Analysis: Macedonian Tourism – II


SKOPJE, Macedonia, July 30, 2003 (UPI) — Macedonia’s tourism industry faces formidable obstacles. Low international visibility and security qualms, as well as infrastructure, transport and financing problems continue to plague.

Nevertheless, the largely undeveloped country has potential. Worldwide, industry sub-sectors such as eco-tourism, cultural tours, and mind/body tourism are growing rapidly. Here, Macedonia is ideal. The country boasts vast stretches of mountain wilderness, scores of Byzantine churches, Ottoman castles, Graeco-Roman ruins and more. Producers of mineral water, mountain teas and holistic herbal medicines can succeed. However, success in general will depend largely on branding and promotion.

In short, Macedonia has the “raw materials” (i.e., physical resources) needed. And its problems are mostly surmountable.

Infrastructure improvements continue. The largest remaining transportation project, Corridor 8, will connect Bulgaria and Albania via Macedonia. On the route are projected a highway, railroad and oil pipeline. Italy, this semester’s EU president, has pledged to finance 960 km of railway and over 270 km of roads. Other ongoing European investments in Macedonia’s telecommunications, media and food industries indicate renewed optimism for future stability.

Financing problems owe to the commercial banks’ high interest rates and the sluggish pace of government reforms. Restructuring the tax system, creating incentives for foreign investors and developing a tourism promotion fund are key, according to a recent six-month study by French consultants Louis Berger.

An official “tourist tax” of 20 denar (35 cents) is currently levied on each individual staying in a Macedonian hotel. 80 percent of revenues go to municipal tourist boards, and 20 percent to the central government. Still, under-funding remains a chronic problem for tourism initiatives. Modifying the tax structure could dramatically improve things, says Daniel Serafimovski, Louis Berger representative in Skopje.

“Someone willing to spend $100 on a hotel can obviously afford to spend a little more in tax than someone spending $20 only,” Serafimovski told UPI. “Transforming the flat tax structure into a graduated one is a relatively painless way of increasing the government’s capacity to fund tourism ventures.”

Commercial banks are cautious about lowering rates. Oftentimes a political “in” is required to getting a loan. However, a promotion scheme exists, whereby European development banks lend to the government, which is obliged to pass the money on to the banks. They then must lend to private entrepreneurs in fixed sectors and at pre-determined interest rates. According to Serafimovski, such a development fund could also work for tourism.

However, he says, “interest rates must be harmonized by region. For example, eastern Macedonia is much less economically developed. Investors there shouldn’t have to pay high rates.”

Economy Minister Ilija Filipovski praised these findings. According to him, tourism investment is crucial, because “every dollar invested in tourism returns 8 dollars.”

One month ago, Finance Minister Petar Goshev announced new tax incentives for foreign companies investing in Macedonia — a welcome development. Those investing below 100,000 euros won’t pay tax on profits, while those investing over 100,000 euros will pay 30 percent less.

Resistance to tax on profits used to be strong, says Serafimovski. “We went to the ministers months ago, and they said, ‘it will be hard, but we’ll see.’ Concerted pressure from investors helped bring this law to pass.” Stating that the government “is interested” in the tourism tax restructuring and development fund ideas, he adds that implementing the reforms could eventually help Macedonia double tourism revenues.

What kind of tourist does Macedonia seek? Having an undeveloped industry means the possibility for choice.

Greece and Turkey are dominated by foreign package tour operators. This has resulted in whole stretches of coastline becoming decimated by tacky resorts, as well as a significant outflow of foreign capital. There’s something to be learned here.

According to Arsenije Janevski, president of the Association of Travel Agents of Macedonia, “big European banks are taking over the industry. Recently, Deutsche Bank swallowed up Thomas Cook — once Britain’s leading tour operator. The banks are also investing in real estate.”

Could regional entrepreneurs be convinced to make a deal down at the crossroads? Bulgaria has posted 12-14 percent tourism growth lately, yet this may be misleading:

“a European bank offers $10 million to refurbish an old Communist hotel — on the condition that the owner works exclusively with them for say, 15 years. So they’re posting what looks like growth, but in the end they’ll be working for peanuts.”

Macedonia, Janevski believes, should avoid mainstream, package tourism and keep local ownership and control. This has economic justification: “we’d rather have 500 well-off visitors here than 5,000 without a penny to spend.”

Most private businessmen surveyed by UPI agree. Today’s individualized Western tourists are seeking something unique, whether it be a yoga retreat, a wine-tasting tour or a wilderness sports adventure. Such tourists have disposable incomes and prefer small, exclusive accommodations to traditional-style hotels.

The private sector is seen as disorganized. Macedonia’s entry into the Balkan Federation of Tourist and Travel Agents (BAFTTA) should help remedy this. The federation includes Greece, Turkey, and five other Balkan countries. For years, the name dispute with Greece stymied cooperation.

Indeed, BAFTTA represents a breakthrough for international cooperation. At the May summit in Athens, relates Janevski, “we agreed as a federation that all of the brochures, promotional materials and maps will use the name “Macedonia.” This is a very big step.”

Entrepreneurs now realize the importance of Western-style hospitality. According to Zoran Temov, manager of the Millennium Palace Hotel on Lake Ohrid, “simply put, good treatment of our guests brings more money.”

Although large state-owned companies traditionally owned the big hotels, tourism-specific companies are beginning to invest. In the early 1990’s, Skopje’s Aurora Tours became the first Macedonian agency to sell tours to Southeast Asia. Today, Aurora sells tours to 30 countries, and ranks high among Macedonian agencies.

However, fears of SARS, terrorism and a poor economy have seen Southeast Asia bookings fall by 30 percent since 2001.

This depressing trend has provoked introspection. Aurora president Slave Siracevski detailed for UPI his ambitious new project — a 5-star hotel near the eastern town of Berovo. Near the Bulgarian border, Berovo sits snug on a placid lake surrounded by forested hills. The area is popular with hikers, hunters and cross-country skiers. In autumn it seems remarkably like New England.

Siracevski is confident about his 2 million euro investment. “We are creating the best eco-tourism center in Macedonia,” he says. “Besides the beautiful setting, guests will enjoy things like horseback riding, canoeing, berry, mushroom and tea-picking, and bird-watching… we are targeting the high-end tourists who currently don’t visit Macedonia.”

Eco-tourism is now popular with well-off, professional and retired persons in places like Britain, Holland and Germany. Aurora has held preliminary talks with 3 British and Dutch tour operators, so interest does exist.

When completed, the hotel will comprise several small houses within a large and secluded enclosure. Each house costs 200,000 euros and will be built in the traditional Macedonian style, using thick blocks of red volcanic stone.

If fully booked, the hotel can turn a 600,000 euro annual profit — no small feat for an almost completely undeveloped part of Macedonia. However, it will depend on the success of international promotions.

All the way west from Berovo, near the Albanian border, is the mountain resort of Mavrovo. Macedonia’s premier ski center, Mavrovo also draws tourists for summer activities such as mountain biking, canoeing and an unusual traditional wedding celebration in the nearby village of Galicnik. Of Mavrovo’s handful of hotels, most indicative of changing trends is the 128-bed Hotel Bistra.

6 years of steady investment have made Bistra — with its pool, sauna and in-room Jacuzzis — one of the few Macedonian hotels operating to high Western standards. Risto Peov, the Macedonian-Australian owner, has long experience in Skopje’s hotel business and is developing the enormous adjacent ski center. Manager Darko Stojanovski told UPI that, “we’ve added 3 new chair lifts and another snow-making machine, and are now making huge preparations for the winter season.”

Part of these efforts involve promotion. Stojanovski, a former marketing manager with Macedonia On Line (MOL), is preparing a new brochure and will represent Bistra at November’s HelExpo trade fair in Thessaloniki — part of a general campaign to bring Greece’s winter sport enthusiasts to Mavrovo.

Zoran Tancev of Millennium Palace in Ohrid also refers to trade fairs — in Germany and Austria, where the hotel’s owners have professional experience. Also, the BAFTTA federation’s activities should help increase Macedonia’s visibility.

Yet the government has done little. The Ministry of Economy announced last week that a tourism website will soon appear. However, if it’s of the same quality as most of the other government websites, we shouldn’t hold our breath.

The Louis Berger study suggested creating a website and guidebook. A French government-funded guidebook is underway, but none exist in English. Instead, major travel publishers relegate the mysterious little country to a chapter, more often than not under its unwieldy acronym, ‘FYROM.’

In the final analysis, Macedonian tourism is neither so dead as prejudice would imagine nor so lively as local enthusiasts attest. A poor economy means that domestic promoters can’t rely on local visitors to make a return on their typically high investments. To really succeed, they must make a far stronger and more articulate international marketing campaign than has so far been attempted.

This is where the outside investor — armed with external capital, contacts and foreign know-how — has the advantage. With proper management and professional external marketing, Macedonian tourism can be lucrative. Despite a poor image regarding stability, in actuality most parts of Macedonia are safer than other, better known destinations like France and Spain — as recent terrorist attacks there have shown. Considering three factors — low level of market saturation, high potential for growth, and the absence of overpoweringly competitive conglomerates — Macedonia arguably offers higher return on investment potential than any other Balkan country.