May 31, 2021 - Aaron Antwine of Hurricane Hostel in Split on the realities of opening a business as a foreigner in Croatia.
To be upfront, if I had known that the combination of Covid and the Croatian government would screw my wife and me over so hard, I would have moved to any other country.
My wife and I opened our hostel at the start of March 2020. A few weeks after opening, we closed our doors due to quarantine. Officially, accommodations were not required to close, but with so little information about Covid and a terrible amount of fear, we thought it would be the socially-responsible decision to close. Maintaining two meters of space in a dorm setting is next to impossible, and there were no tourists to be had anyway. We remained closed through all of April and reopened on May 18th.
We filed for aid through HZZ during those first few months of Covid, and we did receive salary support for three months. Once the season became more active, filing for aid was much more difficult, and we were denied. Business was not that bad for a few months, and we were optimistic for the future for a time, but that all changed once we reached September.
Small caveat. I am a U.S. citizen, and to maintain my own residence permit, I must employ three full-time Croatians, which we started in February 2020. Once the season started to slow, we requested salary support again to keep them employed. We were denied initially. Then we filed an appeal pointing out that our staff will be terminated if we do not get any help, and we were denied again. Due to no aid, the threat of a second wave, and greatly diminished sales, we were forced to terminate the staff in September.
At this point, I was working by myself. My wife and I were hoping we could make enough money each month to cover our operating costs. I do not even pay my own salary. I pay the taxes and contributions for myself. Every kuna I would pay myself, I put right back into the company anyway. We were trying to survive, and I was doing everything I could. Basically, to survive the winter months, my wife and I tapped into a lot of our resources so we could stay afloat.
A new ordinance closed almost every business on November 27th, 2020. It did not exactly state that hostels were included as the wording was ambiguous and vague. Hostel owners across Croatia were questioning our lawyers and accountants to verify if we were included. Eventually, we decided that we could stay open. With so much uncertainty, it was too risky to close and have no income whatsoever. Several requests were sent to government offices in Zagreb to get clarification, and no official answer or response was ever given. We thought we were ok.
January 23, 2021, an inspector entered our hostel and, after looking around for 10 seconds, informed me that our hostel needed to kick out all the guests and close our doors immediately. Their interpretation of the ordinance is that all hostels in the country needed to close. No one in the hostel owners’ group in Split was aware of this. Not one hostel owner in the country knew this was a thing. We asked repeatedly. My attorney and I asked several other government offices, and not one office knew what was going on. The only office in the entirety of the Croatian government that said hostels were to close was the inspector’s office here in Split. My company and I were both fined, and we were forced to close immediately. We lost what small income we were making from January, and we had to remain closed all of February as well.
Here is where it gets fun. We were the only hostel this happened to. According to Hostelworld and Booking.com, there were around 100 hostels open across Croatia during the winter months. At least 10 of them here in Split. Not one of them was asked to close or received any punishment for being open. We told the hostel owners about being closed, and some responded by closing their own properties until March 1st. None of us could afford fines, and it was safer to close. The other hostels in Zagreb and throughout the country were taking in guests with no problem. Hostels all over were still taking in digital nomads, while some sold “reservations” as a cover charge to go in and party.
My attorney and I planned on taking the fines to court to contest them. We were going to present information from several other offices, discussing the lack of clarity in the November decision and that hostels elsewhere were still open. Instead, we were hit with a larger fine for wasting the time of the court. I have discussed legal action for discrimination or something to that effect, but legal battles cost money I don’t have.
Hostel owners and I here in Split deduced that we were now eligible for receiving some sort of support. It was determined that since our hostel was open in January, our business was not eligible to receive any aid, which was an understandable reason. It sucked, but we understood. We then asked for support for February during the month that we were explicitly closed by the government, and we were denied again. I am still not even sure why at this point.
During the first three months of 2021, I worked on renewing my residence permit. Obviously, I could not maintain the requirement of three full-time Croatians. As part of our re-application process, MUP was kind enough to give me some leniency and work the process another way to ensure I could get a permit and stay open. We caught at least one break, and I am thankful for their help. Sadly, we learned something that nearly broke me almost immediately.
A new law was passed for foreign business owners in January. The employees I am required to have must be paid the median wage of all employees in the entire country. So instead of paying a net of 3.400,00 for a full-time minimum wage receptionist position, we were now required to pay over 6.700 kuna. In bruto, that is over 9.300,00 kuna per employee.
I requested MUP asking for a better clarification on the salary law to see if it meant median wage for the receptionist job position. According to the website MojaPlaca, the top salary for any receptionist in the country is around 6.800 kuna. MUP stuck by the law, essentially making our three staff members one of the highest-paid reception staff in Croatia…. for a little 27 bed backpackers’ hostel.
The hostel reopened on March 1st. We made a few thousand kuna total for the entire month, so my wife and I had to dip into even more savings to help cover our costs again. As part of my residence permit process, we set up full-time contracts with three employees that would start working on April 1st. We were still optimistic that sales would increase, and we could get at least enough money to cover most of the bills. Also, we planned to ask for salary support from HZZ to help cover our costs. If we can get salary support, then that would help us cover our largest expense until we can get enough guests. Wrong again.
We filed our requests for aid during this latest March-April window. As our company is relatively new, instead of comparing our sales numbers to 2019, they allowed us to use our first full month of sales in 2020 to use as the basis of the 40% decrease in sales. Our first full month of being “open,” according to HZZ, was April 2020, the month we were closed. Hard to make 40% less than zero. We were denied aid again. I voiced my concerns with my accountants, and they were able to help me produce another complaint. We asked for a different method we could use to show our decrease in sales and our dire need for any type of support. Clearly stating that if we don’t receive some sort of aid, our employees will be terminated, and our company will have to close. I received the decision from HZZ a few days ago, and despite our plea, we were denied again.
The highest-paid receptionists in the country, continuously denied aid from HZZ, closed, and fined by the government. We cannot win. I concede that some events were unfortunately timed, but the rest is going to destroy us. My wife and I will only be able to hold this business open for a short time, and if we do not get any aid or a massive influx of tourists, we are doomed to close later this summer, if not sooner.
For anyone who might question how our business performs, we have been immensely successful by every metric we can track. According to Booking.com, out of the hundreds of accommodations in Split, from hotels, apartments, guesthouses, and other hostels, we are ranked 19th in guest nights booked over the last 3 months. We are working as hard as we can for every guest we can get, and we are still getting destroyed by a Covid economy and a government that not only refuses us aid but punishes us as well.
Fundraiser by Aaron Antwine : Help Aaron and Ashley keep their hostel open (gofundme.com)
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