Destination of the Week: Montenegro

The world’s youngest sovereign state is ripe for investment

In 2007, for the fourth consecutive year, the World Travel & Tourism Council (WTTC) ranked the Republic of Montenegro as one of the top three destinations in the world in terms of forecast travel and tourism growth over the ensuing decade. And preliminary estimates put Montenegro in second position in the growth ranking for 2008, behind Macau – the Special Administrative Region of China.

To be ranked alongside Asian powerhouses such as China and India is no mean feat for a country whose tourism industry ground to a complete halt during the 1990s as a result of the Balkan conflict.

Since WTTC produced its first Tourism Satellite Account and Country Report for Montenegro in April 2004, Montenegro – the world’s youngest independent nation – has demonstrated that it is well on the way to fulfilling its tourism promise. Although the destination really only re-emerged onto the world’s tourism stage at the end of the 1990s, when its tourism plant was still suffering from years of neglect due to international sanctions during the Balkan conflict – Montenegro was never directly involved in the war itself – international tourist arrivals and tourism receipts have recorded strong double-digit annual increases.

A solid recovery in tourism demand

After recording a growth in international arrivals of 45% in 2005 and 39% in 2006, 2007 saw a further 22% rise – nearly six times the average for Europe overall. And total tourism revenues rose by an even more impressive 39%, according to the Central Bank of Montenegro.

Growth has in part been stimulated by an extension of the tourism season since the beginning of the decade – to nearly nine months of the year from less than five – and hotel performance, as a result, has far exceeded expectations, despite the rapid growth in hotel room capacity. Room revenues in renovated four-star hotels, for example, topped €23,000 (US$34,155) per room in 2007, and gross operating profit (GOP) increased from 20.3% of total revenues in 2006 to 32.2% last year. In addition, more and more airlines are operating direct airline services into the country from key markets, facilitating access and thereby stimulating demand.

The trends are a clear reflection of Montenegro’s strong tourism recovery and its enormous potential for the future. Leading Western markets have returned to the country’s coastal resorts and new emerging markets are starting to show interest in what has become widely known as the ‘jewel in the Balkan crown’. True, the unique ‘wild beauty’ of Montenegro is still a long way from being tapped. But the country has an wide range of natural attractions – mostly in unspoilt terrain – including mountainous regions covered by forests, lakes, rivers and national parks, which boast some of Europe’s most spectacular scenery. Together with its rich diversity of flora and fauna, Montenegro offers unparalleled opportunities for ‘authentic’ tourism – one of the fastest growing segments in tourism today. And investment in mountain accommodation, such as ecolodges, is now gaining speed.

Growing investment in infrastructure and tourism facilities

More than 95% of Montenegro’s existing hotels have already been privatized and, during the past five years, private investors have poured close to €400 million into extensive renovations and modernization, including the addition of state-of-the art wellness and conference facilities, in a dozen or so large privatized hotel and resort complexes. At the same time, the Montenegrin Government has invested more than €250 million in the modernization and upgrading of airports, roads, border crossings and utility infrastructure projects. And this is only the beginning.

Agreements signed with international organizations such as the World Bank, the International Monetary Fund and the European Bank for Reconstruction and Development, as well as with national aid agencies and donor organizations, will ensure the upgrading and expansion of water supply systems, waste water treatment, landfills and similar critical infrastructure.

Europe’s new Monaco

Since independence, in 2006, the value of real estate has soared, making Montenegro one of the most attractive destinations in the world, not just in Europe, in terms of return on foreign direct investment (FDI). In fact, Montenegro is among the top three countries in Europe in terms of FDI per capita. Many now see this small Adriatic state as the new Monaco. In 2007, FDI exceeded €785 million (US$1.17 billion).

Moreover, while the country still only has a handful of five-star hotels, interest from developers in building high-quality resorts is growing rapidly, and competition for good sites is rife. In addition to existing properties available for renovation, some 12 Greenfield sites of a total 4,000 hectares, are being offered by the government for hotels and mixed-use developments. Negotiations are underway with a number of international hotel groups, and several big projects have been signed, which will see the arrival of new international hotel brands in Montenegro, such as Kempinski.

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