Hotels a hard sell in tourist magnet Croatia

By Adam Tanner

DUBROVNIK, Croatia (Reuters) - Pavle Radonic has worked as assistant manager for Hotel Belvedere, overlooking the medieval city of Dubrovnik, for 18 years. Except for the first few months on the job, he has never welcomed a guest.

How a five-star cliffside resort on the Adriatic has remained shuttered for so long -- or how other prime seaside hotels live in a socialist-era, state-owned time warp -- are among the enduring mysteries of Croatia's tourist industry.

"It is hard to believe that I have been here 18 years and nothing has happened," Radonic said as he toured the hotel's broken glass, shattered walls, and twisted metal -- damage from the war of independence that started soon after he took up his post in 1991. "I didn't think it would be 18 years. If I knew that before, I would never have come."

Offering crystal-clear Adriatic waters uncommon in many parts of rival destinations such as Italy and Spain, Croatia has enjoyed a tourist boom since the end of the Yugoslav wars.

Relatively affordable prices and the country's accessibility by car helped lift tourist arrivals and overnight stays by four percent in August -- despite economic crisis -- over the same period in 2008, according to the Croatian bureau of statistics.

The region has lured foreigners for many centuries. The Romans and Venetians made the Dalmatian Coast part of their empires. Today, Germans, Italians, Slovenes, Czechs and Austrians are prominent among the nine million who visited from January to August.

Yet fewer than half stayed in hotels, preferring self-catering private accommodation, campsites or other options.

The Belvedere earns about 3,500 euros ($5,200) a month renting its roof for cellphone towers and leasing its gutted lobby for boat repairs, Radonic said.

Tourism and travel now account for nearly a quarter of Croatia's GDP, a share the World Travel and Tourism Council expects to rise. The sector makes up just less than a tenth of GDP in the European Union on average.

Beefing up hotels are, some investors say, an opportunity on the coast especially as Croatia heads for European Union membership, due in 2012. But to make something of that potential, Croatia needs to address problems of past privatizations, corruption, unclear laws, muddled ownership and the lack of a national investment strategy.

PROBLEMS WITH PRIVATISATION

On Korcula, the most populated of Croatia's more than 1,000 islands, the state has a virtual hotel monopoly around the medieval old town resembling a little Dubrovnik.

The indebted hotels lack funds for renovation and recall the styling of the 1970s and 1980s, so many wealthy visitors opt to sleep on cruise ships or yachts instead.

"There are huge problems with privatization in general in Croatia," said Bill Montgomery, deputy chairman of the Adriatic Luxury Hotels group which owns several Dubrovnik hotels.

Initial privatizations favored cronies of Croatia's first President Franjo Tudjman and his government, said Montgomery, a former U.S. ambassador to Croatia.