Hotel Tourism In Belgrade Serbia Tourism Essay Example
Hotel Tourism In Belgrade Serbia Tourism Essay Example

Hotel Tourism In Belgrade Serbia Tourism Essay Example

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  • Pages: 11 (2920 words)
  • Published: November 8, 2017
  • Type: Analysis
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Summary of Findings

Nine years ago, Serbia became a democratic nation, making it an intriguing destination for foreigners to visit. Belgrade is particularly noteworthy as it has gained recognition as one of the top party cities in the world, according to Lonely Planet [1] and other guides.

This section will be divided into three parts. The first part will provide a summary of research data and relevant theoretical background on what constitutes a successful hotel tourism sector. Specifically, it will examine this sector in Belgrade, Serbia and compare important factors based on the literature discussed in the previous chapter.

The second part will analyze the current credit crisis and assess its potential impact on the hotel tourism sector in Belgrade. Various secondary sources such as journals, newspapers, and books will be utilized for this analysis.

Finally, the writer's interviews condu

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cted for this thesis will be evaluated alongside additional questionnaires provided in Appendix A. The findings from primary research will then be combined with information about a thriving tourism sector and possible channels through which the financial crisis may affect this industry.In conclusion, the writer will assess whether the hotel tourism industry in Belgrade will experience decreased rates and a decline in profitability over the past year. The research will also explore limitations and potential areas for further investigation. Section 4.1 of the study focuses on evaluating hotel tourism in Belgrade. To analyze data from Belgrade, first, global trends and figures provided by the World Travel and Tourism Council (WTTC) reports are examined. According to these reports, in 2008, the Travel & Tourism sector employed more than 225 million people worldwide and contributed 9.6% to global GDP. However, due to

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the global recession that began in mid-2008, there was a decrease in these numbers which even impacted emerging markets. Projections indicate a real GDP growth rate of -3.5% for the Travel & Tourism sector in 2009 but expect an average annual growth rate of 4.0% over the next decade.Focusing specifically on Central and Eastern Europe, it is estimated that direct industry GDP will reach $53 billion or 1.6% of total GDP in 2009.Additionally,direct industry employment is expected to be around 2,272,000 jobs or approximately 1.4% of total employment.However,maximizing its potential can be challenging due to significant risks like climate change, terrorist attacks,and natural disasters among othersThe tourism sector in Serbia has a significant impact on the country's economy. It contributes approximately $253 billion or 7.6% of the GDP and provides employment for around 10,133,000 people or 6.3% of total employment. This sector also plays a crucial role in exports, contributing $142 billion or 10.1% of total service and ware exports.

Investment in tourism is substantial as well, with a capital investment of $85 billion or 11.1% of total investment. The government spends $16 billion on tourism, which accounts for 3.0% of total government outgoings.

Considering the overall impact on Serbia's economy across all sectors, travel and tourism contribute about $129 billion or 4.2% of the total GDP. It employs approximately 78,000 people (3.7% of total employment) and represents $50 billion worth of exports in services and ware (5.1% of total exports). Furthermore, it attracts significant investment amounting to $51 billion or 10.4% of the total investment received by Serbia.

Additionally, this sector receives $4 billion in government expenditure which accounts for 0.8% of the country's overall government outgoings.

However,

there are predictions for a decline in both economic GDP and employment for the year 2009 (-1.% and -1.,6%, respectively), leading to a loss equivalent to $2,258 million and about 78,000 jobs being affected.
Compared to other Central and Eastern European countries and global figures, it is clear that Travel & Tourism plays a crucial role in Serbia's economy. The tourism sector in Serbia has the potential for growth in the next decade. Figure 3 shows that personal travel and tourism drive this sector with a growth rate of 42.79%, while business travel and tourism remain low at 6.42%. However, capital investment stands at 26.13%, indicating optimism for increased tourism and business involvement in the country.

When comparing Serbia to the CEE region (Figure 4), it currently holds only a 0.93% market share in the region's tourism industry. Nevertheless, it is expected that this growth discrepancy will decrease over time. Despite experiencing decline during the civil war in the early 1990s, there was a significant increase after transitioning to a democratic government in 2001-2002.

In terms of hotel tourism specifically, this industry has faced significant challenges over the past two years. According to HVS's European Hotel Valuation Index 2009 report, hotel performance remained stable at the beginning of 2008 but declined towards the end due to reduced consumer spending and travel concerns. As a result, operational costs were reduced, and refurbishment programs were postponed.

Data from various Central and Eastern European cities considered competitors to Belgrade show declining annual growth rates from 2000 to 2008;Sofia saw a slight increase during this period, while Belgrade experienced a decrease of 14.4% to EUR114,800 in hotel values due to global recessionary conditions

in 2018. Among CEE cities, Belgrade ranks fourth in terms of year-on-year growth, following Warsaw, St Petersburg, and Moscow. However, it is only positioned 35th in terms of value per room, slightly above Tallinn and Riga. The HVS study predicts that several international brands will enter the business-driven market in the near future, leading to higher average rates and increased demand. The financial crisis has significantly impacted the hotel industry with fewer transactions and a decline in market value due to limited available debt. Furthermore, reduced consumer demand has negatively affected price competitiveness. According to Mishkin's framework (1992), financial crises occur as a result of asymmetric information within the financial system. Adverse selection happens when borrowers with high credit risks are more likely selected while moral hazard arises when borrowers have incentives to invest in high-risk projects where they benefit from success but lenders bear most of the losses.According to Mishkin (1992), there are five economic factors that contribute to worsening adverse selection and moral hazard in financial markets: an increase in interest rates, increases in uncertainty, stock market declines, bank panic, and unexpected decreases in the aggregate price level. Mishkin's study also identifies a fiscal crisis occurring when two factors worsen, causing a shift from high-end products to low-end products due to lack of funds for those with good investment opportunities. A diagram representing this fiscal crisis, adapted from Mishkin (1992), will be presented on the next page. The origins of the current fiscal crisis will not be extensively discussed in this thesis; instead, its focus is primarily on examining its effects on indicators impacting a country's tourism sector, particularly the hotel industry. However,

it is worth mentioning that the real estate market in the U.S. was responsible for causing the current fiscal crisis. Notably, many observers were surprised by how severe the current economic downturn was as highlighted by Jerger and Knogler's analysis of South Eastern Europe (2009).

According to the IMF, global industrial production fell by 25% between April 2008 and April 2009, while trade flows decreased by 60% during that same time period. However, there is a slight recovery expected as predicted by the IMF. This trend can also be seen in countries across Eastern and South Eastern Europe.

All countries in this region except for Albania experienced a decline in growth in 2009 and are projected to continue experiencing this decline. For example, Serbia is expected to contract by 4.0% in 2009. Despite not being heavily exposed to the US real estate market, these countries have still been impacted by events in the US and Western Europe through other means.

Jerger and Knoler (2009) argue that South Eastern European economies have been influenced by the subprime mortgage financial crisis through five channels, including a decrease in demand for exports. They further suggest that a more volatile environment could increase country risk or at least its perception, justifying a higher risk premium. This heightened perception of risk may lead to unexpected devaluation in several Eastern and South Eastern European countries according to Jerger and Knoler (2009).Many businesses and households in these regions have a significant amount of debt in foreign currency, mainly Euro. As a result, even a small devaluation of the domestic currency can significantly increase the burden of this debt. Additionally, some countries heavily rely on remittances

from emigrants as a substantial part of their income. If these emigrants lose their jobs abroad, their source of income will decrease significantly.

The interconnectedness brought about by globalization has made it clear that a recession or devaluation of the U.S. dollar will have negative consequences on export opportunities worldwide, not just in the United States. Eastern and South Eastern European countries with significant current account deficits must either increase exports or reduce imports to balance their accounts. However, they are unlikely to pursue an expanded export strategy due to ongoing recognition crises.

Despite this situation, foreign banks have continued lending to businesses and households in these countries during the crisis, possibly out of caution or because they see economic potential within them.

In terms of its impact on tourism, there are conflicting indicators. Global tourism is expected to grow reasonably next year after experiencing a 5% decline this year. The UN World Tourism Organization reported a 7% decrease in tourist arrivals between January and August 2009.The decline in international tourist arrivals has slowed down recently, with only a 3% drop in July and August. However, profits from international arrivals have been more affected than overall volumes due to consumers choosing cheaper alternatives and shorter trips. According to UNWTO, international tourist arrivals decreased by 9-10% in the first six months of 2009, while volumes declined by 8%. There is hope for a slight recovery in 2010, with growth expected to vary from 1% to 3%. Recent improvements have been seen especially in Asian markets, with Europe and the Americas also expected to recover gradually. The "staycation" trend and the weakening of the pound against the euro provided some

relief to the struggling travel industry during summer. Official data shows that Britons took fewer overseas trips due to recession and weak currency. A recent study by Oxford Economics indicates that global travel and tourism experienced a greater decline than anticipated this year, impacting international air passenger traffic, leisure trips, and business travel for the outlook of 2010. Travel companies are projected to experience a 5.5% decrease in sector spending compared to 2008 according to Oxford Economics' assessment for the World Travel & Tourism Council's annual report.The researchers predict that travel and tourism will contribute 9.3% to the global gross domestic product, slightly lower than the 9.6% in 2008 and less optimistic than Oxford Economics' previous prediction this year. The focus of the author's analysis is Belgrade and its hotels from January 2009 to July, highlighting market resilience despite the global crisis affecting tourism worldwide, including Serbia. The Statistical Office of the Republic of Serbia conducted studies providing information for this analysis. During this period, there were a total of 4,191,353 visitors in Serbia, with 897,154 being foreign visitors (21.4% of the total). Belgrade was the top destination for foreign tourists, accommodating overnight stays for at least one night for 501,228 visitors (55.87% of all foreign tourists coming to Serbia). Furthermore, neighboring countries such as Bosnia (10.3%) and Montenegro (8.27%) also significantly contributed as sources of tourists visiting Serbia.The next page includes a table displaying these tourist sources.
Both Italians and Germans have shown remarkable interest in visiting Serbia by surpassing expectations.In addition,dometic tourists from other parts of Serbia continue to make up a significant portionofthe Serbian tourismandtravel industry.As the crisis began to subside,the number offoreigntourists

startedto increase steadilyfrom April onwardsThe main reason why most foreign visitors come to Serbia is to see Belgrade, which accounts for 68% or 610,065 visitors from January to July 2009. To analyze this trend and test the null hypothesis, primary research was conducted using both qualitative and quantitative methods. Interviews with hotel owners/managers in Belgrade provided valuable insight into the hotel tourism industry. The questionnaires used can be found in Appendix A, and important findings and interesting responses are summarized in the following pages.

This section will focus on responses from Questionnaire No.1, which was designed for hotel owners/managers. According to Mr. Gota from "Townhouse," the economic crisis has affected the Belgrade hotel industry by reducing the number of guests per night. However, it has primarily impacted guests' budgets for hotel expenses as companies now prefer middle- and low-class hotels due to decreased budgets. Currently, around 60% of companies have a spending limit ranging between EUR 120-130 per person per night compared to EUR 160-180 previously spent per person per night.

Despite these changes, Serbia remains an affordable tourist destination as food, drinks, and partying are cheaper compared to other European cities. However, hotel prices in Serbia are similar to those in other European cities and do not necessarily justify their high costs. Additionally, there is a limited availability of high-quality rooms.
The hotel tourism sector in Belgrade has seen a decline, with a reported 3.5% decrease in sector revenue and approximately a 5% decrease in tourist arrivals over the past year. Respondents have identified young professionals and nearby states as being heavily impacted by this crisis among potential guests, specifically mentioning Slovenian tourists. It is believed that

domestic tourists typically only stay at hotels for one or two days regardless of prices and services provided. In a survey conducted, respondents were asked to rate how well hotels have managed during difficult times. Most respondents said they did "not so badly," with only one manager reporting success. Another respondent noted that hotels in Belgrade did not perform significantly poorly but had lower outcomes than expected, attributing it to many visitors coming from the lower-middle class and banks sending employees to more affordable accommodations resulting in shorter stays. Despite concerns about the current fiscal crisis in the Belgrade hotel industry, respondents expressed optimism about its future, anticipating increased investments, more tourists, and positive EU accession prospects.Despite a majority of respondents expressing negative views on the 50% decrease in gross and 20% decrease in value per room, their comments suggest that actual falls range from 18% to 35% for gross and estimates for decrease in value per room range from 8% to 16%, still below the expected 20%. However, there is optimism among participants regarding future expansion and an increase in tourist numbers. The average rating for growth expectations was 6.9, while optimism about future tourist numbers stood at an average rating of 7.1.
Another phase of research involved using Questionnaire No.2 to interview respondents from the Serbian Ministry of Tourism. One anonymous respondent emphasized the adverse consequences resulting from the credit crisis on Serbia's tourism sector. The Ministry of Tourism has also acknowledged a negative impact on both inbound tourists and domestic travel within Serbia due to this crisis. Additionally, the ethno and green tourism projects have been put on hold as a result of

the crisis. Foreign companies had previously sought information about regulations and government assistance for promoting these forms of tourism. Furthermore, numerous hotel projects in Belgrade are facing challenges as foreign banks seek to renegotiate loan rates and local investors hesitate to proceed with them. Interviews conducted for this thesis indicate that the tourism industry has performed reasonably well over the past yearThere are several reasons why the hotel industry in Belgrade may not have been severely affected by the recession and decline in income. One reason is that many tourists who visit Belgrade and Serbia come from within the country or nearby states, which are not as integrated into the global economy as countries like the UK or France. This means that the impact of the economic downturn may not have been as significant compared to Western Europe.

According to one person interviewed, renegotiating loans has resulted in a halt in new hotel construction in Belgrade. Additionally, corruption within the city government discourages important international investors from investing in hotels in the city.

When discussing the impact of the credit crisis, both respondents agreed with hotel owners/managers that young professionals are most affected by it. As a result, these professionals are now being directed towards more affordable hotels, making up a majority of 40% of visitors to Belgrade's hotels.

The second largest group of visitors, accounting for about 25%, consists of individuals from neighboring countries, particularly Slovenia. The respondents noted that Slovenians tend to visit Belgrade primarily during their travels to other festivals in Serbia such as EXIT in Novi Sad or Guca near Cacak.

Interestingly, a significant 75% of respondents believe that hotels in Belgrade have not been

severely affected by the current recognition crisis. There were no rankings given for good or very good impacts on hotels due to this crisis; however there were also few rankings indicating severe impacts or no impacts at all on hotels.According to feedback received, when comparing the tourism potential of Belgrade with nearby capitals (Sofia, Banjaluka, Sarajevo, Zagreb, Skoplje), excluding Budapest, respondents appeared hesitant in expressing their views. This led to speculation that employees in the Serbian Ministry of Tourism may not be enthusiastic about the prospects of Belgrade's hotel industry. However, there is optimism among respondents regarding future growth in Belgrade's hotel industry within the next few years. They cautiously believe that there will be an increase in the number of tourists staying in hotels during this period. The average outlook for hotel industry growth in Belgrade in the next few years is favorable, with a ranking of 8.2. The ranking for a higher amount of tourists staying in hotels is average, scoring 6.75. For more information on this topic visit [1] http://www.theage.com.au/travel/the-worlds-top-10-party-towns-20091118-im4q.html and [2] http://www.fvw.de/index.cfm?objectid=EDF564FB-FFDD-C88A-258F45956735BE8C&navID=B417E1F7-A18C-922C-1F4AEED0B13DAE8C

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