Hospitality Facilities
Hospitality Facilities
Business Model Description
Establish and operate hospitality facilities for accommodations using local value chains and local cultures and heritage in areas such as preselected cities, spa areas, and mountains. That entails capital, land, building permits, know-how, technology, workforce, and experienced staff. If it's built-in protected areas, it needs a permit for construction. Serbia has 28 spa regions and 19 particular climate areas suitable for investment.
Expected Impact
Promote economic growth and job creation while prioritizing diversity, local cultures and heritage, and equality.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Serbia: Southern and Eastern Serbia
- Serbia: Vojvodina Autonomous Province
- Serbia: Šumadija and Western Serbia
Sector Classification
Infrastructure
Development need
Progress towards target SDG 9.1 indicates contradictory trends. Progress is made in road and air transport, and movement away from the target in rail, pipeline, and inland waterway transport. Concerning target SDG 11.6, a decrease in the municipal waste recycling rate is registered (2). The poor state of water infrastructure is identified (3).
Policy priority
The aim of the high-level policy Spatial Plan of Serbia (2021-2031) is better accessibility of traffic, infrastructural, social and communal services, and integrated infrastructure; higher quality of life; economic development and functioning of all/critical activities based on sustainability, circular development and mitigating the impact of climate challenges (4).
Gender inequalities and marginalization issues
About 70% of Roma men and women in the Republic of Serbia live in spatially and socially segregated settlements, in deplorable and inadequate living conditions, and without access to basic infrastructure. The majority of homeless people are women over 65 years old, and about 31% are Roma men and women. Young LGBT* people who mostly live in families that do not approve of their sexual orientation also encounter difficulties, and young people increasingly end up homeless after "outing" (5).
Investment opportunities introduction
Policies of Serbia are focused on the implementation of traffic networks, reconstruction and development of infrastructure; increase in electricity generation and lift energy efficiency (4). 4 billion EUR are planned to be invested in reconstructing the railway infrastructure (7). Renovation of rural infrastructure for 70 million EUR is planned (8).
Key bottlenecks introduction
The age and inefficiency of the transmission and distribution power grid and facilities and the quality of trade and transport-related infrastructure show a decreasing trend (3, 6). Only few local governments have waste collection centers ("recycling yards") (1).
Real Estate
Development need
Serbia's real estate sector needs development in residential and tourism segments. Construction of new energy-efficient housing is slow, with outdated units needing renovation. The tourism sector presents opportunities for developing accommodations like hotels and resorts due to Serbia's cultural and natural heritage (4).
Policy priority
Serbia's real estate focus lies on housing support, management, maintenance, and improvement of residential buildings, primarily through energy efficiency. Rehabilitation and reconstruction of informal settlements and encouraging social inclusion and cohesion are priorities within defined urban development programs (4).
Gender inequalities and marginalization issues
The gender ratio in the field of the mortgaged property is an essential indicator of credit standing as this type of property is used as collateral for buying real estate or investing in a business. Data from the Republic Geodetic Authority from 2019 reveals a significantly higher share of men who own mortgaged property at 65% (9).
Investment opportunities introduction
Serbia is the most competitive in obtaining building permits, ranking 9th among the most attractive destinations for investments. This means a reduction in procedure costs by 18% (4).
Key bottlenecks introduction
Considering the energy efficiency focus in Serbia's real estate, investing in energy-efficient homes or renewable energy systems can be uncertain and may not provide the returns investors expect due to unpredictable demand, as much as consumer seasonality character (4).
Real Estate
Pipeline Opportunity
Hospitality Facilities
Establish and operate hospitality facilities for accommodations using local value chains and local cultures and heritage in areas such as preselected cities, spa areas, and mountains. That entails capital, land, building permits, know-how, technology, workforce, and experienced staff. If it's built-in protected areas, it needs a permit for construction. Serbia has 28 spa regions and 19 particular climate areas suitable for investment.
Business Case
Market Size and Environment
USD 100 million - USD 1 billion
Average annual growth rate: 5% - 10%
Serbia registered 2,591,000 tourists in 2021 (36).
According to the tourism development strategy, the projected number of overnight stays was expected to reach 9.6 million in 2020. The total number of overnight tourist stays in 2015 was 6.7 million, meaning an average annual growth rate of 7.6% is expected in this category (21).
The basic parameters for evaluating the growth model refer to indicators of the state of tourism in the Republic of Serbia taken for the period from 2006 to 2015: estimated income of 1.05 billion USD in the food and accommodation sector, of which it is estimated that 160 million USD is in the accommodation sector (21).
Indicative Return
5% - 10%
The approximation of the average hotel investment ROI is less than 10%. However, hotel infrastructure investments can vary widely depending on the type of investment, location, market conditions, and size (18).
Investment Timeframe
Long Term (10+ years)
With an ROI of below 10%, the expected payback period is around 15 years for hotels based on stakeholder consultations (18).
Ticket Size
> USD 10 million
Market Risks & Scale Obstacles
Market - Volatile
Business - Supply Chain Constraints
Capital - CapEx Intensive
Impact Case
Sustainable Development Need
Accommodation and catering services accounted for 1.1% of GDP in 2020 and almost 80,000 direct jobs in 2021, making it the most severely affected sector by the COVID-19 pandemic due to travel restrictions (37, 38).
By the Travel & Tourism Competitiveness Index, Serbia was in 83rd place out of 140 observed countries in 2019. By the 6th pillar - prioritization of Travel & Tourism, Serbia was in 109th place, and by the 13th pillar - Natural Resources were in 127th place (39).
Serbia's tourist offer is undeveloped due to the average low quality of accommodation, and tourist infrastructure, underdevelopment of tourist products for foreign demand (especially spa, cultural, and ecological products), and insufficient contents of high offer (marinas, etc.) (21).
Gender & Marginalisation
Inadequate development policies and low investment in rural areas led to poverty, unemployment, and underdevelopment of infrastructure. Rural population faces inflexible labor market, low income, standard of living, and quality of life due to insufficient modernization and competitiveness (41).
The tourism industry benefits from women who are majority of employees in this sector. An unintended consequence may be a vertical division of labor in which women are concentrated in the lowest-paying positions. Women in the tourism industry are more likely than men to experience discrimination and sexual harassment at work place.
Expected Development Outcome
Hospitality facilities increase tourism, create jobs, and drive local economic development. It aligns with intending to boost direct tourism employment by 50% and increase GDP (4).
Building new hospitality facilities in the vicinity of over 122 locations in the Republic of Serbia with internationally recognized natural, historical, and cultural attractions improve the place of the Travel & Tourism Competitiveness Index of Serbia (4).
Investment in hospitality facilities enables raising the quality and intensity of the existing tourist offer, as well as strengthening existing and introducing new tourist products (21).
Gender & Marginalisation
Hospitality facilities create decent jobs for women, especially in rural areas, by developing the significant potential of rural tourism in the Republic of Serbia (21). Consequently, it leads to the improvement of infrastructure and quality of life in rural areas.
Primary SDGs addressed
8.9.1 Tourism direct GDP as a proportion of total GDP and in growth rate
N/A
N/A
12.b.1 Implementation of standard accounting tools to monitor the economic and environmental aspects of tourism sustainability
N/A
N/A
15.b.1 (a) Official development assistance on conservation and sustainable use of biodiversity; and (b) revenue generated and finance mobilized from biodiversity-relevant economic instruments
Less than 5 national biodiversity-relevant taxes and 6 biodiversity-relevant fees and charges on national level (2020) (25).
N/A
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Corporates
Public sector
Indirectly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Outcome Risks
Hospitality facilities can lead to over-tourism, which can result in overcrowding, increased traffic, losses of the natural habitat of animals, and strain on local infrastructure (19).
Hotel operations can negatively impact the environment, including waste generation, excessive use of water, and air pollution (19).
Impact Risks
Tourism investments may follow standard approaches and neglect sustainability and inclusivity principles (42).
Investments in hospitality facilities can result in an unequal distribution of benefits, with marginalized communities receiving fewer economic benefits.
Impact Classification
What
Hospitality facilities result in increased tourism and economic growth, job creation, higher tax revenue, better infrastructure, and property values.
Risk
Tourism's profit-driven focus often can neglect environmental and community concerns.
Impact Thesis
Promote economic growth and job creation while prioritizing diversity, local cultures and heritage, and equality.
Enabling Environment
Policy Environment
The Tourism Development Strategy Priority of 2016 is the improvement of tourism infrastructure based on the principles of sustainable development, which also improves other forms of economic growth (21).
The Spatial Plan of Serbia's Goal, 2021 is the spatial development of tourism, integrated into the economic, social, cultural, and ecological development of territorial units, urban and rural settlements, and infrastructure, activation, and protection of tourist areas (4).
The Action Plan for Implementing the National Youth Strategy, 2018 has a focus to support for youth entrepreneurial ideas with an environmental protection component through promoting renewable energy sources, ecotourism, and other forms of the green economy (26).
One of the focuses of the Sports Development Strategy, 2014 is an improved relationship between sports and tourism and the environment (27).
Financial Environment
Financial incentives: The regulation on attracting direct investments in the hospitality capacities regulates conditions and methods of attracting direct investments in the hotel accommodation services sector in spa and climate resorts and keeping records of approved incentives (32).
Fiscal incentives: The Law on Investment in Serbia provides tax incentives to investors, including those in the hospitality industry, such as reduced corporate income tax rates and exemptions from customs duties and VAT for imported equipment and machinery (40).
Other incentives: Serbia's liberal foreign exchange regime and its network of Bilateral Investment Treaties provide foreign investors in the hospitality industry with significant protections and privileges, including the ability to freely repatriate their profits and capital (23, 24).
Regulatory Environment
The Tourism Law, no. 17, 2019 regulates conditions and methods of tourism planning and development; tourist organizations for the promotion of tourism; tourist agencies; services in tourism; register of tourism; other issues of importance for the development and improvement of tourism (28).
The Law on Planning and Construction, no. 52, 2021 regulates conditions and methods of spatial arrangement, arrangement and use of construction land and construction of buildings; supervising the implementation of this law and inspection supervision (29).
The Environmental protection Law, no. 95, 2018 indicates the need for strategic assessment in the field of spatial and urban planning or land use, tourism, protection of natural and cultural assets, flora and fauna and their habitats (30).
The Law on culture, no. 47 and 78, 2021 indicates the strengthening of the capacity of culture, and its connections with other areas, such as tourism and the integration of cultural development into the socio-economic and political long-term development of a democratic society (31).
Marketplace Participants
Private Sector
Corp. Jvjv, Mk Mountain Resort, Alco Group Hotels, Belaga Management Company, Delta Hospitality, Doo Brzmin Brzeće, Bmp Ad Novi Beograd, Montvision Doo, Metropol Palace Doo.
Government
Ministry of Construction, Transport, and Infrastructure, Ministry of Tourism and Youth, Ministry of Mining and Energy, Ministry of Rural Care, Tourism Organization of Serbia.
Multilaterals
United Nations Development Programme (UNDP), Western Balkans Enterprise Development & Innovation Facility (WBEDIF), World Tourism Organization UN (UNWTO), World Travel & Tourism Council (WTTC), UN Environment Programme (UNEP).
Non-Profit
Association of Tourist Agencies of Serbia (UTAS), Association of Hoteliers and Restaurateurs of Serbia (HORES), Association for Nautical Tourism of Serbia Natus, Serbian Spa Association, Center for Responsible and Sustainable Tourism Development (CenORT).
Public-Private Partnership
Terra Panonica's Rusanda spa project is a top 8 finalist in the "PPP as Development Potential" contest. The public partner contribute USD 1.3 million for land, building and equipment, and the private partner adds USD 1.2 million for infrastructure and documentation plus USD 80,000 for working capital (22).
Target Locations
Serbia: Southern and Eastern Serbia
Serbia: Vojvodina Autonomous Province
Serbia: Šumadija and Western Serbia
References
- (1) Ministry of Environmental Protection, Waste management program in the Republic of Serbia for the period 2022-2031, 2022. https://ekologija.gov.rs/sites/default/files/2022-02/program_upravljanja_otpadom_u_rs_za_period_2022-2031._god_0_2.pdf
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