WTTC report 2007 - Ada Bojana

Meanwhile, in order to manage the growth in tourist arrivals andrelated airline traffic over the next few years, WTTC recommendsthat Podgorica be marketed as a valid alternative to Tivat to reach theMontenegrin coast, thereby reducing pressure on Tivat and bringingmore international traffic and recognition to Podgorica and the centralregion.Need to woo the low-cost carriersNot surprisingly, the 98 per cent state-owned Montenegro Airlines,which is the country’s flag carrier, is the airline with the highestnumber of flights and it serves the greatest number of destinations.Nevertheless, since an open skies policy was adopted in January 2005,there has been almost no evidence of protectionism on the part ofgovernment – something that was very prevalent in the early years ofthis decade.The number of foreign airlines flying to Montenegro has increasedsharply over the last few years, attracted by the growth in trafficdemand and competitive landing charges. Nevertheless, a significantshare of services are operated in the summer season only. Amongthe leading markets, the least well served in terms of direct scheduledflights is the UK. Although the British market ranks only tenth in termsof arrivals and eighth in overnight volume, it is the second biggestspending market after Scandinavia, according to the Central Bank ofMontenegro.Airports of Montenegro would like to attract British Airways, oranother UK airline. But, for the time being, the only existing directflights are charters and British Airways operates only to Dubrovnik overthe border on the Croatian coast.Meanwhile, WTTC supports the Government of Montenegro’sefforts to search for a low-cost carrier (LCC) to fly into the country.The Ministry of Tourism and Environmental Protection, togetherwith the two airport authorities, has been in talks with numerousLCCs, including Ryanair, Air Berlin, easyJet and germanwings.The preferred LCCs are easyJet and germanwings, since Ryanairis seen as overly demanding in terms of the commercial support itexpects. But the experience of other emerging tourism destinationswould appear to justify the costs involved. LCCs can generatenew short-haul markets and contribute to boosting awareness of thedestination.TAXATIONTaxing intelligentlyIn line with WTTC’s recommendations in its 2004 Country Report,the Government of Montenegro has focused considerable effort overthe last three years on reducing fiscal barriers to growth and ensuringthat taxation is fair, whether for companies, employees or investors.Its main objective has been to create a favourable business operatingenvironment since it recognizes that Travel & Tourism growth canbe inhibited by local market conditions – such as unfair taxation, andincoherence in planning, to inadequate banking and financial services,uncertainties over land ownership issues and land lease regulations, anda lack of transparency in decision-making processes.Among the different examples of intelligent taxation inMontenegro, corporate tax is currently running at 9 per cent – thelowest in the region. While the bank base rate is 9 per cent, loans fortourism development are available at 6-7 per cent – down from 12per cent a couple of years ago. VAT now stands at just 7 per cent forTravel & Tourism – the 17 per cent VAT on hotel rates which wasintroduced in 2003 was cut in 2006 on recognition that this was notaiding competitiveness and was, in fact, harming performance. As far aspersonal taxation is concerned, a flat tax of 15 per cent was introducedin January 2007. This will be further reduced to 12 per cent from 2009and to 9 per cent from 2012.Meanwhile, WTTC supports proposals from the Ministryof Tourism and Environmental Protection to introduce two newtaxes. An environmental road tax is being considered for the peaksummer season to help reduce traffic, especially on coastal roads, andWTTC urges that any monies collected should be ploughed backinto infrastructure development. The second tax, one on secondaryresidences in Montenegro, is seen as a way of recouping some ofthe lost income due to non-payment of bednight taxes by the greymarket. Such a tax is a good idea, according to WTTC, as long asit remains in essence simple and does not run up exorbitant costs inadministration and collection. Otherwise, the main objective of thetax is defeated.HUMAN RESOURCESA serious imbalance between demand and supplyStructural unemployment is a serious problem in Montenegro, andthis situation is exacerbated by the fact that the population is ageing– it is one of the 30 fastest ageing populations in the world – and islargely inactive. The Employment Agency says that there are 40,000unemployed, constituting just under 15 per cent of the country’sofficial workforce. But this is a conservative figure, according to theAugust 2006 Household Survey, which puts the total at 60,000 or 22.5per cent.Despite the number of Montenegrins out of work, Travel &Tourism suffers from an acute shortage of qualified personnel, andthe opportunities to retrain these people to meet the supply needs ofthe industry are few and far between. Admittedly, the lack of suitablepersonnel is partially compensated for by non-resident workers. Buta recent study, commissioned from the German Organization forTechnical Cooperation (GTZ), one of the leading donor agenciesoperating in Montenegro, to assess the human resource needs of thesector, indicated that around 1,000 new qualified personnel will beneeded every year over the next 20 years to meet forecast industrygrowth.A tourism fair organised in Budva in early 2007 attracted 1,700applications from different regions of the country for seasonal jobs intourism – admittedly, mainly for low-skilled positions – highlighting46