High season 2009 in Croatia (summer)

[darcy]

I was just wandering what do the experts think about the tourist bookings for 2009? I am receiving mixed responses from Croatia and I would like to make up my mind.

As you all know very well, I am personally a pessimist in all Croatian matters (other then “prsut” and “prosek”) , but I would not like to disappoint couple of my loyal customers.

[darcy]

Anybody aware of any new developments in this area? Any news about the new prices for 2009 high season accomodation? My buyers are relaxed, I think sellers are on the edge - any advise?

[Sasha]

Yesterday the Minister for Tourism Bajs said it will be tough in 2009, but as usual he is still an optimist. There will be more money available for publicity and promotion of CRO tourism.

We hope for the best!

[darcy]

Sasha, I can't ask your minister to bail me out if I make it wrong, so I have to think about the appropriate discount now to fill my bookings - not too high, not too low - just right. I also can't be optimist without the appropriate risk assessment.

Your minister will receive the same salary no matter what happens in 2009 if the current government is still in power. Are you employed in the Croatian public service?

[mambo]

Well, I don't think that you need to be a rocket scientist to make some predictions for the 2009 season, it is all a matter of deduction.

At the moment we have a bit of a crisis in the world, companies are closing, people are losing their jobs, banks raise interest rates and are unwilling to borrow money.

So what could be the reaction of many people in Europe ?
If you already lost your job or stand a good chance of losing it, you will face a much lower income, which means you cannot spend that much on a holiday. In fact many people will not be able to afford it anyway.
If you did not hear anything about your company being in trouble chances are that you will notice the economy slowing down.
People are afraid, so start consuming less, trying to save some money for the bad times.

The first things that will go out of the window are the luxury items, things you don't really need at this moment. Expensive holidays are one of those items and I dare to bet a nice amount of money that many people in Europe (and around the world) will start looking for cheaper places for their holidays.
Where ?

Marocco, Turkye, at home etc.

Croatia is one of the most expensive countries in Europe with regard to accomodation and the fact that you basically have to come by car is not really positive.
Unless Croatians hotels drop their prices drastically they will see numbers go down very rapidly. Same goes for the apartment owners. If I can rent a complete apartment (kitchen, living room, dining room, bathroom, bedroom incl internet, telephone, television, airconditioning, cleaning service and breakfast) for 40 euro per day in Seville, Spain the conclusion is simple. With 100 euro per night here in Croatia the prices are simply too high.

And when people in Europe have the choice between 2 weeks holiday in the sun in Marocco or Turkye, incl air travel, all in hotel for the whole family or 1 week with your own car to Croatia........the choice becomes extremely simple.

For those who don't understand this human behavior....................they should get out of the tourist business and go back to school.

[darcy]

Mambo,

Thanks for your input. So, what is your bottom line - 10% off, 20% off, 30% off, 50% off or close down for 2009 as it might run with a loss. (Hotel chains can run with the loss, I do not want to.)

[mambo]

What the season of 2009 will bring us may not be clear until we see the real extend of the crisis. Soon we will have Obama taking the office, the G-20 perhaps coming with ideas, but perhaps also the collapse of the US and European automotive industry. When they fall over we will see a ripple effect and many other industries will fall over as well, having a huge effect on our economy.

It is always said the very rich will still continue to live their life the way they used to, so the upper segment will be fine.
It will be the middle segment which will get hit and this is exactly the segment the main hotel chains were aiming at. Figures were already down over the last year, it could become a massive drop in case this crisis continues to develop the way it is doing now (read: depression).

I expect we will see many people making late reservations, not willing to commit in uncertain times.

If you have an apartment you basically have nothing to do with the prices of the hotels and if you can resist the pressures of the neighbors I would approach it differently.
I would look at the occupancy rate over the last few years. If you see a down trend it is time to take some action. If there is an uptrend it would be nice if you can continue the trend, but in both cases you will need to know why the trend exists.

All owners of apartments have the desire to have a 100 % occupancy rate all year long, but you cannot call that realistic. I only hope that you don't calculate the price of your room according to the ancient Croatian method:
required/desired amount of money = last year's occupancy rate x room price.

That is the easiest way of going fully down the drain.

My approach would be different. I would figure out what my minimum required amount of money would be (and minimum does not mean: desired).
Then comes the difficult part, estimating the price of the room. Yes you may be allowed to ask a fortune, but is that clever ?
Like Lee Iacocca (Chrysler) once said: I have zero jobs of 20 dollars, but I have 1000 of 10 dollars.
This means that lowering your price may result in a much larger pool of potential guests, thus raising your occupancy rate and..........making you less susceptible to sudden changes. If you have 10 guests who pay a little less the impact of one cancelling is a lot less than a cancellation of your one customer who pays a fortune.

So, once you have set your price it is time to start marketing your apartment and doing it in such a way that you don't spend fortunes on the marketing. Go out and find your customers instead of the other way around (them finding you).

Some locals here in Istria still say that they don't want to rent their apartments for less than a certain amount of money. 'I need 80 euro per day minimum', but they don't explain why.

If tourists want (or need) to move to cheaper countries then perhaps you may have this attitude, but your place will be empty. In this crisis people simply don't have that money, so they will not stay in your apartment.
Not lowering your price is clever ? Not really.

Maybe you should try to find to lower the total cost of a stay in your place (which includes travel).

Some people offer an apartment with satellite television, internet, air conditioning, bbq, swimming pool etc and because of these items they want 100 euro per day.
But what should the tourist do if he likes your location, likes the apartment, but cannot care less about the internet, the television or the swimming pool ?
He has to go somewhere else or pay for the things he does not want ?


Why not take your apartment apart and sell all the options separate ?

Make one basic rate and everything else is optional (even the bed linen and towels).

This will put the apartment in reach of basically everyone. Those who can spend money can go for an all in rate and those who don't have the money will go cheap, but chances are they will spend extra money when they get to your place.

To sum it up:

This crisis may give you opportunities to increase your business, but that will only happen when you do it yourself. Waiting for others to come and do it for you won't work.
If other Hotels and apartments are too greedy..............that is a perfect opportunity for you.
Don't let them run your business, look at the market and play with it.

Adjust and overcome is the best way of fighting this crisis. And remember, anyone who goes bankrupt is one competitor less.

[ray51]

Based on what I've heard here , about the last season's experiences ,
it doesn't take Agatha Christie's Hercule Poirot to tell you that not many Belgians were likely to return to Adriatic shores and isles in anycase , even before the shocks of the Credit Crunch and all the ensuing crisis ;
( since they are well known for their liking to eat and drink well , to enjoy their comforts , to be entertained and to take interesting and/or exotic excursions...preferably : at realistic price-levels , too ...)
but , that still leaves some east-EUropeans , Russkies and others , to address the main pitch of marketing at , so much for my 3EUrocents' worth of opinion...

[darcy]

In my case, the decision is not that easy. It is not only about renting the place, it is about my market credentials. If I close for 2009, my client will say - he is retiring next year. If I set the price too high or too low, my clients will say - he had lost the edge.

[hansel]

I agree with Mambo (and thanks for a nice bit of analysis Mambo), we still don't know what the interest for 2009 season will be and I would not look at the predictions of the Ministry as they are too general, i.e. include all sorts of accommodation and we need to be more specific.

In my opinion the financial restrictions of the potential tourists might even have a positive impact on apartment/private accommodation bookings as people might shift from expensive hotels to apartments as long as the prices for the apartments are realistic.

Just done the price list for 2009 and it wasn't easy. All in all I decided that it was only fair to the tourists and myself to have different prices for different group sizes so lowered slightly the prices for a group size 2 and increased slightly for a group size 4 in hope that this will produce more bookings in early and late season when I usually have couples and not change my bookings in the high season with which I am anyway satisfied.

I tend to look at the price per person and compare it with the price of an average hotel. The price needs to be much more appealing so if a family of 4 wants to come to a good location in Rovinj for a week it needs to be substantially less than in one of the local hotels for all of them.

Also agree with Darcy's comment about market credentials. There is so much on offer and lots of it is of a suspicious quality and I don't wish to identify with those through matching their prices. In the last three years didn't have a single visitor who complained about my apartments so why underestimate the business.

Darcy, you might make it very easy for yourself and not change the prices from the last year. This way the clients might just say that you have taken economic changes into account but your credentials stay. I did this last year as I didn't have enough trend to do a proper analysis and it was fine, increased bookings for about 25% although there was some extra advertising.

And what is it that you have Darcy?

[Sasha]

Fantastic analysis Mamo, you are gold!