Our executive director Mr Tomo Knežević answered the questions of the first Montenegrin magazine specialized for tourism and hospitality “Turistički magazin PUTOVANJA” that has been in publication for 24 years. Mr Knežević spoke about our company’s business practice and the consequences of the pandemics to our business results and tourist sector in general over the past period of time.
• What are the consequences and to which extent did the obstruction of tourist sector affect your company’s business activities and results, and what challenges and consequences are you facing today? (Could you compare financial data from 2020 and 2019?)
Issues faced by not only our market, but the global economy as well, affected all segments of society. Looking back at 2019, which was one of the best tourist seasons, we all expected a lot from 2020. Unfortunately, coronavirus pandemic severely affected tourism sector and everything we were working on over the past years. A large number of business entities faced the drop in the turnover by 85%. Our company had 75% drop in turnover, which is somewhat lower than the state average. Major problem we are currently dealing with is liquidity. Significant financial resources are necessary for starting a tourist season and improving tourist infrastructure. Unfortunately, banks in Montenegro regard tourist workers as a high-risk group which makes our situation even more difficult. Collateral requirement is another serious barrier we are facing. What was once the strongest liquid sector has now become the highest investment risk.
The situation that befell tourist sector forced tourist workers to approach the market from different perspective. We missed out on what we prepared ourselves for years through experiences we gathered. Unlike major companies, small businesses could more easily adapt to newly arisen circumstances. In order to survive at tourist market, companies had to reorganize their business activities. We reorganized our company as well so that every employee was responsible for multiple activities during working hours. Along with regular activities, we were all assigned to other operational positions for two days a week. This model enabled us to lower the expenses. Also, this new situation influenced the decision making process regarding our company’s promotion strategy. Over the past few years we set aside 40% of our marketing budget for the purposes of digital promotion, while last year we used 80% of the budget for this purpose. According to our projections, we expected this to happen in 2022. We managed to speed up this process thanks to contemporary computer literacy of the citizens. In future, we will continue the development of promotion strategy on digital platforms via which we will present our product in the best possible manner.
• Did you have the means for simple reproduction for the purpose of preserving your company? (regular functioning, maintenance and preparations for the ongoing year)
Thanks to the good tourist season of 2019 and its positive balance, the funds the owners had at disposal were used for overcoming business issues in 2020. However, the pandemic has taken its toll and the challenges we managed to overcome in 2020 left us without funds for initiating the tourist season of 2021. As I have already emphasized, liquidity is a problem which should be approached as a cancer hurting all tourist workers and the entire economy.
I also believe that the period to come should be directed at expanding the offers we have and that we should focus on investment activities. Serious tourist workers will use this period for new investments. Due to the situation the other sectors are facing, investment expenses might drop by 20% in relation to previous year. In this manner other sectors will get the help they need which will result in faster economic recovery.
• Were social and economic measures implemented by the Government effective and what is your view regarding the fourth package of Government measures directed at economy and tourist sector issued with the aim to alleviate the consequences of new coronavirus and move toward economic recovery?
If the Government didn’t help, a major number of companies would most certainly not have survived. As far as I can see, 80% of tourist entities managed to survive thanks to Government support. The fourth package of measures is quite generous and it suggests a large amount of funds that can restart the economy. Nevertheless, just like it always is, I believe that commerce should have been included in the decision making process. The fourth package included a much bigger number of business entities, which is great, but there are barriers regarding this as well. I’m not sure that tourist workers will be able to use the funds set aside for them in the amount given. Mandatory criteria defined by the package, specifically the payment of taxes and contributions, are a major problem. It should have been considered that taxes and contributions for 2020 should be postponed for the next 24 months so that the economy could be revived. I believe that the stimulus for new employment puts newly founded businesses in a more favorable position and makes the price of their products more competitive than those of the companies already in business. In order to be eligible for that stimulus, taxes and contributions should have been paid by the end of September 2020. It is excellent that the owners of private accommodation were included through issuing vouchers to health and education workers. In this manner standard of living of Montenegrin citizenship has been directly boosted, especially bearing in mind the fact that owners of private accommodation are mostly households. Apart from that, the fourth package recognized investment activities of businesses which, in my opinion, is a very significant form of support.
• Did you have any support, stimulus, or benefits issued by the Old Royal Capital of Cetinje, banking sector or other public institutions?
There was no support from the Municipality of Cetinje. What we were allowed was to postpone the payment of tourist taxes, increased due to exquisite business results in 2019, to the Local and National Tourist Organizations for the ongoing year. We hope that in the next period of time local governments will find a way to help business entities operating on their territories since they should keep up with the Government’s policies. Also, tax policy regarding real estate, concessions and other taxes and obligations for 2020 and 2021 should be reconsidered. When it comes to the banking sector and other institutions, we there was no help apart from those included in Government’s packages.
• If global coronavirus crisis ends, when do you expect the recovery of tourist sector and when will we be able to achieve physical and financial results from 2019?
The year before us will certainly be better than 2020 since business results in the tourism sector last year have never been witnessed before. If different decisions had been made and if the citizens of the countries from the region were allowed to enter Montenegro, I’m positive that we would have reached between 50% and 60% of 2019 profit. Speaking about recovery, it doesn’t depend solely on us. It is very important that the citizens of both Montenegro and the rest of the world be vaccinated. Normal influx of people, in my opinion, could not be expected before 2023 when profit in the tourist sector has a realistic chance of reaching 2019 level. In order to sustain a tourist product, it is necessary to issue a set of conditions all businesses should abide by. In this manner the shutdown of a large number of companies and the increase in unemployment would be avoided.
• Tourism has become the major sector of development… It seems that earlier it was “overestimated”, while today many “underestimate” it… Can tourism be the primary economic activity or main development driver in Montenegro?
Tourism is the most significant sector of development in Montenegro, but I also think it cannot be the only one. This very crisis has shown the disadvantages of relying on one economic sector solely. In future, attention should be turned towards agriculture, transport and traffic, and industry. Tourism on itself cannot be sufficient, but it still is the engine that powers further development of society in all segments because it brings numerous investment activities to other sectors as well. Tourism is well positioned and good foundations for further development have been set, but agriculture is not keeping pace with tourism and that is one of the main problems we tourist workers are facing. We should continue educating tourist workers and raising awareness about the importance of domestic products. In future, we should be obligated to use domestic resources and coordinate the needs of tourist workers with the offer of agricultural producers. This practice would alleviate the sale of agricultural products which is one of the main challenges for agricultural producers.
• The personnel with certificates and degrees achieved at universities abroad are being more and more appreciated. Does Montenegro have potential in qualified staff needed for tourism development?
In my view, Montenegro has problems with highest-rank personnel which, unfortunately, we lack. Universities abroad approach education differently, and the implementation of that approach has begun here as well. If you decide to work in the tourism sector you have to work on your own education by yourself as well. What you learn at universities is not enough. Tourism, as a very specific sector, is changing on daily basis and it is among very dynamic sectors. Take hotels for example. In my childhood they looked completely different than hotels today do. To name a few, major halls, hallways and receptions were once distinguishing features of hotels, while today most attention is paid to room coziness, spacious bathrooms, and the content they offer. While rooms once were uniformed, the rooms that hotels offer today are of various types and adapted to the needs of a larger number of clients.
The current problem, among tourist workers also known as “2 meter” problem, is how to change the approach to tourism at this very moment. We have all changed our habits, and the rapport learned throughout education and achieved while working with guests has suddenly vanished. No university could have foreseen or imagined working under the current conditions. It is necessary to additionally connect tourist workers with universities and to integrate tourist workers into assessment process. Obligatory theoretical knowledge offered at universities should be merged with practice, and mandatory courses taught by the best tourist workers should be introduced. That is how we would ensure future qualified staff ready to be integrated in the work process of the tourism sector.
• Are you satisfied with tourism and hospitality legislation which defines these sectors and is it applicable?
Legislative regulations themselves are good. There is always room for progress, but we shouldn’t be discontented. Legislation should be brought together with business entities and a balance should be reached between decision makers and decision takers. So there are things that could be improved, but, as I said, we should be dissatisfied.
• To which extent is Montenegro being recognized and promoted on emitting markets?
I believe we are insufficiently present on emitting markets. Primarily, through my engagement in the Board for Tourism, I have always criticized the Government while presenting the budget for the National Tourist Organization (NTO). Our NTO has the lowest budget compared to the budgets of NTOs in the region, and it should be changed. Without strong tourist promotion there is no progress in further tourism development. The budget set aside for the participation in world fairs should be merely one of many strategies for promoting our country. We should work on the introduction of digital platforms in the process of promotion on emitting markets. There is also a need for better air transport availability of Montenegro, along with the need to alleviate the entrance of tourists from the countries in the region. In addition, I believe that we are insufficiently promoted in China and that through networking with other countries of the Balkans we could jointly present ourselves on such a tourist market.
Author: Vladimir Mihailović, magazine PUTOVANJA