Government subsidies efficiency analysis in the tourism sector in Croatia

Purpose – The purpose of the work undertaken was to assess to what extent the government subsidies influence the tourism volume in Croatia in order to be regarded a key influencing mechanism for meeting the objectives of the tourism development strategy. Design –Tourism is seen by many as the most important sector in the Croatian economy. The key driver in generating this revenue is costal Croatia focusing primarily on well-established landmarks. Given the key directions set forth by the Croatian tourism development strategy, further development is seen to be driven by promoting tourism in continental Croatia in addition to the traditional areas. This is expected to cut down seasonality and generate diverse new products and services. The corresponding investment and incentivising strategy relies largely on public subsidies to co-finance development projects at landmarks yet to attract substantial touristic demand. Methodology – The paper analyses the efficiency of the subsidies from different public sources by investigating the subsidised amounts with the corresponding tourism volumes. First, baseline volumes were defined for the 2011 financial year using the overnights and employment data. The 2012 and 2013 volumes were then analysed against the baseline data. All the data assessed were geo-referenced to allow for the spatial analysis of the generated effects to be made. Approach – A research hypothesis was set that, in continental Croatia, only marginal advances in the generated tourism volume may be expected as a direct consequence of the subsidised development projects primarily due to the lack of the tourist infrastructure needed. To assess the geographic distribution of both the subsidies and the corresponding volumes, advanced geographic information software (GIS) tools were applied on the NUTS III level statistical data. Findings – Discrepancies in volumes not matching the subsidised amount have been identified and recommendations have been given to mitigate these adverse effects. The paper advocates changes in the subsidising policies to be made, focusing primarily on geographic areas which are capacitated to provide significant immediate positive effects on performance indicators such as employment, GDP and others. This is seen particularly important in times of major economic crisis. Originality – The research utilises detailed NUTS III level data which were geo-referenced to allow for spatial analyses to be made. A state-of-the-art spatial model of the research territory was generated and advanced GIS software utilised in the analyses undertaken.