1.2.

Analysis of the Current Situation in the Tourism Sector

1.2.1. Tourism and Related InfrastructureTurizam i povezana infrastruktura

According to the MONTSAT's data, there are 12,000 registered beds in Montenegro. On the
other hand, the “Inventorisation of Tourism Accomodation Capacities and Estimation of Tourism
Circulation” (conducted by the International Institute for Tourism, Ljubljana) estimates the
number of beds in 2005 in Montenegro to around 300,000.

The different data from MONTSTAT and those contained in the Study are conditioned by the
fact that a large number of appartments and holliday houses and private rooms for rent are not
registerred for providing tourist accomodation. The registration of all vacation houses and
appartments, as well as the more detailed control of private rooms that undergo registration, will
contribute to more transparency and safety in the infrastructure planning and identifying the
limiting sustainability capacities.

If the official statistics are not used in the identifying of the accomodation capacities of
Montenegro instead of the data from the mentioned study, its inconvenience from the market
point of view will be stressed. Accordingly, the percentage of hotel capacities drop from the
statistic 26% to the realistic 13%. It is an inconvenience due to the fact that hotels and similar
accomodation capacities constitute the outline of tourism economy.

Hotels and similar accomodation capacities usually make the highest profit per guest and per
day, the longest season and provide the most jobs per bed, which imposes the need for building a
quality, high profile hotel sector

Still, in spite of significant efforts, 58% of hotel capacities is below the standard of the
international tourism market. Compared to the state from 1989, the impression that the average
hotel quality dropped could emerge. This would certainly be incorrect due to the fact that
different criteria were used for defining the standard. There are currently 12% of high quality
hotel beds in Montenegro, which constitutes 1.5% of the total accomodation objects capacity.
The demand on the international market is above all focused on the high quality hotel capacities.

Another shortcoming of the hotel sector is evident. Only a certain number of modernised hotel
capacities (“resorts”), mainly privatised with an obligation and a guarantee investment, with
around 6,000 beds, dispose with the following contents and services (wellness/spa capacities,
indoor and outdoor pools, conference halls with suitable contents etc) for the high spending
clientelle, with a round-the-year offer. On the contrary, unmodernised hotels (with more than
30,000 beds) provide only the basic accomodation and meals services. Such state poses a
challenge to the private sector. After the privatisation of hotel objects by the model of mass
voucher privatisation which, contrary to tender privatisation, did not include mandatory
investments, the hotel owners seldom decide to follow tourism trends relating to the
diversification and specialisation of the offer. Due to this fact, there is still a high necessity to
create hotel capacities of a more wholesome content. Sports, wellness, family and fun offers are
crucial in modern tourism, especially if an extremely short summer season needs to be extended
regardless of the bathing weather, and offer and permanently provide a high quality vacation in
its complete sense.

The data on achieved overnight stays contribute to the unrealistic display of the accomodation
structure: around 70% of all overnight stays relate to July and August and the remaining 20% to
June and September. If the overnight stays that took place on the grey market are taken into
consideration, then we are not talking about six to seven millions, as reported in the official
statistics, but about 15 to 16 million, as the Study for 2005/2006 estimated.

1.2.2. Quality and Quantity Analysis of Tourism Parameters

Since 2000, a significant growth rate has been marked in the business of tourism economy. For
2008, the World Travel and Tourism Council (WTTC) expects a percentage of tourism (direct
and indirect effects) in gross national product (GNP) in the amount of 26.4% with 30,500 direct
and indirect job places in tourism and its complementary branches - 19.1% of total employees.
WTTC forecasts a further growth of GNP of an anual 5.7% by 20018 - compared to the EU's
average of 2.8% - and sees Montenegro among the first five of 176 comparing countries. WTTC
connects the stated progress and good economic indicators to the work on tourism development
in the recent years, good investment climate, efficient marketing for Montenegro which was
earlier a n almost unknown destination, privatisation and improvement of the hotel offer, as well
as to the reduction of the set of job taxes, narrow resort cooperation within the Government and
the cooperation with international institutions.

Generated tourism revenues in 2007 exceeded the anual amount of revenues defined by the
WTTC's report (411 million Euro), as well as the amount defined by the Economy Policy of the
Government of Montenegro for the same year (350 million Euro). Such state is the result of a
significantly higher number of guests with higher spending ability visiting Montenegro.
Furthermore, it is important to stress that the demand of such guests for the offer of higher
category accomodation capacities every year grows higher than currently offered. Accordingly, it
is natural to expect that the established positive trend will continue in the coming years, the
faster growth of achieved revenues in relation to the increase in the number of overnight stays.

Economic indicators of tourism business already exceed expectations, although derived only
from the official statistics. The importance of tourism would be even more impressive if the grey
market were taken into account, because it itself - although not as strongly as professional
tourism - contributes to positive economic effects and providing working places in the tourism.
Its scope (regarding bed capacities and overnight stays) is estimated as twice as high as the
statistically estimated one. The percentage of tourism economi in the GNP might increase for
over 30% by taking into account the grey market. Due to its scope, the Government adopted
legal mechanisms for a better management of the area. The goal to improve this sector and for
the sector to be included in general public revenues after the privatisation is connected to this.

The marked number of tourists on a monthly level for the period from 2002 to 2007 indicates to
the fact that, apart from the number of tourists increasing each year, the duration of the main
tourist season is extended. For several years, there has been a trend of the main tourist season
starting earlier (March - April) and ends later (October - November). Apart from this, visits to
the northern tourist centres have been more frequent, which leads to a significant decrease of the
seasonal character of tourist activity.

Dva faktora određuju ekonomske efekte turizma: prosječni prihod po gostu/danu (pansion i
van- pansion), kao i ukupan broj noćenja. Osim toga, treba uzeti u obzir i dnevne posjetioce –
izletnike, o kojima do sada nije bilo zvaničnih podataka. Centralna banka Crne Gore utvrdila je
da prosječan prihod po gostu/danu iznosi – 42,8 €.
According to the official statistics, the number of overnight stays increased for 130% from 2000
to 2007, from 3.2 do 7.3 million. This progress varies depending on the region. While the
overnight stays from the domestic market remained the same, the number of Serbian tourists'
overnight stays increased by 45%, i.e. their participation was 36%.

Additionally, the increase of the number of foreign guests was obvious, with an eight times
higher number of their overnight stays and the participation of 52% in the total scope.

In the future, a significant growth should be expected from the domestic market in Montenegro.

Neighbour markets, with Serbia as a dominant market (ex-SFRY without Slovenia, plus Albania)
togeather achieved a total of 3.7 million registered overnight stays in 2007. Since the grey
market is generated mostly from this region, the participation in the total scope should increase
from the statistic 50% to the realistic around 75%. The characteristics for all neighbour markets
are: arriving by car, bus or train, focus on summer vacation in the period from July to August and
modest expectations. In spite of their currently low level of expenditure, neighbour markets bear
a high significance for Montenegro, because, with a gradual growht of living standards, demands
and behaviour, as well as expenditure, should become equal to those in the Western Europe.