Stakeholders in the hospitality industry - hoteliers, restaurateurs, and private accommodation providers - consider the government's measures aimed at alleviating the impact of rising energy prices good, but think they will have difficulty not increasing prices if VAT on sector services is not cut.

Croatian Tourism Association (HUT) director, Veljko Ostojic, said he believes the government’s measures could help slow down the rise in food and energy prices, which has also affected the tourism sector.

In an interview with the Croatian state news agency Hina, Ostojic said a precondition for that was that the lower VAT rates also resulted in lower purchase prices of food and energy.

“Reducing the pressure of growing operating costs would reduce the need to raise prices in the tourism sector, which is preparing for the tourist season which will, among other things, be marked by growing competition in the Adriatic,” Ostojic said.

Prime Minister Andrej Plenkovic on Wednesday unveiled a 4.8 billion kuna (€640 million) package of measures aimed at cushioning the impact of rising energy prices, with the measures including a lowered VAT rate on gas supplies and some agricultural products, subsidised gas prices, one-off discounts on energy bills for pension recipients and other measures.

The head of the national federation of restaurant and bar owners (NUU), Nikola Eterovic, said the measures would – to some extent – cushion the blow of huge price rises, but only for households, while restaurants and bars would not feel any positive effects, just as had been the case with previous aid schemes.

He said the lower VAT rate on food would not have any effect on restaurants and bars either, and would possibly have a negative effect if some retailers used the lower VAT for unnoticed price increases.

“In any case, we are witnessing a raging inflation, and had the government responded by lowering VAT in the restaurant and bar sector to 13 percent, maybe we would have been able to keep the prices at the current level and increase wages to keep workers in our already devastated businesses,” Eterovic said, noting that purchase prices had increased constantly for restaurants and bars during the coronavirus crisis and that now they had to increase prices of their services.

The head of the association of family-run businesses providing private accommodation (ZOT), Martina Nimac-Kalcina, considers as commendable the government’s announcement that it would help all households and micro, small and medium businesses with gas subsidies.

“We should wait and see how high those bills will be. The current situation is very worrying, especially in the country’s interior where people more or less use gas for heating, and for private providers of accommodation registered as firms or trades… because their costs are regulated as those of hotels and other large facilities. They have complained that their gas and heating bills in December were three times those for December 2020,” she said.

She noted that private providers of accommodation, which account for around 70 percent of all accommodation capacity, should be granted loans by the Croatian Reconstruction and Development Bank to invest in quality, maintenance, and so on.

As for possible increases of prices of private accommodation, Nimac-Kalcina said that it was evident that year-on-year the costs had increased so much that not even a 10-20 percent price increase would suffice to compensate for it.