Investment Analysis of a Joint Forest and Game Management – A Case Study from Croatian Dinarides

Abstract

Wildlife-based tourism, including hunting, is attracting interest from governments, the tourism industry, and researchers. Capital investment in renewable resources, like forests, represents spatial and temporal management, which is significantly limited by the natural potential of a particular habitat (e.g., volume increment, the quantity of food for wildlife, etc.). Therefore, the return rate expected by the investor is quite fixed and the only tool by which the investor can increase it is by adding further business activities and/or expanding the existing value chain. In the Republic of Croatia, the only forests which can be purchased by individual or institutional investors, and in which it is possible to establish both active forest management and commercial hunting, are private forests. Based on these insights, we analysed characteristics of capital invested in a large-scale private forest, where game management is carried out in addition to extensive forest management. Of the 1,104 hunting grounds in Croatia, the one with the largest percentage of forest cover (92%) and privately owned (61%) was taken as the subject of this case study (name of the hunting ground: VIII/120 “Permani” (10,017 ha)). A theoretical approach was used in which the investor buys all private forests (predominantly consisting of common beech), conducts forest management activities, and makes a profit by selling timber (30-year period). Furthermore, the hunting segment consisting of game management for red deer, roe deer, wild boar and brown bear is evaluated. At the lowest cost of capital (5.41%), the results of the separate forest management revealed an Internal Rate of Return (IRR) of 5.10%, a negative Net Present Value (NPV) (-760,000 €) and a 30-year discount payback period. Joint forest and game management resulted in an IRR of 5.69%, a positive NPV (680,000 €), and the same length of a discount payback period.