP assisted the Serbian Tourism and Hunting Associations in initiating a procedure before the Ministry of Agriculture for the initiation for enclosure of Serbia and Montenegro into the EU third country list.


3.5.   Investment patterns (recent acquisitions, ownership structures in Serbia and globally)

The majority of acquisitions in tourism sector in Serbia were privatizations of small and medium hotels, which were usually performed by domestic investors. Foreign investors, particularly branded foreign hotel chains were reluctant to invest in either Greenfield of Brownfield investments mainly due to unresolved legal issues (for details on legal issues see section 3.4).


Greenfield investments in tourism sector are mainly located in Belgrade. One of them is Le Petit Piaf, a four-star hotel with seven rooms located in Skadarlija. Another Greenfield investment, which is in the construction phase, is a 200-room luxury hotel near Kalemegdan. In addition to this there are two potential hotel projects in New Belgrade by different investors. The Hayat Regency Belgrade was constructed in 1989 as a foreign Greenfield investment. The two major domestic Greenfield investments The Aleksandar Palace and Ivanium Center, which is under construction at the moment, are located in downtown Belgrade.


Several Brownfield investments in privatization of hotels have been performed in Serbia so far, while there were only few privatizations of tourist agencies/tour operators. The Best Western hotel chain acquired Hotel Mladost in the process of privatization. The Midland Resources, a private equity company, acquired The Stari Grad Company, a restaurant chain in privatization, including the hotels Casina and Park. Besides a number of small hotels which were privatized by domestic investors, Hotel Izvor, which is located in Arandjelovac spa center, Belgrade hotels Sumadija, Royal and Union, Hotel Park in Novi Sad and Morava Hotel in Cacak, are major ones. The largest privatization amongst tourist agencies/tour operators, which also includes several significant hotels (hotel Putnik in New Belgrade and one in Kopaonik) is The Uniworld Company, a US tour operator, investment in The Putnik Company and The Srbija Turist Company.  This privatization is under dispute at the moment due to alleged unfulfilled contract obligations by the acquirer.


4.     Product markets


4.1.   Overview

The potential of geographical market for tourism is measured by installed capacity i.e. number of beds, quality of tourist attractions, promotion and country image, etc. Tourism is strongly dependant on promotion and marketing efforts.


4.2.   Domestic market, trends

The most interesting tourist activities for the domestic tourists are swimming, sunbathing, walking, health treatments and sightseeing. The main tourism destinations for domestic tourists are Belgrade, Novi Sad, Vrnjacka Banja, Kopaonik and Zlatibor.


The majority of domestic tourists, based on industry surveys, usually book hotel reservations themselves, and stay at a destination more than 7 days, while a smaller number of tourists stays 5-7 days.


Since the year 2000, domestic tourists have the opportunity to travel to foreign destinations which raises their expectations regarding tourism.  This is important because they will become more demanding customers on the domestic market, which will influence domestic tourism providers to increase the quality of their service.


4.3.   Export markets, current and potential, barriers and requirements to enter new markets, logistical issues, standards

In 2003 the major export markets, based on the number of foreigners’ bed nights, were from former Yugoslav countries: Bosnia and Herzegovina 12%, Macedonia 8%, Slovenia 7%. Additional export markets were Germany 7%, Italy 6%, USA 5% and 4% in Poland, Greece and Great Britain, respectively. The, majority of foreign tourists book their tours organized by one of 11 Serbian tour operators. For detailed information on inbound tour operators see Appendix 2.


The most interesting activities for foreign tourists are restaurants and nightclubs, sightseeing and cultural activities. The main tourist destinations are Belgrade and Novi Sad, interest for other destinations, other than sightseeing and excursions is less significant.


The majority of foreign tourists, according to information based on industry surveys, usually book hotel reservations through a travel agency/tour operator, and stay at a destination 3-4 days.


Existing markets have strong potentials for growth. Current attractions, such as “city break” packages, excursions and skiing, should be further developed with culture, events and festivals, nature and country side, mountain and spa resorts and other interests that Serbia has to offer. Particularly important is quality improvement in facilities and service improvement.


Markets, both existing and new ones, where the Serbian Diaspora is situated shows a significant potential for faith tourism and cultural tours.


Serbian tourism has a potential in attracting Japanese tourists with regional package tours.


Barriers for entering new markets are related to high promotion costs and the poor image of Serbia after 15 years of isolation, wars and political turmoil. The low quality of tourism products, lack of regional package tours and lack of low cost airlines, which most competing EU destinations have, are also a significant factor when entering new markets.


When it comes to logistics, transportation infrastructure in Serbia needs to be developed. Road transportation is relatively developed but needs further improvement especially in rural areas. Train transportation is slow and with a network which needs to be further developed. Serbia enjoys vicinity of major trade routes to Central Europe and to Middle East.


4.4.   Strategies

Industry players attack domestic and foreign tourist differently. When approaching foreign tourists, export oriented companies perform jointly. However, when approaching domestic tourists they act individually.


Tour operators offering Serbian tourism abroad are targeting 6 major tourist markets. They promote Serbian tourism on joint stands when they attend fairs on major target markets in Great Britain, Italy, Germany, Austria, France and Russia. In Germany and Great Britain they have a common PR agency, funded by the Tourism Organization of Serbia,[6] representing all exporters of Serbian tourism. The Tourism Organization of Serbia organizes “familiarization trips” for foreign journalists and tour operators in order for them to experience Serbia and learn about what they can offer to their tourist when offering Serbian tourism in their countries. When organizing “fam trips” they focus on niche operators, to which they offer Belgrade and Novi Sad destinations in “city break” package, excursions and skiing on Kopaonik mountain. Export oriented tour operators are constantly improving their marketing and promotion material, particularly their internet sites.


When attracting domestic tourists, tour operators and tourist agencies approach them independently. An increasing trend of PR promotion for domestic purposes is visible. Also, promotion of Serbian destinations to domestic customers is very important due to import substitution and increasing customer awareness about Serbian tourism. Domestic tourists use unions and variety of other associations’ services which offer discounted tourist destinations to their members.


5.     SWOT analysis


  • Varied scenery and landscapes with individual natural features

  • Strategic location on the crossroads of Europe and Asia; and East and South Europe and ease of packaging with other nearby destinations

·         Cultural heritage (monasteries, museums, archaeological sites); cultural assets and events (Guca, EXIT, festivals etc.)

  • Relative closeness to the target markets in East and West Europe

  • Growing Government support and recognition of tourism at the highest level

  • New Law on tourism and Tourism development strategy pending adoption

  • Main tourism institutions, e.g. Tourism Organization of Serbia, already in place and increasing coordination between public and private sectors on specific activities

  • Naturally friendly and helpful people

  • Natural openness for foreigners and Western way of life

·         Belgrade city offer especially for night time tourism

·         The largest European river Danube

·         Good active holiday facilities – particularly walking, cycling, riding, water sports, hunting, fishing and bird watching

·         Rural experiences of traditional Serbian hospitality

·         Strong regional crafts

·         Value for money services and shopping

·         Many international air routes and a national carrier

·         Potential for special interest such as spas and health tourism, and wine and food trails



  • Lack of top European and international attractions

  • Many historical monuments destroyed over time

  • Lack of attraction development and interpretation

  • Insufficient international festivals/events

·         Pollution of the environment and poor facilities such as toilets

·         High air fares and lack of charter flights/low cost airlines

·         Poor information for visitors

·         Lack of central reservations facilities for accommodation and consortia offering ease of booking to independent travellers

·         Foreign language interpretation weak – both verbal and written

·         Incomplete Tourist Information Centre network and varied branding and service standards

·         Poor co-ordination of different tourism products

  • Few professional operators educated in modern business practices

  • Lack of trained and skilled staff at all levels

  • Limited understanding of competition and its impact

  • Weak standard of service generally, lack of customer and market oriented business thinking

·         Lack of education about all of the product in Serbia amongst local people

·         Weak transport infrastructure

·         Generally low standard of accommodation from an international perspective, and shortage of appropriate accommodation for visitors

·         Shortage of conference/convention and exhibition centres of international quality


  • Negative image due to recent past (political turmoil, war)

  • Marketing efforts still under funded, insufficiently targeted and coordinated; lack of acceptance by all stakeholders of an integrated national marketing and promotion plan

  • Lack of clarity and unified vision about how Serbia wants to position itself

  • Lack of promotion of authentic Serbian experiences – cuisine, accommodation reflecting ambience, etc.

  • Lack of coordination between different Government departments (at different government levels, i.e. Republic vs. Local Governments)

·         Fragmentation and lack of coordination amongst tourism organisations

·         Lack of financial incentives for product development and improvement

·         Slow privatization process in hotel industry



  • Rise of activity (hiking, biking) and special interest tourism

  • Emergence of environmentally conscious tourism and rural tourism

  • Development of a distinctively positioned Serbian tourism brand

  • Joint marketing initiatives within region

  • Potential interest by international hotel brands

  • Differentiation and positioning of tourism themes for priority markets, taking into account competition

  • Develop, agree and articulate a clear tourism strategy with action plans that are understood by relevant government agencies and the private sector

  • Close coordination with private sector stakeholders (hotels, car rentals, training schools etc.)

  • Potential for modernizing tourism industry associations

  • Develop a national quality certification to differentiate quality service providers and raise standards

  • Give wider support to nascent regional coordination initiatives (e.g. The Balkan Federation of Tourist Agency Associations)

  • Continue to develop management skills to ensure best international standards

  • Introduce franchise certificates, develop modern training programs: product and marketing training for national, regional and local tourism officials, accommodation, catering and tour operating personnel

  • Take advantage of growth trend in Europe city breaks: Airport improved as gateway, attracting a budget airline to lower air fares, taxi drivers managed

·         Take advantage of growth trend in self-enrichment holidays: package tourist experience in Serbia as a learning experience

·         Introduction of an accommodation central reservations system especially for free independent travellers market

·         Accommodation classification

·         An comprehensive national tourist information system

·         Road assistance provision for motorists

·         Education to local people about their own country and its assets



  • Uncontrolled tourism facility development

  • Lack of adequate infrastructure development to match tourism projections

·         Political positioning overshadowing tourism development; ongoing poor image & negative perceptions

  • Inability to turn socioeconomic developments into a successful tourism activity

·         Neglect of tourism development potential: lack of political will for investment and organisation of the tourism sector

  • Interpret tourism as an outgoing activity primarily

  • Ignore regional cooperation potential

·         Ongoing failure to address pollution

·         Lack of adequate market research to inform product development and guide skills and training investment

·         Lack of representation in markets & insufficient funds for campaigns in priority markets (low share of marketing voice in most markets compared to competitors)

·         Lack of education of residents on value of tourism

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