Zadar, Croatia  - Over decades, Croatia was the traditional summer destination for Germans and Austrians on a tight budget - families with several children, students, the elderly and young couples.

The accommodation reflected the customers - only one out of seven beds on offer was in a quality hotel. Most guests were happy to drive their cars to somewhere on the stunning coast and sprawl on air-mattresses in their tents or on cheap beds in "rooms to let."

But new demands are changing the face of Croatia's coast. After frantic work over the past three or four years, even the pickiest visitor can find what he wants today, with a tight network of new hotels covering the coast from Istria in the north to Dubrovnik in the south.

The Austrian firm Valamar is the largest foreign operator on the coast, running 22 hotels and eight apartment compounds. The operator bought, modernized and refurbished buildings made in the 1970s, pushing them up to 4-star standard.

Valamar's flagship is the recently opened Lacroma Resort in the crown-jewel of Croatia's tourism, the UNESCO-protected medieval fortress-city Dubrovnik.

The President Hotel, also in Dubrovnik, with its magnificent view of the sea and the Elaphite Islands, as well as the Diamant and the Tamaris near Porec in the north, have earned a name among foreign guests.

In 2008, 9 million foreigners visited Croatia, roughly one-third of them Germans and Austrians. Along with 2 million Croat vacationers, they spent more than 7 billion euros (9.9 billion dollars).

That translates to around one-quarter of Croatia's gross domestic product, cementing tourism as by far the most important industry for the country hoping to join the European Union.

Despite these massive figures, even at the season's peak the beaches are far from overcrowded. After all, along the entire 1,700 kilometres of coast, there are only 120,000 beds in hotels and rooms, along with room for 200,000 people in holiday camps.

With a few exceptions, mostly in Istria, the coast is steep, rocky and convoluted, placing natural limitations on construction and excluding flat concrete deserts as elsewhere in the Mediterranean.

Signalling a strong shift to the upper end of the market, the latest investments include the Kampinski Adriatic in Savurdija, on the westernmost tip of the Istria Peninsula - straight across the Adriatic from Venice in Italy.

The five-star spa-resort has an 18-hole golf course, the first on the coast, as well as a wedding chapel for guests.

Another top-notch hotel, the Hilton in Dubrovnik, threw its doors open to big-spending guests three years ago.

But the most ambitious tourism project in Croatia is Punta Skala, a peninsula near Zadar with an untouched, 1.6 kilometre beach behind which the Austrian Falkensteiner-Michaeler Group is developing a 30-hectare resort for 210 million euros.

Punta Skala is the first-of-its kind resort of the so-called "mixture concept," manager Gerhard Mansbart says.

The complex includes a brand-new hotel with an 800-square metre playground for children and a wellness centre. Early next year a luxurious, five-star apartment compound is due for completion, with flats ranging from 40 to 100 square metres up for rent or purchase.

Further, there is a pool with water salted to emulate the Dead Sea, a massive Turkish bath of black marble, 6,000 square metres of spa area, with paths, waterways and slides strewn all over the place.

To keep the view car-free, there is a huge underground garage and to secure smooth operation regardless of what happens outside, the complex has its own desalination, wastewater and electric plants.

"Filled to capacity, we can operate completely autonomously for three days," Mansbart says.

Foreign investments such as at Punta Skala, but also ones on a smaller scale, are set to introduce the know-how of international caterers and may help Croatia shed its image as a cheap destination with poor catering.

In a wave of privatization since 2000, local tycoons and people with good connections to politicians and often with dirty money, snapped up the decrepit hotels built in the Communist era.

That however did nothing for Croatia, because the new owners had no plans to invest, but only to re-sell, this time on the open market and with a massive profit.

With the ongoing developments by genuine operators, Croatia with its breath-taking coast may finally look forward to a more lucrative and cleaner tourist industry. (dpa)