2 Market Study
This objective of the market study will be to provide a cultural, historical and economic overview, as well as an analysis of the tourism product and market of Montenegro.
Initial recommendations for the proposed usage of the site will be provided as a result of the findings, which will outline the concept, design and target market of the development.
These conclusions will assist in building the component matrix and essentially form a major part of the business plan.
2.1.1 Project Development Proposed Location
The Olviya site is a prime parcel of real estate and a very short drive to the main cities of Kotor and Tivat. The site currently has access issues with access to date consisting of single track roads, which are lovely rural roads but will not be able to handle significant volumes of traffic. The client has suggested bringing a tunnel through the mountain on the back border of the property, which would have a significant cost associated with it.
The land itself is varied with some flat areas, some gentle slopes and some extremely steep cliffs. The flora and fauna are low-level bushes due to the high winds here in the wintertime. This site is a perfect site for a 9 or 18-hole golf course that can have villas surrounding it. The slopes down to the cliffs are ideal for villas and apartments and there are many areas suitable for water parks, commercial areas etc.
There is a beach located on this site that is currently accessible via a very steep and twisty road however, the beach is very small in size and would only be able to cope with 30 people at one time. The client suggested a new breakwater and placing a larger beach in this location, which is a very good idea depending on the currents along the cliffs. Unfortunately there is no opportunity of a marina with this site as the cliffs and swells are too severe with very minimal shelter.
Montenegro is a country located in Southeastern Europe. It has a coast on the Adriatic Sea to the south and borders Croatia to the west, Bosnia and Herzegovina to the northwest, Serbia and its partially recognized breakaway southern province of Kosovo to the northeast and Albania to the southeast. Its capital and largest city is Podgorica, while Cetinje is designated as Prijestonica, the old royal capital or former seat of the throne.
A Serbian principality in the Late Middle Ages, its independence from the Ottoman Empire was formally recognized in 1878. From 1918, Montenegro became a part of various incarnations of Yugoslavia and the state union of Serbia and Montenegro. Based on the results of the referendum held on May 21,2006, Montenegro declared independence on June 3, 2006 making it the newest fully recognized country in the world. On June 28, 2006, it became the 192nd member state of the United Nations, and on May 11, 2007, the 47th member state of the Council of Europe.
Montenegro's native name, Crna Gora, is mentioned for the first time in 1296 by King Stefan Uros I in his edicts to the Serbian Orthodox Zeta Episcopate seat at the Vranjina Island in Lake Scutari. The origin of the term lies in the Slavic reference to excessively mountainous regions, often emerging in the medieval Serbian realm. Mentioned afterwards in most Nemanyidens' edicts and in subsequent Venetian sources in the 13th and 14th Centuries, signifying the area of the Upper Zeta, the name stabilized itself for a Principality in the second half of the 15th Century under Lord Ivan Crnojevic, mostly confounding erroneously the term with the dynasty's name, which both have similar roots.
The region itself became remembered as Old Montenegro (Stara Crna Gora) as by the 19th Century The Highlands were added to the state, and Montenegro further increased its size several times by the 20th Century during wars against the Ottomans, expanding its name to and annexing Old Herzegovina and parts of Old Serbia, most notably Metohija and southern Rashka. The state changed little to modern day reference, losing Metohija (Western Kosovo) and gaining the Bay of Kotor. The term gave the name to its people, the Montenegrins (Cmogorci).
The country's name in most Western European languages, including English, reflects an adoption of the Venetian term monte negro, also meaning "black mountain", which probably dates back to the era of Venetian hegemony over the area in the Middle Ages. Other languages, particularly nearby ones, use their own direct translation of the term "black mountain" (e.g. Albanian: Mali i Zi, Bulgarian: Cherna gora, Czech: Cerna Hora, Greek: Mavrovounio, Polish: Czarnogora, Romanian: Muntenegru, Slovene: Crna Gora, Slovak: Cierna hora, and Turkish: Karadag).
The first recorded settlers of Montenegro were lllyrians, the Docleata. In 9 AD the Romans conquered the region of present-day Montenegro. Slavs massively colonized the area in the 5th and 6th Centuries, forming a semi-independent principality, Doclea, that was involved in the Balkan medieval politics with ties with minor Rascia and major Byzantium and to a lesser extent Bulgaria, becoming a Kingdom in 1077. By the end of the 12th Century fully incorporated into a unified Serbian realm, the "Zeta" was governed by Nemanjics preparing to assert the throne. After the Serbian Empire collapsed in the second half of the 14th Century, a family came to prominence by expanding their lordship in present-day Montenegro, the Balsics. In 1421 it was annexed to the Serbian Despotate, but after 1455 another local noble family, the Crnojevics, ruling the Principality of Montenegro that until the end of the 15th Century became the last free monarchy of the Balkans, finally falling to the Ottomans in 1499, annexing it to the sanjak of Skadar. For a short time Montenegro existed as a separate autonomous sanjak in 1514-1528, an alteration of which existed again some time between 1597 and 1614.
In the 16th Century Montenegro developed a form of special and unique autonomy within the Ottoman Empire, the local Serb clans were free of many bonds. Nevertheless the Montenegrins refused to accept Ottoman reign and in the 17th Century raised numerous rebellions, culminating with the Ottoman defeat in the Great Turkish War at the end of the century. Montenegro factually became a theocracy led by the Serbian Orthodox Metropolitans, flourishing ever since the Petrovic-Njegos became the traditional Prince-Bishops. The Venetian Republic introduced Governors that mettled into Montenegrin politics, succeeded by the Austrian Empire in 1797, it was abolished by Prince-Bishop Petar II in 1832. His predecessor Petar I contributed to the unification of Montenegro with the Highlands.
Under Nicholas I, the Principality of Montenegro vastly advanced and enlarged several times in the Serbo-Turkish Wars and achieved recognition of independence in 1878. Modernization of the state followed, culminating with the draft of a Constitution in 1905. Political rifts for the first time emerged between the reigning People's Party that supported democratization of the ruler's autocratic regime and unconditional union with Serbia and the minor pro-monarch True People's Party. In 1910 Montenegro became a Kingdom. It initiated the Balkan wars in 1912 and 1913 in which the Ottomans lost all lands in the Balkans, achieving a common border with Serbia, but the Skadar was awarded to a newly created Albania. In World War I in 1914 Montenegro sided with Serbia against the Central Powers, suffering a full-scale defeat to Austria-Hungary in early 1916. In 1918 the Serbian Army liberated Montenegro, which elected a union with the Kingdom of Serbia.
In 1922 Montenegro formally became the Zeta Area of the Kingdom of Serbs, Croats and Slovenes, in 1929 it became a part of a larger Zeta Banate of the Kingdom of Yugoslavia. In World War II Yugoslavia was invaded by the Axis forces in 1941, which established a fascist puppet Independent State of Montenegro, liberated by the Partisans in 1944. Montenegro became a constituent republic of the Communist Yugoslavia, its capital renamed to Titograd in honour of Tito. More and more autonomy was established, until SR Montenegro got its last Constitution in 1974.
After the dissolution of the SFRY in 1992, Montenegro kept a smaller Yugoslavia with Serbia, the Federal Republic of Yugoslavia.
In the referendum on remaining in Yugoslavia in 1992, 95.96% of the votes were cast for remaining in the federation with Serbia, although the turnout was at 66% because of a boycott by the Muslim, Albanian and Catholic minorities as well as of pro-independence Montenegrins. The opposition claimed that poll was organised under undemocratic conditions, during wartime in the former Yugoslavia, with widespread propaganda from the state-controlled media in favour of a pro-federation vote. There is no impartial report on the fairness of the referendum, as the 1992 referendum was totally unmonitored, unlike the 2006 vote, which has been closely monitored by the European Union.
During the recent Bosnian War and Croatian War (1991-1995) Montenegro participated with its police and paramilitary forces in the attacks on Dubrovnik and Bosnian towns along with Serbian troops. It conducted persecutions against Bosniak refugees who were arrested by Montenegrin police and transported to Serb camps in Foca, where they were executed.
In 1996, Milo Dukanovic's government de facto severed ties between Montenegro and Serbia, which was then still under Milosevic. Montenegro formed its own economic policy and adopted the Deutsche Mark as its currency. It has since adopted the Euro, though it is not formally part of the Eurozone. Subsequent governments of Montenegro carried out pro-independence policies, originally restored by the Liberal Alliance of Montenegro, and political tensions with Serbia simmered despite the political changes in Belgrade. Despite its pro-independence leanings, targets in Montenegro were repeatedly bombed by NATO forces during Operation Allied Force in 1999.
In 2002, Serbia and Montenegro came to a new agreement regarding continued cooperation and entered into negotiations regarding the future status of the Federal Republic of Yugoslavia. In 2003, the Yugoslav federation was replaced in favour of a looser state union named Serbia and Montenegro and a possible referendum on Montenegrin independence was postponed for a minimum of three years.
The status of the union between Montenegro and Serbia was decided by the referendum on Montenegrin independence on May 21, 2006. A total of 419,240 votes were cast, representing 86.5% of the total electorate. 230,661 votes or 55.5% were for independence and 185,002 votes or 44.5% were against. The 45,659 difference narrowly surpassed the 55% threshold needed to validate the referendum under the rules set by the European Union. According to the electoral commission, the 55% threshold was passed by only 2,300 votes. Serbia, the member-states of the European Union, and the permanent members of the United Nations Security Council have all recognized Montenegro's independence; by doing so they removed all remaining obstacles from Montenegro's path towards becoming the world's newest sovereign state.
The 2006 referendum was monitored by five international observer missions, headed by an OSCE/ODIHR monitoring team, and around 3,000 observers in total (including domestic observers from CEMI, CEDEM and other organizations). The OSCE/ODIHR ROM joined efforts with the observers of the OSCE Parliamentary Assembly (OSCE PA), the Parliamentary Assembly of the Council of Europe (PACE), the Congress of Local and Regional Authorities of the Council of Europe (CLRAE) and the European Parliament (EP) to form an International Referendum Observation Mission (IROM). The IROM, in its preliminary report, "assessed compliance of the referendum process with OSCE commitments, Council of Europe commitments, other international standards for democratic electoral processes, and domestic legislation." Furthermore, the report assessed that the competitive pre-referendum environment was marked by an active and generally peaceful campaign and that "there were no reports of restrictions on fundamental civil and political rights."
On June 3, 2006, the Parliament of Montenegro declared the independence of Montenegro, formally confirming the result of the referendum on independence. Serbia did not obstruct the ruling, confirming its own independence and declaring the Union of Serbia and Montenegro ended shortly thereafter.
2.2.2 Government and Politics
Montenegro is defined as a "Civic, democratic, ecological and state of social justice, based on the reign of Law". It is an independent and sovereign Republic. It proclaimed its new Constitution on October 22,2007.
The current Government of the Republic of Montenegro (Vlada Republike Crne Gore) is composed of the prime minister, the deputy prime ministers as well as ministers. Zeljko Sturanovic was the Prime Minister of Montenegro and head of the Government, but he resigned due to health reasons. The ruling party in Montenegro ever since multiparliamentarism is the controversial centre-left Democratic Party of Socialists of Montenegro (DPS) (Demokratska Partija Socijalista Crna Gore), in coalition with the much smaller center-right Social Democratic Party of Montenegro (SDP) (Socijaldemokratska Partija Crne Gore).
The President of Montenegro is elected for a period of five years through direct elections. According to the constitution, the President will represent the republic in the country and abroad, promulgate laws by ordinance, call elections for the Parliament, propose candidates for the Prime Minister, president and justices of the Constitutional Court to the Parliament, propose to the Parliament calling of a referendum, grant amnesty for criminal offences prescribed by the national law, confer decoration and awards, and perform all other duties in accordance with the Constitution. The President shall also be a member of the Supreme Defence Council.
The Montenegrin Parliament (Skupstina Republike Crne Gore) passes all laws in Montenegro, ratifies international treaties, appoints the Prime Minister, ministers, and justices of all courts, adopts the budget and performs other duties as established by the Constitution. The Parliament can pass a vote of no confidence on the Government by a majority of the members. One representative is elected per 6,000 voters, which in turn results in a reduction of total number of representatives in the Parliament of Montenegro. The current president of the Parliament is Ranko Krivokapic.
A new official flag of Montenegro was adopted on July 13, 2004, by the Montenegrin legislature. The new flag is based on the royal standard of King Nikola I of Montenegro. This flag was all red with a gold border, a gold coat of arms, and the initials HI in Cyrillic script (corresponding to Nl in Latin script) representing King Nikola I. These initials are omitted from the modern flag and replaced with a golden lion.
The national day of 13 July marks the date in 1878 when the Congress of Berlin recognised Montenegro as the 27th independent state in the world and the start of one of the first popular uprisings in Europe against the Axis Powers on 13 July 1941 in Montenegro.
In 2004, the Montenegrin legislature selected a popular Montenegrin traditional song, "Oh, Bright Dawn of May", as the national anthem. Montenegro's official anthem during the reign of King Nikola was Ubavoj nam Crnoj Gori (To our beautiful Montenegro). The Montenegrin popular anthem has unofficially been "Onamo, 'namo!" since King Nikola I wrote it in the 1860s.
Montenegro is divided into twenty-one municipalities (opstina), and two urban municipalities, subdivisions of Podgorica municipality:
2.2.4 Geography and Climate
Internationally, Montenegro borders Croatia, Bosnia and Herzegovina, Serbia, Kosovo and Albania. Historically, its territory is composed by the following geo-historical entities Old Montenegro, The Highlands, Old Herzegovina, the Montenegrin Littoral, or the Bay of Kotor in specific, and to an extent Old Serbia.
Some of the biggest cities and towns in Montenegro are:
Montenegro ranges from high peaks along its borders with Serbia and Albania, a segment of the Karst of the western Balkan Peninsula, to a narrow coastal plain that is only one to four miles wide. The plain stops abruptly in the north, where Mount Lovcen and Mount Orjen plunge abruptly into the inlet of the Bay of Kotor.
Montenegro's large Karst region lies generally at elevations of 1,000 metres above sea level; some parts, however, rise to 2,000 metres, such as Mount Orjen (1,894m), the highest massif among the coastal limestone ranges. The Zeta River valley, at an elevation of 500 meters, is the lowest segment.
The mountains of Montenegro include some of the most rugged terrain in Europe. They average more than 2,000 metres in elevation. One of the country's notable peaks is Bobotov Kuk in the Durmitor mountains, which reaches a height of 2,522 metres. The Montenegrin mountain ranges were among the most ice-eroded parts of the Balkan Peninsula during the last glacial period.
UNESCO World Heritage sites include Durmitor and Tara River Canyon, and the old city of Kotor.
During the era of communism Montenegro experienced a rapid period of urbanization and industrialization. An industrial sector based on electricity generation, steel, aluminium, coal mining, forestry and wood processing, textiles and tobacco manufacture was built up, with trade, overseas shipping, and particularly tourism, increasingly important by the late 1980s.
The loss of previously guaranteed markets and suppliers after the breakup of Yugoslavia left the Montenegrin industrial sector reeling as production was suspended and the privatization program, begun in 1989, was interrupted. The disintegration of the Yugoslav market and the imposition of the UN sanctions in May 1992 were the causes of the greatest economic and financial crisis since World War II. During 1993, two thirds of the Montenegrin population lived below the poverty line, while frequent interruptions in relief supplies caused the health and environmental protection to drop below the minimum of international standards. The financial losses under the adverse effects of the UN sanctions on the overall economy of Montenegro are estimated to be approximately $6.39 billion. This period also experienced the second highest hyperinflation in history (3 million percent in January 1994) (The highest hyperinflation happened in Hungary after the end of World War II, when inflation there hit 4.19 x 1016 percent).
In 1997, Milo Dukanovic took control over the ruling Democratic Party of Socialists of Montenegro (DPS) and began severing ties with Milosevic' Serbia. He blamed the policies of Slobodan Milosevic for the overall decline of the Montenegrin economy, as well as his systematic persecution of non-Serbs. Montenegro introduced the German mark as response to again-growing inflation, and insisted on taking more control over its economic fate. This eventually resulted in creation of Serbia and Montenegro, a loose union in which Montenegro mostly took responsibility for its economic policies. This was followed by the implementation of faster and more efficient privatization, passing of reform laws, introduction of VAT and usage of Euro as Montenegro's legal tender.
According to 2006 census, Montenegro has 672,656 citizens and the annual population growth was 3.50%. The ethnic composition according to the census is made up of the following:
The main language is Montenegrin but many people also speak Serbian, Bosnian, Albanian and Croatian. Most Montenegrin inhabitants are Orthodox Christians, followers of the Serbian Orthodox Church's Metropolitanate of Montenegro and the Littoral. The religious institutions all have guaranteed rights and are separate from the state, there is a handful of Sunni Muslims in Montenegro that maintain their own Islamic Community of Montenegro. There is also a small Roman Catholic population, divided onto the Achdiocese of Antivari headed by Serbian Primates and the Diocese of Kotor that is a part of the Church of Croatia. Religious determination according to the 2006 census:
The culture of Montenegro has been shaped by a variety of influences throughout history. The influences of Orthodox South Slavic, Central European, and seafaring Adriatic cultures (notably parts of Italy, like the Republic of Venice) have been the most important in recent centuries.
Montenegro has many significant cultural and historical sites, including heritage sites from the pre-Romanesque, Gothic and Baroque periods. The Montenegrin coastal region is especially well known for its religious monuments, including the Cathedral of Saint Tryphon in Kotor (Cattaro under the Venetians); the basilica of St. Luke (over 800 years); Our Lady of the Rocks (Skrpjela); the Savina Monastery and others. Montenegro's medieval monasteries contain thousands of square metres of frescos on their walls.
The traditional folk dance of the Montenegrins is the Oro, a circle dance that involves dancers standing on each other's shoulders in a circle while one or two dancers are dancing in the middle.
The first literary works written in the region are ten centuries old, and the first Montenegrin book was printed five hundred years ago. The first state-owned printing press was located in Cetinje in 1494, where the first South Slavic book, Oktoih, was printed the same year. Ancient manuscripts, dating from the 13th Century, are kept in the Montenegrin monasteries.
Montenegro's capital Podgorica and the former royal capital of Cetinje are the two most important centers of culture and the arts in the country.
Education in Montenegro is regulated by the Montenegrin Ministry of Education and Science. Education starts in either pre-schools or elementary schools. Children enrol in elementary schools (Serbian: Osnovna skola) at the age of 6 years old and stay in elementary school for 9 years. The students may continue their secondary education, which lasts for 4 years (3 years for trade schools) and ends with graduation (Matura). Higher education lasts with a certain first degree after 3 to 6 years.
Serbia and Montenegro were represented by a single football team in the 2006 FIFA World Cup tournament, despite having formally split just weeks prior to its start. Following this event, this team has been inherited by Serbia, while a new one was organized to represent Montenegro in international competitions. On March 24, 2007, the Montenegrin national team came from behind to win its first ever fixture, 2-1, in a friendly game against Hungary at the Podgorica Stadium.
On their 119th Session in Guatemala City in July 2007, the International Olympic Committee granted recognition and membership to the newly formed Montenegrin National Olympic Committee. Montenegro is set to debut at the 2008 Summer Olympics in Beijing.
2.3 TOURISM ANALYSIS OF MONTENEGRO
The unique 'wild beauty' of Montenegro is still a long way from being fully tapped. Its mountainous regions covered by forests, its lakes, rivers and national parks, which boast some of Europe's most spectacular scenery as well as a rich diversity in flora and fauna, offer unparalleled opportunities for authentic tourism, one of the fastest growing segments in tourism today. Meanwhile, 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'.
More than 95% of Montenegro's existing hotels have now been privatized and, during the past four years, private investors have poured over €350 million into extensive renovations and modernization, including the addition of state-of-the art wellness and conference facilities, in 12 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.
Since Montenegro's independence, 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). Montenegro is among the top three countries in Europe in terms of FDI per capita. Many now see this small Adriatic state as the next Monaco.
In total, more than €500 million has been committed for modernizing six additional hotel complexes and for the construction of the Peter Munk-led marina and upscale mixed-use resort complex. This level of investment will clearly pave the way for more similar projects, helping Montenegro transform its tourism product from that of a low-yield, mass-market destination to one offering the highest quality for customers and the highest yields for investors.
2.3.1 Travel & Tourism Trends
The widespread interest among investors in Montenegro is hardly surprising given its spectacular tourism performance over the last seven years or so. International tourism receipts (excluding spending on international transport) increased by 22% in 2006, to €271 million, thereby exceeding the previous record achieved as long ago as 1990, ie before the outbreak of the Balkan conflict.
The annual increase in international tourism earnings has averaged 21% over the four years to 2006, and 26% over the past two years. Average spending per arrival for international tourists is estimated at some €715, and the average per night is just over €120, with about two thirds going on accommodation and, in the case of tourists on package tours, all the different elements offered in the package (ie meals and drinks for all-inclusive guests).
Figures for 2006 point to a 39% increase in international tourist arrivals, to 378,000, as well as a 39% rise in overnight volume, to 2.2 billion. This means that international tourist arrivals and overnights have grown by more than 31 per cent annually since 2000. The 2003 decline was due to the fact that hotels were temporarily taken off the market during a period of major renovation and reconstruction.
By comparison, domestic tourism, including tourism from Serbia, which is now of course considered an international source, has only shown moderate growth although, by European standards generally, the increases are still commendable. Annual growth in domestic arrivals has averaged 7.5% since the beginning of this decade and overnight volume has risen by 5.3% a year.
Tourists from member countries of the European Union account for some 50% of all arrivals in Montenegro, with other Europeans and non-Europeans generating a further 13%. Countries of the former Yugoslavia represent 19%, and Russia and other members of the former Soviet Union (now the Commonwealth of Independent States, or CIS) 18%.
Thanks to an annual average growth in arrivals of nearly 50% since 2000, Russia has become the clear leader in terms of absolute volume of arrivals, overtaking Bosnia-Herzegovina in 2005. A major contributor to the growth from Russia is that Russians have been key players in FDI. With investments estimated at US$2 billion until now, they dominate a sizeable chunk of the economy. Among other strategic assets, they own the crucial aluminium factory in Podgorica. In third place in the ranking, some way behind the leaders, is the Czech Republic, followed by Albania, which has shown the strongest growth of all leading markets over the past six years.
Other significant growth markets include Italy, up 55% a year since 2000, France (+57%) and the UK (+67%). But their absolute numbers remain modest. With the exception of Macedonia, countries from the Balkan region have generally shown good growth but, along with Russia, West European markets are expected to generate most of the new arrivals over the short term, increasing their already dominant market share.
Average length of stay in Montenegro in 2006 was 5.8 nights, with all top three markets -Russia, Bosnia-Herzegovina and the Czech Republic - exceeding the average. Although the average stay for a summer holiday is likely to remain at around seven nights, the expected increase in short breaks - especially if low-cost airlines start serving Montenegro - could bring the average down, especially out of the main summer season.
The ranking of foreign markets by overnight volume is very similar to that of arrivals. However, given the lower than average length of stay in Montenegro by tourists from these countries, Albania, Macedonia and Slovenia come lower down the ranking and Italy - which has the lowest stay of all the leading markets - slips out of the top ten altogether, replaced by Slovakia in seventh position.
Like Albanians, Italian visitors to Montenegro are frequently on long weekend breaks, with package prices reportedly starting at around €300 out of the main season, including charter flights and meals. Other short-stay visitors include the non-European markets - such as Israelis (1.6 nights average stay), Japanese (2.4 nights) Australians/New Zealanders (2.4) and Americans (3.0) - who are often on tours of three or more countries in Europe. Business travellers, who make up a significant share of visitors from the USA, of course, also tend to stay a shorter time in Montenegro.
As far as the emerging Asian markets are concerned, there are plans to try to stimulate demand from source countries like India and China, not surprisingly, given the Chinese Government's granting of Approved Destination Status (ADS) to Montenegro in 2006. However, a shortage of funding for marketing and promotions and the existence of other, higher market priorities mean that these sources are still largely untapped.
In terms of overnights, the strongest average annual growth over the past six years has come from France, the UK and Germany.
Although there has been some improvement, as government and the industry have made concerted efforts to stretch the season, Montenegro's tourism continues to be characterized by high seasonality of demand. The five months of May through September account for as much as 91 % of total foreign overnight volume and 84% of arrivals. The peak summer season - just the two months of July and August - generate more than 59% of all overnights and 51% of arrivals.
The winter months of October through March, in contrast, account for a very modest 7% of nights and 13% of arrivals. (It should be noted, nevertheless, that the respective shares in 2003 were 5% and 10%.) Average length of stay during these months falls to a low of some 1-2 nights as against the 6-night average stay overall. And it is clearly much longer in the peak summer months.
Little research has been carried out to date on how tourists organize and book their travel to Montenegro. Most domestic travel from neighbouring states - those formerly part of Yugoslavia - is organized independently, but the majority of trips from West European markets are either fully or partly packaged holidays, booked through tour operators and/or travel agencies.
Data on hotel performance gathered during Horwath International's latest annual survey (see below) shows that as many as 70% of all hotel room nights comprise bookings for group leisure tourists and tour operator allotments. Fully independent leisure travellers (FITs) account for only 18%.
While the Ministry of Tourism and Environmental Protection, in cooperation with the industry, has taken serious steps to try to establish quality standards, there is still a risk that the type of packages most widely available to the lower-end markets could attract too many of the wrong type of holidaymakerto Montenegro, ie those looking for bargain prices and interested solely in sun and beach.
The internet's share of total bookings is currently very low, although it can be expected to rise fairly sharply in the short to medium term, especially since the National Tourism Organisation is planning to commission specialist consultants to develop a new, interactive website, which will link to suppliers' and tour operators'/travel agents' bookable sites. Some of Europe's leading tour operators, such as TUI/Thomson and Thomas Cook, also offer Montenegro through their own electronic channels.
Domestic tourists - from Montenegro, but also the different regions of Serbia - generated around 50% more arrivals in 2006 than the international market, with average length of stay slightly above the international average. If the grey market were included in the overall count, the domestic share would probably be higher. There are over 100,000 unregistered beds in holiday apartments (many owned by Serbian citizens) in Budva and Bar, and a high number of unregistered holiday apartments in Ulcinj, which drive a huge grey market from Kosovo and Albania.
Montenegro's Statistics Agency (MONSTAT) estimates that there are at least as many beds available for rent in private apartments in the country as the official bed capacity, of 120,270, which is spread across registered accommodation of all types.
A significant number of Serbs own properties on the Montenegrin coast and many thousands of others rent apartments during the peak summer months. Although their prolonged presence does bring benefits to the apartment owners and to restaurant and cafe operators, most of the apartment rentals are not registered, and generate no bed night taxes or VAT.
2.3.2 Favourite Destinations
Given the huge investments in recent years following privatization, the coastal resorts continue to dominate very strongly in terms of tourist arrivals and overnights. The most popular destination, the Budva Riviera, generates 39% of both arrivals and overnight volume, while Herceg Novi at the mouth of the Boka Kotorska accounts for 20% and 25 per cent respectively. This means a combined share of 59% of arrivals and 64% of bed nights for the two most popular destinations.
Bar, in third position, is Montenegro's primary port, linking the destination by ferry with Bari and Ancona in Italy, as well as being the rail terminus for trains from Podgorica, the Montenegrin capital and points beyond. Except for transit visitors, most people travelling to Bar are on business although, thanks to the opening of the Sozina tunnel from Podgorica, it is now also a transit stop en route for the southern coastal regions of the country.
Although almost totally undeveloped for tourism, and therefore not yet suited to the international market, the ancient seaport of Ulcinj, in fourth position in the favourites' ranking, is very popular with domestic tourists because of the nearby 13km long, 50-metre wide sandy beach, Velika Plaza. By 2020, when/if the different projects proposed in the 2001 Tourism Master Plan for Montenegro are realized, this could be the most popular region for tourism -and it will certainly compete with Budva in terms of hotel room capacity.
Apart from the capital, Podgorica, and the industrial town of Niks ic, only two inland destinations - Zabljak in the Durmitor National Park and Kolas in in the Bjelasica region, close to the Biogradska Gora National Park - feature among the leading destinations visited by tourists. This is expected to change over the next few years as money is increasingly invested into the mountain region.
The different donor organizations working in Montenegro have all been involved in trying to improve infrastructure, expand and modernize accommodation and other facilities, and also ensure the level of training required to provide the necessary human resources. Different projects are also planned to stimulate demand for tourism in the north of the country, including marketing and promotions to raise awareness of the region's potential, in order to establish Montenegro as the hiking and biking paradise of the Mediterranean.
2.3.3 Transport & Access
The increase in the number of airlines serving Montenegro has been a main driver of growth over the past few years. In 2006, more than 40 airlines, both scheduled and charter, operated regular services to/from the country, linking Montenegro with more than 30 airports in about 20 countries. Montenegro's two international airports, Podgorica and Tivat, have benefited from around €30 million investment since 2004, €23 million of which came from a European Investment Bank and European Bank for Reconstruction and Development loan.
Among other improvements, Podgorica's passenger terminal has been completely rebuilt and the number of check-in desks doubled, raising passenger capacity to one million. Tivat, meanwhile, has been upgraded and modernized, although the work carried out was more cosmetic than structural.
Not surprisingly, given its dominant share of holiday traffic, Tivat recorded a higher international passenger throughput in 2006 (excluding traffic to/from Serbia) - 217,717 as against Podgorica's 143,349, and up 55% on 2005's level compared with a 50% increase for Podgorica. But the capital's airport had a larger number of aircraft movements, reflecting the smaller aircraft operated, as well as lower seat loads experienced on what are predominantly scheduled flights. In contrast, Tivat receives mainly charters from abroad, and these tend to operate at higher load factors.
In line with the increased holiday demand for coastal resorts, Tivat has shown far stronger growth in international passenger throughput over the last few years, at least since 2003. Its annual growth has averaged 46% as against 23% for Podgorica. The airport's main problem is that it can only operate until 16:00hrs every day, restricting the number of flights in and out of the main tourism-generating region of the country. Once night flights are permitted - or, what is more likely, flight departures and arrivals up to 22:00hrs - total passenger capacity should increase significantly from its present 800,000.
As the following table shows, while the number of domestic airline passengers - essentially people travelling between Montenegro and Serbia - remains higher than the international count, whether in Podgorica or Tivat, growth has been fairly sluggish over the past few years. As might be expected, a significant, if unidentified, share of domestic traffic is for business purposes.
Although the number of airlines operating into Montenegro has increased significantly, there are still some unfortunate gaps in coverage. The most important is access from the UK market. At the moment, a sizeable share of UK visitors come through Dubrovnik airport and some industry players believe that the country is losing business to Croatia as a result - eg tourists who plan to drive down to Montenegro, but who finally choose to stay in Croatia.
The Ministry of Tourism and Environmental Protection and Airports of Montenegro are also looking to attract at least one low-cost carrier (LCC) to the country. Their preferred LCCs are germanwings, Air Berlin and easyJet, but negotiations are also underway with Ryanair, which is well known to be the most demanding in terms of the incentives it requires. There is no doubt that LCC operations would attract more independent travellers to Montenegro and would help to raise awareness of the destination across a wider segment of the European population.
Montenegro's hotels, 237 of which have now been officially classified, account for a relatively modest share (25.5%) of total tourist bed capacity in the country. If non-registered private rooms were included, the share would be even lower. Estimates by MONSTAT put the number of beds available to rent in private apartments at a similar level to the total registered bed count.
Of the 237 hotels now classified, just two (1%) are five-star properties, and their share of the total room count in the country is even lower, given that they are both fairly small boutique hotels. Two-star hotels (41%) have the highest share of rooms (46%), followed by three-star properties (a 30% and 32% share respectively). However, given the increased focus on four-star accommodation by new developers and hotel owners looking to build, or upgrade, this is the category likely to show the biggest growth over the foreseeable future, followed by five-star hotels.
Of total hotel bed capacity, 96% is located in the coastal region of Montenegro, 1% in the mountains and 3% in the capital and central region generally.
Although hotels account for a relatively modest share of total registered commercial room and bed capacity in Montenegro, data from MONSTAT suggests that they attract 62% of international tourists and 56% of total bed nights.
According to the Horwath Hotel Industry Survey 2006, some 69% of total room nights are generated in the months of July and August. Year-round average occupancy was 34%, up from 31% in 2005, while average room rate increased from €31.86 to €37.29 over the 12-month period. Gross operating profit, meanwhile, increased from 11.8% to 20.1% of total revenues, and revenue per available guest room (revPAR) averaged €11,363, with four-star properties recording the highest revPAR, of €18,517.
Based on the Tourism Master Plan for Montenegro, drawn up by experts from the German Investment and Development Company (DEG) in 2001 and currently being reviewed, the country's coastal resort region is due to expand hotel capacity to some 50,000 beds by 2010 and to 100,000 by 2020. Although there are a number of concerns, as reported in the Policy Recommendations, that this may be too rapid a rate of development - given the need to ensure that infrastructure development keeps pace with that of new hotel construction - the forecast growth has been incorporated into the latest draft of the Physical Plan of the Republic of Montenegro, published in August 2006. According to the Master Plan, Ulcinj will eventually have the highest number of beds, of 36,000,50% more than Budva.
A breakdown of the planned coastal zone expansion shows that five-star hotels should account for a 14.5% of total bed capacity by 2020, with four-star properties representing 39.5%, three-star having 35.5% and two-star having 10.5%.
The current review of the Tourism Master Plan is expected to develop a detailed proposal for the expansion of hotels and other accommodation in the mountain regions of Montenegro, and particularly in Durmitor and Bjelasica. For the time being, these two regions have a total hotel bed capacity of only 700 and 521 respectively.
While there has been some upgrading and modernization of hotels - the most notable being the Bianca Hotel in Kolas in (Bjelasica), bought by the UK-based Beppler & Jacobson - these projects have so far been few and far between.
With the strong support of the donor organizations, however, steps are also being taken to modernize and expand alternative accommodation facilities, such as campsites, mountain and eco-lodges. One project, led by German Technical Cooperation (GTZ), is the development of a new, home-built brand of mountain hut/lodge. In addition to construction and other physical improvements, the donor organizations support also includes tourist information centres, tourist attractions, signposting for hikers and bikers, and the creation of local arts and crafts, brochures, maps, postcards, etc - all designed to meet the needs of the new breed of tourist expected to visit in the country over the foreseeable future.
Some believe that, because of Montenegro's unique natural attractions, tourism demand for the country's hinterland could one day match, or even exceed, that for its coastal resorts.
2.3.5 The Government's Policy
Travel and tourism has always enjoyed the support of the government of Montenegro, however, this support has been significantly stepped up in the last few years. Travel and tourism is now seen as the future economic driver of the country and has become "top of the pyramid of priority industries" according to the Deputy Prime Minister, Vujica Lazovi.
Since 2004, tourism has made significant progress, reaping benefits of investment by the government and the private sector. While there are still challenges to be addressed, the adoption by the government of many of the World Travel & Tourism Council (WTTC) recommendations, and not to mention its additional measures to ensure optimum conditions for tourism development and investment, has helped to catapult Montenegro to the top of the WTTC's ranking of growth economies.
Over the past three years, and particularly since the country's independence from Serbia in June 2006, Montenegro has pursued an open market economy, and all its macro-economic indicators are stable. Inflation is running at 2.6%, having an averaged just 2.0% in 2006, which is considerably lower than for some European Union member countries, and GDP is growing at 6.5% a year. Montenegro can also boast a budget surplus for the first time in its history, so it is little wander that it ranks so favourably in terms of foreign direct investment (FDI) and has the best developed capital market in the whole region.
In 2006, FDI totalled around €1,000 per capita, ranking Montenegro within the top ten in the world and third in Europe, according to this measure. And total capitalization in 2006 was €2.4 billion, or 140% of GDP.
Montenegro is now a member of the World Bank and the International Monetary Fund, and has signed an EU Stabilization Association Agreement in preparation for future membership of the European Union. Ratification of the Kyoto Protocol is also pending. On the tourism front, the country was formally admitted to the United Nations World Tourism Organization as a full member at its General Assembly in November 2007, and it is a new member of the European Travel Commission.
Since the combining of the Ministries of Tourism and Environmental Protection, tourism has become part of the larger picture for Montenegro, particularly in terms of achieving overarching goals of sustainable development. Moreover, the combined ministry, led by the dynamic and visionary former Minister of Tourism, Predrag Nenezic, bodes well for the future coordination of both tourism and environmental policy, facilitating communication and the cross-fertilization of ideas between the two aligned departments.
The only drawback is the size of the respective annual budgets - a modest €2.3 million for tourism and €1.7 million for environmental protection, excluding funding from the capital budget for specific projects. This represents only a 7% annual increase for tourism over the past four to five years, although the government does contribute significantly to the National Tourism Organisation's annual budget of €650,000.
One of Minister Nenezic's major achievements over the last few years has been the privatization of 95% of former state-owned hotels and other tourism-related companies in Montenegro and the subsequent, and ongoing, raising of standards in the country's hospitality industry, thanks to investments by new owners in modernization and upgrading of their hotels. This is totally in line with the Ministry's stated goal of transforming Montenegro's tourism product from that of a low-yield, mass-market destination to one offering the highest quality for customers and the highest yields for investors.
Investors are clearly being won over as well. The country has attracted two major, high-profile groups in 2007 - Adrian Zecha's Amanresorts, which has taken a 30-year lease on Montenegro's main jewel, the island of Sveti Stefan, and properties on two adjacent beaches; and a leading Canadian industrialist, Peter Munk, who will develop an 800-berth marina and related deluxe resort on the former naval base at Tivat. Investments have come from international groups in more than ten different countries in Europe, North America and Asia, and negotiations are underway with a number of other high-profile brands.
One important factor contributing to the significant growth in tourism and investment since WTTC produced the first Montenegro Country Report has been the harmonious working relationship between the Ministry of Tourism and Environmental Protection and the different donor agencies operating in the country. Their support has been paramount, not only in elaborating detailed guidelines as to the steps necessary to ensure sustainable tourism development, but also in providing practical help and technical assistance where it is needed. In many instances the donor agencies and non-governmental organizations (NGOs) have been coordinating their efforts to avoid duplication, as well as pooling their skills, in the many different projects launched across the country.
Nowhere is there more tangible evidence of this than in the mountain regions, which are now the main focus of government. The goal is to integrate the north with the already discovered, and much more widely developed, coastal regions - a wise and laudable strategy, which will provide an opportunity to narrow the now obvious disparity between the north and the south, both in terms of wealth and demographics, as well as diversifying Montenegro's tourism product and relieving some of the intense pressure on the coastal zone during peak periods.
Also very positive are the ongoing dialogue and regular meetings between the Ministry of Tourism and Environmental Protection, other interested ministries and government agencies, including the Cabinet, the donor agencies and NGOs, local municipalities and the different private sector stakeholders in Montenegro's Travel & Tourism industry.
The huge investments in travel and tourism since the beginning of the decade have stimulated rapid growth in demand, with the result that infrastructure and utilities have become strained in different parts of the country, and especially in the coastal zone. The inadequacy of the existing infrastructure is of course in no small part due to the sustained period of neglect and starvation of investment during the years of the Balkan conflict.
Furthermore, given the sharp increase in arrivals in the region, the transport infrastructure, such as roads, the railway network and airports, are stretched and struggling to keep up with the pace of development of hotel capacity. This poses a very real challenge, as infrastructure is integral to the overall tourist experience and could therefore have a major impact on return visits. It is also possible that some of the Greenfield sites that have been put out to tender along the coast would impose a further strain on infrastructure, given the additional planned capacity the related hotel and resort developments would bring to the coastal region.
The WTTC has urged the government to give priority in terms of project approvals to hotel resorts, which have the greatest potential for year-round occupancy, thereby generating the best economic potential. In view of the fact that the government accounts are currently so healthy, and its level of debt is so low, now is an opportune time to make infrastructure investments and to support the private sector investments taking place. Travel and tourism will not be the only industry or sector to benefit. Infrastructure improvements and modernization will provide a fillip for all regional development, as well as enhancing the quality of life and well being of the Montenegrin people.
Montenegro has a total of nearly 5,200 kms of roads, with the two major roads being the Adriatic motorway from Igalo to Ulcinj and the motorway that links the south and the north, from Petrovac through Podgorica to Kolas in and Bijelo Polje. The latter, which passes through the Morac a Canyon and continues on to Serbia, is considered one of the most dangerous routes in Europe, especially during the winter. Preparatory work has nevertheless begun on a bypass for the canyon.
The country's road network is of strategic importance in that it provides the only seaport link to the Republic of Serbia and the major road axis from Croatia and Bosnia-Herzegovina to Albania, Kosovo and the former Yugoslav Republic of Macedonia (FYROM). However, the natural terrain of the region limits road geometry and, therefore, speed and capacity, as well as involving relatively high maintenance costs.
The opening of the Sozina Tunnel linking Podgorica to the Port of Bar on the coast has had a very positive impact on traffic flows, cutting the journey time from the Montenegrin capital by half, to about one hour. Over the last three years, other parts of the country's road network have also been upgraded, and a more skilled workforce is now engaged on the maintenance of the roads so that the general quality and safety standards have risen.
There are a number of road improvements underway, some of which are being financed by a loan from the Czech Government. Construction of a highway from Podgorica to Belgrade, and on to Budapest, is being part-funded by the European Bank for Reconstruction and Development (EBRD). The planned Adriatic Highway, part of the Marco Polo Road Programme -a joint venture of the Italian, Czech, Slovene and Greek governments - would link all countries down the Adriatic coast from north to south. This coastal road would in theory ease the bottlenecks currently experienced in the coastal region, and especially around Budva, during high season.
Meanwhile, Montenegro's railways, which suffered from chronic under funding in the 1990s, are considered to be well below minimum standards. As an example, safety problems culminated in the Bioc e train disaster, when a passenger train derailed, killing 47 passengers. The Montenegrin part of the Belgrade-Bar railway line is the backbone of the Montenegrin railway system. It opened in 1979 and was at that time a state-of-the art railway, with features such as the Mala Rijeka viaduct - the highest railway viaduct in the world - and the 6.2km long Sozina Tunnel. About one third of the Montenegrin part of the railway is in a tunnel or on a viaduct. It is also the only railway corridor in Montenegro that is fully electrified.
Efforts are currently being made to completely rebuild the country's rail network, in part to relieve pressure on the roads. Loans are being sought for new railway stock and the longer-term goal, once the reconstruction is completed, is to privatize the maintenance of the railway system. This is also the plan for the roads, and there is already interest from potential concessionaires, such as Bechtel.
Given the many different priorities for redevelopment and regeneration, it is perhaps not surprising that progress on rebuilding roads and railways has appeared slow to date. The WTTC has urged the Government of Montenegro to speed up the process, not just for the benefit of the tourism industry. Travel and tourism is an important driver of economic development, and a modern transport infrastructure will stimulate growth and will help distribute wealth and jobs across the country.
2.3.7 Hotel Development in Montenegro
Since the government's adoption of the Tourism Master Plan for Montenegro in 2001, more than 95% of the former state-owned hotels in the country have been privatized in line with the government's policy of privatization of all state-owned enterprises.
Overseen by the Privatization Council, which includes the Agency for Reconstruction and Investments and the Ministry of Tourism and Environmental Protection, the properties have been disposed of through different privatization models, among which asset sales, bankruptcy sales and mass voucher privatization. (Some 27% of the core capital of Montenegrin companies was distributed among the country's adult citizens, who were free to invest in whichever companies they wished.)
While the hotel privatization process has been generally very successful, some €350 million additional investment has been made by new owners in upgrading, the mass voucher scheme has been disappointing, in terms of attracting additional investment. This is due to the fact that the resulting joint stock companies involve a large number of small shareholders, who either have no additional funds to invest in renovations and modernization, or who prefer to sit on their assets and wait until the properties have appreciated in value before selling them at a profit. The rapid appreciation in real-estate values in the country since independence from Serbia in May 2006 has clearly exacerbated the situation.
Several Greenfield sites have also been offered for hotel development, primarily along the 13km stretch of undeveloped beach, Velika Plaza, in the south of the country. The overall number of Greenfield sites available has increased sharply since independence and the release of former military sites for development. These include prime property in the coastal zone, in locations such as Ada Bojana, Buljarica Valdonos, Jaz, the Z upa-Bonic i region and the island of Mamula at the entrance to Kotor Bay. In all, between 15-20 potential sites have been earmarked as possible tourism resorts.
Most Greenfield sites are being offered for joint venture development, the government's preferred development model, although long-term leases are also likely and land sales have not been totally discounted. The land in question might be fully government owned, as in the case of the former military sites, or involve a combination of public-private ownership, or be totally in private hands, with private landowners usually forming an association to represent their joint interests.
Planning requirements, which also include related infrastructure needs, are fairly strict, designed to ensure balanced development in harmony with Montenegro's spatial development plan. Tenders stipulate the maximum number of rooms permissible, residential requirements, green areas to be incorporated, etc, as well as opportunities to add golf courses, conference centres, entertainment and sports complexes. Developments also have to respect the 'non-building line' - i.e. minimum construction distance from the sea.
Different requirements and related coastal zone legislation are covered by the Integrated Coastal Zone Management Strategy (ICZM), developed by the German Organization for Technical Cooperation (GTZ), one of the leading donor agencies operating in Montenegro, which is funded by the German Federal Ministry for Economic Cooperation and Development. This has been developed in cooperation with the Ministry of Tourism and Environmental Protection and other relevant ministries, agencies, coastal municipalities and national level non-governmental organizations (NGOs). GTZ was also responsible for the Guide to Investment and Development in the Hospitality of Montenegro published in 2006, which provides a one-stop guide for potential investors.
Real-estate investment opportunities are not restricted to the coastal zone. There are increasing projects available in other regions of Montenegro, including the capital Podgorica, Skadar Lake and most importantly, given the minimal investment to date, the mountain regions, which the government, donor agencies and NGOs are now promoting heavily. Not only will development of these areas ensure a more balanced development between the hinterland and the coast, but it will also help reduce Montenegro's seasonality problems, stretching tourism demand beyond the current five months or so.
Although the basic infrastructure, as well as accommodation, needs significant upgrading and modernization to cater to a growth in demand, Montenegro has huge potential as a mountain resort destination, whether for winter sports or summer outdoor enthusiasts. Two of the regions offering the greatest opportunities are Bjelasica, which includes the Biogradska National Park, and Durmitor, where the country's largest national park of the same name is located, and which is close to the country's world-renowned Tara River and Canyon. But the whole of the mountain region in the north of the country boasts a wide range of attractions for nature-based and active tourists, from its well-preserved natural environment to its unique wildlife, flora and fauna.
The German Investment and Development Company (DEG), which was responsible for the Tourism Master Plan for Montenegro, is currently reviewing the Master Plan and undertaking a more detailed analysis of development needs in the mountain regions. Meanwhile, donor agencies and NGOs have earmarked specific projects for funding and support, such as the development of mountain lodges, ski lifts and recreational facilities, the creation of hiking trails with related signposting, the training of mountain guides, and the publication of promotional and information brochures.
Foreign investment until now has been almost exclusively in Montenegro's coastal zone, although there has been quite a lot of interest from international brands in developing or managing upmarket, quality resorts. Negotiations by private investor groups with hotel chains such as Hilton and Starwood are currently in progress. The Ministry of Tourism and Environmental Protection also expects Club Mediterranee to return to Montenegro. The French group had a resort, since abandoned, on the island of Sveti Marko in the 1980s.
Among foreign owners/management companies currently operating in the country, in addition to Beppler & Jacobson, the Slovene company HIT Slovenia has rebuilt the 180-room Maestral in Becici, the Spanish Iberostar is managing the four-star, 576-room Bellevue in Becici, and an Irish-American group, United Investment Partners (UIP) - owned by United Entertainment Partners - has bought Hotel Fjord in Kotor plus two other development sites. It plans to build three hotels with a total capacity of 700 rooms, at a total investment cost of €200 million, due for completion in 2010. The hotels will be operated under the UIP brand, and the group plans to purchase four Airbus aircraft to provide direct year-round flights from major European source markets. In total, investments have come from international groups in more than ten different countries in Europe, North America and Asia.
The most exciting projects for Montenegro's tourism industry so far, which should help raise the overall quality image of the destination, have both been signed in the last six months. In late October 2006, a deal was concluded with Peter Munk (one of Canada's leading industrialists and chairman of the world's largest gold producer, Barrick Gold) for the purchase of a former shipbuilding and naval yard once controlled by the Yugoslav Army, at a superb location on Kotor Bay with easy access to Tivat airport. The deal, which also reportedly involves the Rothschild family, paves the way for developing a major marina - one of up to nine planned over the next ten years - as well as the related resort infrastructure in the coastal town of Tivat. The marina will have 800 berths, 125 of which for mega yachts. The European Bank for Reconstruction and Development (EBRD), meanwhile, has pledged €5 million to clean up the bay.
Adrian Zecha, Chairman of Amanresorts, also signed a landmark agreement in early 2007 for a 30-year lease of the former fisherman's village of Sveti Stefan, once a favourite summer haunt of the rich and famous, as well as two adjacent properties - the Villa Miloc er, a former royal villa on the adjacent King's Beach, and the Queen's Beach Hotel. The first two will be operated by Amanresorts, and Queen's Beach will be rebuilt as a GHM hotel/spa resort (another deluxe Zecha-owned brand). Four beaches are included in the deal. The resorts are due to open between 2008 and 2009 after investment of more than €40 million.
In total, more than €500 million has been committed for new developments and rebuilds. This level of investment will clearly pave the way for more similar projects, helping Montenegro transform its tourism product from that of a low-yield, mass-market destination to one offering the highest quality for customers and the highest yields for investors. Efforts to improve the quality of existing hotels are also encouraging. Among the hotels surveyed by Horwath for its 2006 Hotel Industry Survey, some 37% said they were planning to invest an average of €348,000 per property in upgrading and improvements last year while, in 2007, 26% expected to invest an average of €1.05 million.
Further modernization and diversification of the hotel sector are still needed, to reduce the growing supply and demand imbalance and the lack of capacity in the four- to five-star hotel segments, and this needs to be supported by a parallel improvement in infrastructure to cope with the increased capacity and projected growth in demand. DEG and the Ministry of Tourism and Environmental Protection estimate that current modernization/upgrading projects will generate approximately 900,000 more overnights, mostly from Ell tourism markets, thus assuring the momentum of growth during the next four years.
Nine international standard hotels with approximately 1,300 rooms are expected to be added in 2007. These will generate approximately 170,000 additional nights, as well as around €1 million in VAT and profit tax revenues, as well as an estimated €35 million investment.
The next two years, 2008-09, will see a further 13 properties with around 2,800 rooms, generating an estimated increase of 220,000 nights, €3.3 million in VAT and profit taxes. These new rooms should represent a total investment of some €150 million, due to the number of high-profile, upmarket properties scheduled to come on line during this period.
The renovation/upgrading of seven hotels in the mountain region in the north of Montenegro would add approximately 460 rooms, a projected increase in tourist overnights of 70,000, some €260,000 in VAT and profit taxes and new investment of €12 million.
2.3.8 Air Transport
Montenegro has two international airports - Tivat in the northern coastal region and Podgorica just outside the capital. Thanks to a €23 million loan from EBRD and the European Investment Bank (EIB), in addition to funding of €7 million from the Government of Montenegro, for upgrading at the two airports, Podgorica has been given a completely new terminal building and new ground-handling facilities. Check-in desks have doubled and passenger throughput capacity now stands at 1 million a year. In 2006, Podgorica Airport saw a 19% growth in passenger throughput to 382,000 - 38% of which was international..
The upgrading of Tivat Airport accounted for only €8 million of the total €30 million investment, but most of the work was cosmetic. As lack of space means the runway cannot be extended, there are plans to add a new runway, but no time-scale has been announced for this project. Tivat handled some 451,000 passengers in 2006 - 56% of its total 800,000 capacity - up 20% on 2005.
Structurally, airports and air access are now coordinated under the institutional umbrella of the Civil Aviation Authority (CAA), which was established in November 2006. It works closely with Airports of Montenegro to bring the country's airports in line with guidelines from the International Air Transport Association (IATA) on installing a departure control system (DCS) so that e-tickets are enabled and luggage can be checked through multiple flights. There are currently no plans to privatize Montenegro's airports but the airport authorities are looking to privatize non-air transport activities to generate commercial revenues. Obvious areas for privatization include fuel supply and duty-free sales.
More than 40 airlines, including charter carriers, operate to and from Montenegro, linking the country to around 20 different cities in Europe. Not surprisingly, given the higher share of tour operator package tourists to the coast, charter carriers predominate at Tivat. While year-round capacity would seem to be adequate at Tivat, the fact that flight movements and passenger numbers fall sharply outside the peak summer season means that peak season capacity is often very constrained. And this will become more acute if current growth forecasts prove accurate.
The WTTC recommends that, for the short term at least, the Ministry of Tourism and Environmental Protection should pursue efforts to obtain local approvals for night-flight operations, even if an extension is only permitted up to 22:00hrs. Without this extension, Montenegro's coastal tourism could become increasingly dependent on Dubrovnik Airport in Croatia.
Access to the mountain regions in the north of Montenegro would be greatly enhanced if the region had its own international, or even regional airport. Berane, located in the northeast of the country between Bjelo Polje and Kolas in, was used as a commercial airport from 1961-76, but it now handles only flights for sports trips and the like. An airport at Z abljak, meanwhile, is only partially completed.
A feasibility study is currently being carried out to determine whether Berane could be upgraded and reinstated as a commercial airport. Preliminary results, according to Airports of Montenegro, indicate that there would be sufficient traffic to warrant this, not only for the winter season but also for the summer, when the region offers many activities and different types of adventure sports. The arguments are all the stronger given current plans for the expansion of hotel and other accommodation capacity. If the final results are as positive, a tender for the airport is expected to be published in 2010.
Meanwhile, in order to manage the growth in tourist arrivals and related airline traffic over the next few years, the WTTC recommends that Podgorica be marketed as a valid alternative to Tivat to reach the Montenegrin coast, thereby reducing pressure on Tivat and bringing more international traffic and recognition to Podgorica and the central region.
Not surprisingly, the 98% state-owned Montenegro Airlines, which is the country's flag carrier, is the airline with the highest number of flights and it serves the greatest number of destinations. Nevertheless, since an open skies policy was adopted in January 2005, there has been almost no evidence of protectionism on the part of government - something that was very prevalent in the early years of this decade.
The number of foreign airlines flying to Montenegro has increased sharply over the last few years, attracted by the growth in traffic demand and competitive landing charges. Nevertheless, a significant share of services are operated in the summer season only. Among the leading markets, the least well served in terms of direct scheduled flights is the UK. Although the British market ranks only tenth in terms of arrivals and eighth in overnight volume, it is the second biggest spending market after Scandinavia, according to the Central Bank of Montenegro.
Airports of Montenegro would like to attract British Airways, or another UK airline. But, for the time being, the only existing direct flights are charters and British Airways operates only to Dubrovnik over the border on the Croatian coast.
Meanwhile, the WTTC supports the Government of Montenegro's efforts to search for a low-cost carrier (LCC) to fly into the country. The Ministry of Tourism and Environmental Protection, together with the two airport authorities, has been in talks with numerous LCCs, including Ryanair, Air Berlin, EasyJet and Germanwings. The preferred LCCs are EasyJet and Germanwings, since Ryanair is seen as overly demanding in terms of the commercial support it expects. But the experience of other emerging tourism destinations would appear to justify the costs involved. LCCs can generate new short-haul markets and contribute to boosting awareness of the destination.
2.3.9 Market Product & Diversification
During the past few years, while 1989's level of arrivals has not quite been regained, Montenegro has more or less rebuilt its coastal tourism. The Ministry of Tourism and Environmental Protection has recognized that it must look for ways to stretch the season and the product offer in the coastal resorts but, more importantly, to look inland at what else the country has to offer. The challenge is to link the different tourism regions together and to facilitate industry cooperation to achieve this goal.
Despite its small surface area, Montenegro boasts a rich diversity of flora and fauna, as well as a contrasting geographical terrain, all of which places it in a unique and enviable position regarding its tourism potential. Sun and beach holidays have dominated tourism demand until now, and this situation is unlikely to change in the foreseeable future, especially with the creation of new facilities and attractions such as nine new marinas.
Nevertheless, Montenegro has the potential to develop a large number of high-quality, niche tourism products associated with nature-based tourism, both during the winter and summer. Product diversification can also help to extend the tourism season and, in the longer term, even turn it into a year-round industry. The Ministry of Tourism and Environmental Protection has already earmarked mountain tourism as a priority development area, and is working closely with donor agencies and NGOs to create new tourism products and develop the associated infrastructure and services. In addition to skiing, the different products identified include all types of adventure and sports tourism, from hiking, biking, paragliding, caving and fishing, to horse riding, canoeing and rafting.
To fully allow mountain tourism to flourish, the bridge between the coast, central and northern regions needs to be built, not only to improve infrastructure and accessibility, but also to enhance collaboration at the municipal level and to facilitate the inclusion of the hinterland in tour operator packages.
While still modest in terms of absolute numbers, demand for Montenegro's mountain regions is growing fast. In 2006, registered hotels received 63% more tourists than in 2005. Furthermore, a significant share of the profits made from the provision of activities such as rafting remain with the local communities. In 2005, of the €1.05 million earned from rafting, €800,000 stayed in the communities, according to WWF International's Mediterranean Programme.
UNDP has been working to cement local government, national parks, local entrepreneurs and NGOs to improve communication and collaboration on areas of mutual interest and benefit. A Sustainable Tourism Festival was launched in 2006 in Durmitor, and donor agencies have been working on a strategic development plan for the region. A programme has been implemented by the OAR and the Ministry of Tourism and Environmental Protection to standardize qualifications in adventure sports, for example, so that sports supervisors or instructors have an internationally recognized standard in their specific field. The programme also includes the training of nature and mountain guides.
The challenges the region faces are the ongoing domination of the capital and the south. The young often migrate to the south or the capital, which leaves the north struggling demographically. The north, and the mountains in general, also suffer from their remote location. Links to the coast, such as the possible helicopter link between the Sveti Stefan Resort (Amanresorts) and an eco-lodge under the same brand in the mountains is an attractive proposition, although it would probably be reserved for Amanresorts' guests.
The central region of Montenegro boasts an enviable array of attractions for tourists such as Cetinje, the former capital of Montenegro for 500 years. The city holds many museums, a royal palace, monastery and theatres and is in close reach of Love en National Park. However, tourist spend is minimal in Cetinje as overnight stay is small and entrance is not charged at the attractions. Since Cetinje is only a short distance from the capital or the coastal resorts, it is often treated as a day-trip destination, reducing its potential to generate hotel room nights. The WTTC has recommended the introduction of a charge for the museums in Cetinje and for entrance to the Love en National Park to start harnessing its tourism potential.
Following the Ministry of Tourism and Environmental Protection's decision to establish a core of large new and renovated hotels in Becici with conference and related facilities, Montenegro is fast developing its potential as a conference destination. The NTO launched its new brochure for the meetings, incentives, conferences and exhibitions (MICE) market at IMEX travel trade fair in Frankfurt in April 2007. For the time being, only one hotel in the mountain region, the Hotel Bianca in Kolas in, has adequate conference facilities, but the situation is being addressed.
Montenegro has local produce and a national cuisine which is not widely known outside the country, but which is nevertheless quite distinct, diverse and an essential part of the country's heritage that can appeal to tourists. The popularity of wine tours in relatively undiscovered winemaking regions throughout the world is ever on the increase. It would be a wise investment to raise the profile of the local grape varieties such as Vranac and Kratos ija.
GTZ has already been working on a wine route with the Ministry of Tourism and Environmental Protection. The work has focused on creating the right legal conditions for small wineries to exploit this niche. In addition, the local Njegus i smoked ham could be promoted in a similar way to, or in tandem with, the wineries, providing an opportunity for complementary wine and ham de gustations. Not only will the wineries prosper from the initiative, but the local municipalities also stand to benefit if restaurants and guesthouses can satisfy tourist demand and curiosity for the local cuisine.
The NTO and the local tourism organizations of Skadar Lake, Bar, Cetinje and Podgorica, in consultation with GTZ, have been proactive and produced a brochure providing information on the local wines and wine growers along a defined route. An extended and larger promotional drive could reap dividends. Much could also be made of organic produce and cookery courses.
Spa tourism is already well established along the coastal region and should be extended into the north where it is less developed. Bianca Resort and Spa, opened in Kolas in in 2006, has introduced a spa to the region. Along the coast, development plans for Velika Plaza, Ada Bojana, Jaz, Tivat, Valdanos, Mamula, Flower Island, etc include a strong wellness component among other facilities and services, in order to prolong the tourism season. As with medical tourism in Igalo, the season is not dependent on the sun or particular weather conditions, so incentives can be offered to attract tourists outside the traditional season.
Maritime tourism is already growing along the coast of Montenegro, but plans are afoot to significantly expand the coast's berthing capacity. Negotiations are pending for a further eight or nine marinas to be developed or renovated over the next ten years, ultimately offering a total of 1,900 berths. Apart form Tivat, the other locations earmarked for marinas are Buljarica, Jaz and Velika Plaz a, and investment for all marina projects is expected to total some €10 million over the period.
Montenegro has two different climatic zones: Coastal and Mountain and two seasons: summer which lasts between March and September; and winter, which lasts between October and March.
The coastal sector enjoys a Mediterranean climate, with dry summers and temperatures that range from 25°C to 28°C. Winter is mild and rainy with temperatures ranging from 5°C to 12°C.
The mountain area has moderate, warm summers with temperatures ranging from 9°C to 23°C, and cold rainy winters with temperatures ranging from -6°C to 3°C.
2.4 Market Study Conclusions
It is plainly obvious that Montenegro is growing rapidly as a destination for travel, tourism and investment. It is definitely becoming the next Monaco of the Mediterranean, and the statistics and figures back this up.
Montenegro is also steeped in history, culture and has a very strong traditional style, even though the country is the youngest in the world.
The holiday season is spread between the summer and winter months. Winter is relatively quiet, but the summer months are very busy, especially during July and August. The coastal regions of Montenegro experience the largest influx of tourists throughout the year compared to other Montenegrin destinations.
Sun and sea tourism are the main reasons why tourists visit Montenegro and this is reflected in the peak travel periods. There is a move to diversify the tourism product of Montenegro, with improvements to products located near the countryside and mountains. Adventure tourism is slowly growing with outdoor sports becoming more popular with international visitors. MICE tourism is also growing and with the demand, properties are slowly reacting to providing sufficient services to cater to this market.
The government are supporting the growth of travel and tourism in a substantial way, although there is a large requirement for the growth to be sustainable, allowing for the infrastructure to catch up to the vast demand, which currently exists.
For further information on the trends of travel and tourism in Montenegro, the WTTC have produced a detailed summary, which can be found in the appendices of this document.
The Olviya site is extremely beautiful and Select Contracts recommendation is that it should stay as a very high-end development. Due to its significant size of 305 hectares, there is huge potential for creating a mixed use development which could include residential, hotels, retail and MICE facilities.
The introduction of a selection of different category hotels, including 5*and 4* as well as a business hotel to satisfy the MICE requirements, will ensure room rates will remain high and in keeping with the surrounding development.
Real estate is booming in Montenegro and providing high end, quality products, which have various unit sizes, will enhance the development and ensure it has an international stand in the market place.
The sheer size of the property will also allow for a fantastic golf course, which will provide an attractive anchor for potential investors, as well as increasing the sales potential for villas, which could be located along the course. An 18-hole golf course will fit perfectly on the site and could be a signature course with a professional golfer associated with it.
Maximising on the natural gradient of the land, which in some parts is very steep, the development will provide for some stunning views, which can be shared by both real estate properties, as well as commercial aspects.
There is a small beach located on the site, but it is so small it could only have a few people on it at any one time. There could be potential to increase the size of the beach by reclaiming some land, and access to the beach would need to be carefully thought out in order to avoid congestion and parking along a very steep road, at the bottom of which has limited space.
There should be retail and entertainment elements associated with the development, as this will cater to the needs and demands of the residents and visitors alike. A village style development could be considered, with boutique shops and restaurants on the ground floor, with residential aspects located on the upper floors. Retail elements will also need to be catered to sell general items for residents of the villas and apartments, and these should be located in a place which has easy access and ample of parking.
All associated areas will need to have sufficient parking and access, and the flow of traffic needs to be carefully integrated in to the plan, so as to avoid heavy congestion or noise pollution in the more exclusive areas. As the site is quite steep in some areas, a road will need to be carefully planned to maximise on the gradient whilst not interfering too much with the overall development.
Montenegro is a very beautiful country and will certainly become the next "Monaco" of the Mediterranean. The Montenegrin architecture is very attractive but is only available in some scenic areas. The big towns and cities have expanded using low cost apartment buildings and many of the construction companies have come under close scrutiny in their methods of building.
It would be suggested that the beauty of Montenegro should be reflected in the Olviya site, using as much of a traditional architecture and resources as possible but have modern and smart interiors to provide the creature comforts that the buyers will be accustomed to. The market of buyers will be from European or CIS countries with the latter preferring apartments versus the Europeans preferring to purchase villas.
A component matrix will be developed to mirror these suggestions, which will then be used as the basis for the master plan.
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