Around 20 hotels in Montenegro have downgraded their official classification over the past year, moving from hotel status to private accommodation. This follows a government decision to double the tax rate for hotel accommodation from 7% to 15%, a move approved by the parliamentary majority in September 2024.
Industry representatives say the shift was not to avoid legal obligations but because operating as a private rental carries lower costs. The government has noted that hotels often reclassify to smaller units to avoid higher taxes and tourism ministry oversight.
While the EU average hotel tax rate ranges from 5% to 14%, experts had warned that the tax hike could harm tourism, which accounts for around 30% of Montenegro’s GDP. Financial analysts emphasize that reclassification does not necessarily reduce service quality, but it could affect market balance and competitiveness in the long run.
Another major problem is unregistered private accommodation, estimated to have cost Montenegro about €86 million in lost revenue in 2025. Such properties, often listed on platforms like Booking and Airbnb, operate outside regulation, making them difficult to track and control. Authorities have tried to cooperate with these platforms to block unregistered listings, but results have been limited due to inconsistent enforcement.
In addition, many property owners do not register guests or pay the required daily tourist tax of about €1 per person, taking advantage of weak controls and mild penalties. Analysts warn that the consequences are fiscal, market-related, and reputational, and could harm investment.
Tourism revenues in 2024 reached €1.46 billion, down 3.6% from 2023, marking the first decline since Montenegro’s independence in 2006 (excluding the pandemic year). Official statistics also show a drop of 272,000 overnight stays in the first half of 2025 compared to the same period the previous year, suggesting the sector is under pressure from poor policy decisions and a lack of long-term development strategy.
