by Barry Napier, July 2006

There are plans, and there are master plans. Some work. Others fail miserably. For Istria, the rising star amongst tourist destinations, its Ten Year Plan is bold and sophisticated. And there is every indication it offers this Croatian gem a very bright future. It also offers investors a once-in-a-lifetime opportunity to get in on the ground floor.

Rather than go down the easy route taken by Spain and other quick-earners in their early years, Istria intends to take tourism by storm, but with style. It doesn�t want quick money, spent by beer-swilling drunks and young louts. Not for Istria the low-value high-trouble route. Instead, it aims for real money, spent by chic and discerning spenders. In return they will receive an authentic, quality, Mediterranean experience.

In the north-western region of Croatia, Istria is the first region to show its tourism muscle. Head of Tourism for Istria is Denis Ivo�evic, dynamic, young, cool, and suave, with plenty of ideas and the guts to try a Plan very few countries are willing to pin their hopes on. The Tourist Board and his colleagues are all united in one aim. Most young holiday venues want fast incomes, and that is why they open very cheap hotels and take in even cheaper tourists. 

In the end, this strategy is bound to bring tears, as Spain has discovered. Cheap holidays are fine, but those with real money will stay away. At first, a quick income seems a good idea. Then come the drunks, thugs and Philistines, whose idea of a holiday is to be continually boozed-up around the pool, waking everyone up with stupidity, and inflicting violence on the towns. Spain, regretting its earlier strategy, is now having to take very costly steps to eradicate the monster it has created.

Poverty in Beauty

Croatia was, right up to the 1990�s, desperately poor. It did not even have proper roads. But, in the past 15 years tarmac roads have been built to cater to the growing number of tourists. The roads are few and narrow, but perfectly in tune with Croatia�s beautiful rural environment. Most roads are still, thankfully, just tracks, and many are topped with stones.

They wind their way up mountains and hills, covered thickly with multi-genus trees, deep-green grassy plateaus, and hundreds of vineyards running down to stunningly blue sea. There are hundreds of hidden inland hilltop villages and amazing Medieval and 17th century port towns. Denis wants all of these kept as they are, because he has the intelligence to know that this is what genuine tourists want to see. 

Istria is an example of �beautiful poverty�. This can be turned-around to advantage. And this is why Istria chose such a high-risk Master Plan, developed by Spanish consultant Eulogio Bordas, head of THR Tourism. The Plan is prefaced as �The big opportunity Istria cannot miss�.

Denis believes the time is right now, with three strands coming together to form a strong economic rope: all Istria�s hotels are now privatised, the country is politically stable, and both private and public sectors are ready for partnership. This binding of three elements should provide the strength needed to make the Plan work.
 

Typical new-build villa for rental: Vizinada medieval village

Motovun, hilltop fortified village with sea mists

The Plan, targeting discerning tourists, is attractive for investors. It began with private individuals buying property; others followed with expensive new builds � luxury villas giving work to local craftsmen and suppliers. Now there is plenty of scope for hotel investors willing to be part of the Plan, both on the coast and inland.  Croatia is more than eager to help.

Denis says �The Plan claims that if it is fully implemented, it will speed-up the restructuring of tourism in Istria (and thus the Istrian infrastructure), position the region amongst the top destinations, increase occupancy and prices, kick-start better productivity, drive-up satisfaction levels of visitors, sharply push up ROI, which will in turn hasten economic growth and, as a desired added-value for Istrians, improve quality of life for locals.� This latter bonus is important, and will eliminate the simmering resentment often found when foreigners get high-value at the expense of low-paid locals. Istria, then, will be a safe place.

To bring the final Plan into being took a minimum of 350 personnel working 8,000 hours, analysing 75 secondary sources, travelling 11,000 kilometres in the process. Three initial plans were produced, and one was chosen for implementation, to be completed by 2012. The cost is a staggering 3 billion Euros.

Optimum verses Maximum

Model One would have added 4.5% growth, based on the usual run-of-the-mill approach of sun, sea and fun, but the season would only have lasted 3-4 months. Low income, short season and low growth. Model Three has a higher growth, but less than the maximum growth of Model Two (66%). 

The main feature of Model 3 is that it goes beyond mass-market income (which is, really, a scatter-gun approach with no defined market), adding value not to simple sun and sand, but to an overall Istrian experience, exploiting every part of the region�s multifaceted character, from stone roads to tiny vineyards, hills and mountains, to beaches and luxury hotels. 

The aim is to offer Istria as it is, but with flair and sophistication. Whilst Model Three does not reach maximum growth, but 18%, it nevertheless targets a higher-income market for a longer season, 7-8 months (instead of 5-6 months). If the market segment is richer, it means a far higher potential income generally. 

What this means is that instead of going for maximum growth (pulling out all the stops all the time but without a rise in quality), Istria is going for optimum growth (giving the very best for the best results). In this way, it should sustain a far better growth record over a very long period of time, without �running out of steam�.

This is found in the details of the Plan. There will be: a 50-60% rise in room income; 45-50% more tourists; average 35-40% room occupancy (I don�t think this includes rural B&B�s specialising in top class cuisine); an ROI of 10-15%; an almost doubled employment rate and �social values� improvement. This latter point is not just a vague idea. Denis says that Istria aims to satisfy the tastes of visitors without sacrificing the well-being of its people. The idea also means that if locals are not threatened by visitors� confidence or overwhelmed by their wealth, they will be more comfortable with their lives. In itself, this will have the spin-off of providing a better, genuine service, and an image of well-being will be more added-value.

Most plans simply develop high-rise hotels and quick-bucks, turning every resort into a bland clone. Because they are clones, visitors inevitably say �It could be almost anywhere, because they all look the same.� This is why this Plan develops the Istrian personality. Formerly based on agriculture and near-poverty, such personality is bound to be more rounded and strong, enhancing all the skills and gifts already within the Istrian people.

�Above all,� says Denis, �growth must be sustainable�. He adds �If the ROI is attractive enough, then investors will provide the financial basis for proper growth and all the other benefits needed.�
 

Cobbled Medieval street, Rovinj

View from Rovinj

In the Plan, 13 sectors are given high priority. Lowest priority are cheap-income businesses, such as one-star campsites and hotels. These will either be replaced altogether or improved vastly to reach a far higher star-rating. It stands to reason, then, that foreign investors need not concentrate only on new builds, they can also propose buy-outs of low-star establishments with potential.

Highest priority will be given to proposals involving golf, corporate meetings, large marinas, marine biology, special-interest holidays, the higher-end hotels (3 to 5 star), anything to do with �wellness�, gourmet venues, apartments, touring, city and short breaks, special events, anything nautical, plus cultural and sports tourism. 

Whilst these higher-priority proposals have to compete with the finest in the world, lower-status options only invite quick-fix finance with no real prospects. So, the competition element is seen to be a welcome challenge. Part of the process is to �cluster� new and vibrant ventures in different areas of Istria, so that visitors will have a wide variety of high-quality venues to go to in each area, all of which will be different.

Positioning

The �Central Identity� is referred to as �The Green Mediterranean Hide-Away�.  Visitors who enjoy a sound ecosystem will like Istria - it is organic from the earth up, and its food and wines have no preservatives or additives. The forests grow everywhere and everything is naturally lush. I also like reference to Istria as �green and blue� - green for land and blue for sea.

From this Central Identity comes the �Extended Identity�, involving a healthy way of life, everything on a human scale, safety, romance, authentic towns, a clean environment, pine-tree peninsula, family values, education and relaxation. All of these are part of Istria�s positioning strategy, worked out through each �cluster� (a cluster consists of a variety of personnel, public and private, who guide each area of Istria along the Plan�s path). 

There are seven clusters in total. Anyone wanting to invest in Istria should take special note of the requirements of each cluster and area, because they each have their own positioning strategy within the �big picture�.

Individual Clusters

The individual areas with their clusters are identified as U-N, P, V-F, R, P-M, L-R and H. (These refer to municipalities within Istria. See below).

Specialist interests in each area include:

U-N: Activity and sports holidays, short breaks and anything related to health and wellness. Also includes a fishing village and a tranquil way of life� and amazing cuisine.
P: Here, too, will be active holidays plus cultural elements, art and traditional fishing. The first church in Europe is sited here, and its inner roads are still untouched Roman.
V-F: Emphasis here is on the actual town; �dreamy� and historic in a lovely Mediterranean setting.
P-M: Culture, history, corporate meetings, and a natural beach environment for both active and nature-type family holidays.
L-R: This is where nature and national heritage mix. Plenty of hills and sea, and a place for artists (though anywhere in Istria is artist-country!).
H: Is the inland parts with natural beauty, traditional villages and lifestyles, culture and wonderful rustic cuisine. It is a hiker�s paradise.
(Rovinj, though not mentioned in this list, is a stunningly lovely port town full of romance, with equally stunning views).

Growth

By restructuring the economy and introducing the desired model, Istria will decrease its existing (cheaper) beds by 41,500, but increase new (more expensive) beds by 81,700, thus making a net increase of 40,200 beds. This is an indicator for hotel investors. By 2012 the number of extra beds (40,200) is not as high as with Model 2, but of greater impact and sustainability.

 To effect this, the number of campsite beds will decrease by 19%, apartment and villa beds will increase by 120% and hotels beds by 81.6%. Therefore, investors should ignore campsite developments and go for apartment and villa builds for holiday rental, or new/well-refurbished hotels. There is particular interest in integrated new resorts (e.g. golf, apartments, restaurants, and central hotel, near historic towns) throughout Croatia.

There will be a reduction of 22.9% in private builds for personal accommodation but a staggering 700% increase in rural/agro accommodation. This latter development should not be underestimated. The agro-accommodations combine excellent top-class rustic cuisine and local wine, with charming places to stay in exquisite surroundings. And each has its own loyal band of local customers. This could provide a unique investment opportunity for the right people, but only if they retain the Istrian character and follow the ideals of the Plan.

As can be seen from the variety of accommodations, there is a huge variety of options for inward monies, right up to 2012 and beyond.
 

Ice cream shop at night, Porec

Lunch in the sun, Porec

These include new resorts, golf courses with hotels and other top attractions, rural hotel resorts, specialist tourism areas and high-quality �wellness� centres, spas, etc., all encompassing between 8,000 and 10,000 accommodation units. The Master Plan is divided into several Sub-Plans: 

Competitiveness

All financiers know that the best deal is low output for big returns. This is the philosophy of the Ten Year Plan. But it does not cut corners. Excellent value and services must be given to visitors, so that their feeling of the experience is treasured. Once a visitor feels discomfort, or lack of security, or that he is not being given value for money, the good feeling evaporates and he is unlikely to return. He will tell his friends how dissatisfied he is, too.

For this reason Istria will be looking at 27 areas of tourism to improve competitiveness. 

6  improvements are to �hardware�: The upgrading of rooms, accessibility, sign posting (already quite good), land reserve, parking and large marinas.

8 improvements will be to �software�, including the taxation system, quality monitoring and labelling, approved tours, hospitality training and clubs to promote competitiveness, etc.

13 improvements will seek to give added-value for efforts expended. These include event management, shopping, resorts, inland towns and villages, the creation of a �Riviera� experience, etc.

A Code of Standards is being developed so that quality labels and certificates are earned and not just awarded for no reason. Websites and advertisements will all try to meet the standards, so that Istria will quickly have its own unique and outstanding image.

Investments

Istria wants to meet a large number of standards, so it has an investment in what it terms �survival� � things it must do to just remain in the tourism market. For example, by improving the infrastructure (without losing Istria�s special character); parking (e.g. taking parking away from waterfronts and placing them where cars do not spoil views); sewage and solid-waste management (vital, as anyone visiting certain parts of Spain can testify); roads (without losing the charm of their narrow and rural nature); water, promenades and lighting.

There will be improved information points, museums and sculpture parks, work done on towns and villages, setting up of panoramic view points, upgrading vineyards and restaurants, etc.

There is also an �investment to succeed�, qualified as creating art and festival venues, multi-language signage, the repair and refurbishment of derelict or old castles, themed beaches, and so on. 

To bring these investment opportunities into being, Istria will spend a lot of money to 2012; in total, E3 billion will be spent on 468 projects. Almost equal funding will be given to the development of attractions and services,  accommodation and the infrastructure. Investors should note that when Croatia enters the EU, its financial footing and property prices will soar.

The amount being spent on accommodation is in the private sector, with most of it spent between 2007 and 2009, for those with insight and flair! By far the biggest spending is all on private sectors. Largest amounts for attractions will be spent between 2010 and 1012, so there is still plenty of scope for investors there, too.

Marketing

Alongside this spending will be an ongoing and sophisticated marketing plan, covering all points of interest, giving an united and integrated approach. Intended visitor experiences will span human desires, both active and passive, from entertainment and aesthetics to learning activities and sheer escapism. So, all aspects of the human psyche are targeted, mental and physical. Istrian venue, attraction, and activity providers will all be given the opportunity to attend seminars and other learning units, to make sure they reach core standards and �cluster� aims.  Marketing will affect everyone, from the inside out!

To support this, all kinds of awards and celebrity involvement will be used. Advertising will be both online and offline, Istrian products will be made available, press trips arranged, sailing events, brochures� a total scheme. The number and type of communications with potential visitors is vast!

The idea is very simple: to promote Istria as a brand. As I have already said elsewhere, Istria is � Istria. It isn�t just a copy of Tuscany! It has places of great beauty and wonder, and it�s all natural and unspoilt. So long as Istria remembers that these are its major assets and don�t try to change what is already wonderful, its Plan will work.

Implementation

The Plan, with its many sub-plans, under the guidance of cluster groups, will involve over 2,000 basic tasks. The roles assigned to each municipality are many and very detailed. Each has been given a level of priority, and each has deadlines and costs. The planning chart I saw is huge and complex, as one would expect for such a daring and stunning Plan. One can see why only a few countries in the world have elected to use it! But, if Istria sticks to its course and to its aims, without destroying those very things visitors love to see, it will quickly be at the top of world destinations. It is already at the top of European destinations, so a take-over bid is imminent and well-deserved!

Denis Ivo�evic and all involved are using a high-risk strategy, but one that will give very high dividends within a very short number of years. This report indicates that if foreign investors get in straight away, they will reap big rewards. And, why not enjoy the unique added-value of �wellness�, so desired by Istria? Help to build a new Istria and sit back in the sun, relax, and watch the green merge into the blue and back again. A lovely country with wonderful potential. You will not be disappointed.

© Barry Napier

Barry Napier 
[email protected]