The increase in value-added tax (VAT) will negatively affect Montenegro’s tourism offer, stated Žarko Radulović, president of the Montenegrin Tourism Association and co-owner of Montenegrostars. He added that the price hikes are extremely risky.
“The consequences will be dramatic. This measure will further expand the grey economy, as many will try to survive. The increase is not linear, but huge – over 100 percent. This will result in a drastic rise in costs for companies, which the market simply cannot bear,” Radulović told Dan.
He expressed concern that this could reduce the quality of the tourism offer in the long term.
Regarding the possibility of increasing prices to offset new costs, Radulović said that raising prices would be very risky.
“We already need to be significantly cheaper than destinations like France, Spain or Croatia to remain competitive. The market has its limits, and a 17 percent price increase could leave us without key clients. Without new products or significant improvements in the offer, a price increase is unjustified,” Radulović commented.
When asked whether business owners had the opportunity to express concern about these measures, Radulović explained that they had met with government representatives, including the Prime Minister and the Minister of Finance.
“All business owners clearly pointed out the negative consequences of these measures, but it seems our arguments have been ignored. Unfortunately, these decisions affect sectors that have just barely recovered from the pandemic, like tourism,” Radulović added.
He also assessed the tourism season as turbulent.
“The pre-season underperformed due to the cancellation of flight routes, while the peak season lasted only 30 days, which is unprecedented. In the end, the post-season was surprisingly good, so we approached last year’s results. Overall, we managed to extract the maximum under challenging circumstances,” Radulović shared.
Regarding Montenegro’s need to introduce visas for many countries, Radulović expressed that the visa regime represents a huge problem for Montenegro, especially for markets like Russia, which has traditionally been a significant source of tourists.
“Upon entering the EU or approaching European standards, we will face the introduction of visas for Russian citizens. This could significantly reduce their visits, which would have serious economic consequences. Russian tourists used to make up one of the largest segments of our visitors, and their absence is already felt due to political tensions and restrictions,” Radulović said.
He mentioned that there is a problem because the common refrain is that the EU does not allow visa abolition for certain markets, but this is not true.
“If we prove the benefit to our economy and minimal risk for Europe, the EU could accept such exceptions. Unfortunately, we do not have experts or diplomats who can adequately defend our interests. This issue is crucial because the Russian market has been a stable source of revenue for our tourism, and now we are facing a significant risk of losing this segment without an adequate plan to replace these tourists with others from different sources,” Radulović explained.
Despite the tough situation, he sees signs of progress.
“The new Minister of Tourism has shown initiative and introduced some good ideas, such as charging transit taxes for summer traffic congestion. Such measures give hope that we can begin solving problems in an innovative way,” Radulović said.
When asked what the key message for the future of Montenegrin tourism is, Radulović emphasized the need for strategic planning and competent people in key positions.
“Tourism is the backbone of our economy, but we cannot expect it to survive without investments and smart measures. We must stop making short-term and harmful decisions, as only long-term development can secure our future,” Radulović concluded.
