Newly released data for July shows tourist numbers were up across the main holiday destinations in Southeast Europe, which have benefitted from concerns about terrorism and political unrest in rival destinations in the southern and eastern Mediterranean. The question now is whether governments and private sector investors in countries from Croatia to Romania can build upon this year’s rise in tourist numbers and continue to attract larger numbers of holidaymakers in future.

Visitor numbers in Croatia and Montenegro on the Adriatic, and Bulgaria and Romania on the Black Sea were up compared with last year in both June and July. Looking at the July figures, the rises ranged from 15.7% in Bulgaria to 2.1% in Montenegro. While tourist numbers typically peak in August, data from the first two months of the summer indicates that all four countries had a strong tourist season.

This is part of a wider trend that has seen a similar surge in the number of tourists visiting Italy, Portugal and Spain this summer. Spain in particular has had a great season, with the number of international tourists up by more than 10% in the first seven months of 2016.

Data for this year also indicates that Russian tourists are returning to Southeast and Western Europe, after a dip in numbers following the imposition of tit-for-tat sanctions by Moscow and Western countries following Russia’s annexation of Crimea in 2014 and its subsequent involvement in the conflict in eastern Ukraine.

By contrast, tourists have shied away from usually popular destinations that have been hit by terror attacks. Turkey’s tourism sector has been hit by the perfect storm of an attempted coup, repeated terror attacks including at Istanbul’s Ataturk Airport, a diplomatic spat with Russia, and unrest in majority Kurdish areas and along its border with Syria. As a result, Turkey saw its biggest ever drop in tourist arrivals, 40.8% year on year, in June. Numbers were also down by 37% y/y in July. The steepest fall was in the number of visitors from Russia, which dropped 93% in July after diplomatic relations between the two countries were damaged by Turkey’s downing of a Russian jet over Syria in 2015.

It is a similar picture in Egypt, where added to the constant threat of terror attacks targeting tourists, Islamic State appeared to be behind the blowing up of a Russian Metrojet plane flying from the resort of Sharm el-Sheik last November. This was followed by the as-yet unexplained EgyptAir crash in May. Arrivals to Egypt fell by 59.9% y/y in June, with the decline softening slightly to 41.9% in July, according to CAPMAS data. Again, Russian tourists accounted for 60% of the fall in visitor numbers.

In the northern Mediterranean, a series of deadly terror attacks including in the seaside city of Nice have resulted in a 15% fall in the number of people visiting France this year, according to the Tourism Office in Paris. Greece has also become less popular, most likely due to years of political unrest and the country’s struggle to deal with the migrant crisis.

A safer southeast

By contrast, the countries of Southeast Europe, which are generally perceived as safe, have seen a steady growth in visitor numbers. A July European Bank for Reconstruction and Development (EBRD) report, “Tourism in south-eastern Europe - driving the recovery?”, points out that tourism is making a growing contribution to GDP in countries in the region.

“These countries are likely to be benefitting from the political turmoil across rival destinations in the Southern Mediterranean. In addition, the perceived increasing threat from terrorism has diverted European and Russian travellers towards destinations closer to home,” says the report.

“In light of the security risks in other popular markets, SEE can expect to see further rises in tourism in the coming years, which would help consolidate the economic recovery under way in the region,” it adds.

This is confirmed from within the region. “Romania is becoming more and more a destination of interest for the foreign tourists and therefore, for investors. One of the reasons for the increased attractiveness is the sense of security provided by our country as a tourist destination, in the current geopolitical context,” Claudiu Vrinceanu, state secretary responsible for business environment and tourism at Romania’s economy ministry, tells bne IntelliNews.

“Croatia now has a recognisable tourist identity and every year the quality of its tourism supply grows. With this, the number of visitors and their spending increases which again attracts new investments and so on. Perception of Croatia as a safe destination in view of recent global events also helps,” agrees Željka Krhač, senior advisor in the investment promotion division at the Agency for Investments and Competitiveness in Croatia. Krhač forecasts that visitors to Croatia this year will exceed last year’s by around 5%, and they will spend about €9bn in the country.

While tourist arrivals this year have at least partly been pushed up by problems at alternative destinations, Krhač points to evidence that investors in the sector are trying to build upon this to retain and attract more visitors in future years. “For the last couple of years, there [has been] a positive trend in both actual investments and expressed interest from investors in the Croatian tourist sector. However, this year we have definitely witnessed a boom, with investments… exceeding last year’s by 35%,” she says.

A total of 40 new or completely renovated hotels are expected to open their doors to the public this year, accounting for around half the investments in Croatia’s tourist sector, with money also going to campsites, marinas and various other facilities.

This investment is important, since as Gunter Deuber, head of CEE research in Vienna at Raiffeisen Bank International, warned in a recent interview with bne IntelliNews: “The good tourism season was mostly related to external factors as other fashionable tourist destinations in and close to Europe are not doing so well. Croatia has benefitted from weaknesses elsewhere, but this may not be a sustainable trend.”

However, according to the Croatian National Tourist Board (CNTB), the upturn in numbers is not due to any single factor, with drivers including the large amount of new accommodation and other facilities launched every year, its reputation as a safe and affordable destination, and the board’s own efforts to raise the profile of Croatia abroad. “One of the key objectives of a new communications strategy is to strengthen the national tourist brand, and to shift away from the perception that Croatia is the ‘land of sun and sea without a lot of additional content, suitable for visit only during the summer’,” a CNTB spokesperson said. “Our key challenge is to raise awareness of the richness of Croatian tourist offer throughout the entire year.”

Also on the Adriatic, neighbouring Montenegro has become the location of numerous mega-projects targeting the high end of the market, including the Porto Montenegro marina and the Lustica Bay luxury resort. This has also been heavily promoted by the Montenegrin authorities. “It is the stated goal of the Montenegrin official tourism policy to develop higher-end tourism and certainly that has been the focus of the major foreign investors in Montenegro, including ourselves, in recent years,” says Darren Gibson, CEO of Lustica Development.

He points out that the World Tourism and Travel Council estimates that Montenegro will be among the five fastest growing tourism economies per capita globally in the next ten years. “We believe this will be fuelled by increasing destination awareness, improved accessibility (particularly air traffic) and the improved tourism offering currently in development,” Gibson says.

To Transylvania!

Further to the east, Romania has also seen a spike in tourist numbers encouraging higher investment. The head of the Romanian Federation of Employers in the Tourist Sector (FPTR) Mohammad Murad told Profit.ro in August that the good tourist season this year could lead to investments of €100mn at seaside resorts in 2017. He expected accommodation capacity to expand by 5% in addition to investments into bars, clubs and restaurants.

“More and more Romanian entrepreneurs are investing in tourism,” says Rǎzvan Pascu, tourism marketing consultant at Travel Communication Romania, pointing out that many Romanians who have sold businesses and now have liquidity are choosing to invest in the country’s tourism sector. “Also we note that foreign investors take Romania into consideration more closely, especially French and Austrian investors.”

Among those investing in the sector is Daniel Truica, the owner of Romania’s largest online travel agency, Vola.ro, which has funding from venture capital firm 3TS Capital Partners. Vola.ro has until now focused on sending Romanian holidaymakers abroad, but is currently working on a new offering for the domestic market. “Without a doubt we expect to see a growing number of tourists visiting Romania,” Truica tells bne IntelliNews. “The numbers have been increasing steadily in the last few years and we believe that at the moment domestic tourism is very well positioned to benefit from the current state of affairs in neighbouring countries which compete for tourist attention.”

Having said that, reforms and investments will be needed if Southeast European countries are to attract more foreign tourists, especially from Western Europe.

The World Economic Forum (WEF) travel and tourism competitiveness index 2015, which is based on a set of 90 indicators, highlights some problems in the region including inadequate infrastructure, a poor business environment and underdeveloped air transport. While Croatia is among the world’s 40 most competitive countries, Bulgaria, Montenegro and Romania barely make it into the top half, and other countries from the region perform even worse. All Southeast European states are less competitive than Western European destinations such as France, Italy, Portugal and Spain.

Western tourists often choose to visit countries like Romania and Bulgaria because of the low prices, but then complain about quality of service. Some problems are hard not to notice; Romania’s top seaside resort, the stunning 8km-long Mamaia beach, is bordered at one end by the Petromidia oil refinery and at the other by a large new sewage works.

If resorts in countries like Romania are to move from primarily catering to local and regional tourists to becoming true international destinations, they will have to start catering to different and more stringent requirements. Often too, it is not a case of higher or lower standards but a different offering altogether. As Pascu points out, Romanians tend to holiday on the Black Sea coast in summer and the Prahvoa valley’s ski resorts in winter, while many foreign visitors are interested in “rural” or “authentic tourism”.

Doing this requires a range of actions from building the country’s brand abroad to the weightier and more expensive task of improving infrastructure. “Although the number of foreigners visiting Romania has been increasing in the past years, I do agree that there is still a lot of work to do to provide a memorable travel experience to foreigners,” says Vrinceanu.

Things are already changing, according to Pascu. “The gap between what Romanian tourists prefer and what foreign tourists look for… is getting smaller and smaller, and the true Romanian tourist gems are emerging,” he says, naming the Danube delta and Transylvanian villages.

Truica acknowledges that Romania cannot compete with Turkey or Greece for beach holidays, or Austria or France for winter sports. “Our view is that Romania needs to find a niche area such as authentic tourism, adventure tourism, rural tourism… and to promote those niches. Promotion is the key word here,” he says, adding that, “Of course, it would help if the private sector was helped by a coherent government strategy when it comes to tourism.”

The window of opportunity is relatively small. Tourist patterns shift rapidly, and tour operators and airlines are quick to respond to hikes and dips in demand to make sure they are not left with empty hotels or half-full planes. While there is no current end in sight to the spectre of terror attacks, other events such as political instability may have only a temporary impact on a country’s reputation – as shown by the return of tourists to Tunisia this year.

However, investors in Croatia, Romania and other countries are hopeful that by improving and expanding facilities in their countries, in some cases backed up by state-sponsored publicity campaigns, they can keep the tourists who visited in 2016 coming back for more.