At the end of the 1990s, the Palace Hotel was a four-to-five star luxury resort. Located in the Haludovo resort complex in Malinska on the Croatian island of Krk, the hotel was intended as a haven of extreme decadence for upscale vacationers on the Adriatic Sea. Today, it sits abandoned; its courtyard overgrowing, its lobbies, rooms, and recreation facilities vandalised and partially destroyed. The current state of the Palace is a story in itself, but its peculiar origins make the hotel one of the more interesting footnotes of the Cold War.
When one thinks of Yugoslavia during the 1970s, the American softcore porn magazine Penthouseprobably doesn’t come to mind, yet it was the magazine’s publisher, Bob Guccione, who funded the construction of this formerly ostentatious resort. In contrast to most other Eastern European communist leaders of the time, Josip Broz Tito had long broken away from Soviet influence and had sent Yugoslavia down a path of official non-alignment, leaving the country just as free to deal with the West as it was with the Eastern Bloc. In 1967, Yugoslavia removed visa requirements for foreign visitors and opened its borders. The country had already allowed a fair degree of foreign investment (for example, the 54-year cooperation agreement between the Serbian automaker Zastrava and Italy’s Fiat; the arrangement may be most famous to Britons and North Americans as the one that produced the Yugo), and now Western tourists were free to flock into the country.
One of the ways Tito’s Yugoslavia encouraged Western tourism was via the operation of casinos, something unthinkable in other communist countries. By 1973, 28 casinos had popped up in Yugoslavia; of these, 20 were in Croatian resort areas, and only four casinos in Istria were directly owned by the government; the rest were products of foreign and/or private investment as various enterprises exploited a loophole allowing them to take their profits out of the country without paying any tax. These gambling facilities (legally called ‘pavilions for games of chance’) were explicitly for tourists; Yugoslavs themselves were not permitted entry to the casinos (though the country’s open borders meant that they could simply go to a neighbouring country and gamble there).
It was through this loophole that the unique partnership of Guccione with the Croatian firm Brodokomerc came to be. Guccione invested US$45 million into the resort, the publicity stunt aspect of opening a Penthouse-branded resort behind the Iron Curtain being too much to resist along with his own altruistic ideas about resolving Cold War differences. Guccione would not be allowed to own and run the resort directly (Yugoslav policy at the time was that of ‘worker self-management’, where employees themselves were in charge of day-to-day operations), but he would be allowed to take home three to seven percent of the generated revenue. Guccione also spend a half-million dollars on advertising, including heavy promotion in his magazine:
‘There are still false ideas about Yugoslavia as a country behind the “Iron Curtain,” in which a businessman or someone looking for entertainment would find nothing. The Penthouse, too, faces many prejudices, doubts and a lack of understanding. We are called non-serious exhibitionists and pornographers, incapable of and disinterested in any serious business. I think that all this is, above all, a result of ignorance. Even the cold war itself is a consequence of ignorance. In order to defeat ignorance it is necessary to develop communications between people. In this connection tourism is certainly one of the most powerful forms of communication. Through the realization of this project we have the opportunity to start a big process of re-education: we have become partners in removing doubts and ignorance.’ (source)
Built in a opulent yet imposing ultra-modern concrete style, the mile-long Haludovo hotel complex opened on 15 June 1972 in Malinska, with the Penthouse Palace Hotel and its Penthouse Adriatic Club casino as its centrepiece, filled with hanging gardens, pools, and fountains. Little expense was spared in promoting decadence. Twelve Penthouse Pet models (promoted by Guccione as the ‘new soldiers of the Cold War’) were employed by the resort as hostesses and croupiers (it’s unlikely that these literal ‘model workers’ were part of the self-management system). 100 kg (224 lb) of lobster, 5 kg (11 lb) of caviar, and hundreds of bottles of champagne were consumed each day by resort guests. Reportedly even one of the swimming pool was filled with champagne. Heads of state including Olof Palme (and reputedly even Saddam Hussein) held court there (one of Guccione’s intention was to make the resort a major international congress and convention centre).
There was one major problem: while guests enjoyed the opulence of the hotel, the middle-class foreign tourists that were the usual clients of Yugoslav casinos stayed away from the gambling hall, and those casino revenues were needed to fund the overspending hotel. As well, the government deprived the casinos of further revenue by not allowing the local Yugoslav citizens entry. By the time 1973 came around, the Penthouse resort was already bankrupt.
For the next 20 years, the Haludovo resort carried on without Guccione as a worker-run enterprise backed by Brodokomerc, discarding the Penthouse label but remaining a high-end resort. The downfall of the complex came with the end of the communist system and the Croatian War of Independence. The war kept tourists away from the resort, whose last profitable year was 1990. Parts of the complex were used as refugee housing during this time, and many of the amenities were stripped. Following the war the complex was privatised, a poorly-managed process which saw the resort end up in the hands of a Cypriot company and then, in 1999, an Armenian diamond merchant and hotel tycoon who inexplicably left most of the complex derelict while transferring the property between various foreign-based shell companies and incurring losses on the few portions of the complex that remained open. There is a possibility of the government seizing the property and redeveloping it (only recently abandoned, the building is structurally intact), but for now it remains a vandalised shell.
The entrance to the Palace Hotel, July 2009. Source: T. Lindstrand, http://www.flickr.com/photos/international-festival/3747029751/in/set-72157621658910773. Licensed under the Creative Commons Attribution-Share Alike 2.0 Generic licence.
The lobby of the Palace Hotel, July 2009. Source: T. Lindstrand, http://www.flickr.com/photos/74758738@N00/3747031101and http://www.flickr.com/photos/international-festival/3747035779/. Licensed under the Creative Commons Attribution-Share Alike 2.0 Generic licence.
The trashed indoor swimming pool, filled with pillows, ottoman, and drawers. Source: T. Lindstrand, http://www.flickr.com/photos/international-festival/3747823588/in/set-72157621658910773. Licensed under the Creative Commons Attribution-Share Alike 2.0 Generic licence.
The outdoor swimming pool. Sources: T. Schroeteler, http://commons.wikimedia.org/wiki/File:Haludovo_palace_hotel_from_pool_2011-08-12.jpg and T. Lindstrand, http://www.flickr.com/photos/74758738@N00/3747035075. Licensed under the Creative Commons Attribution-Share Alike 3.0 Unportedlicence and the Creative Commons Attribution-Share Alike 2.0 Generic licence, repectively.
Source: U. Strasser, http://www.flickr.com/photos/herruwe/2731861679/. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivs 2.0 Generic (CC BY-NC-ND 2.0) licence.
Source: T. Lindstrand, http://www.flickr.com/photos/international-festival/3747818258. Licensed under the Creative Commons Attribution-Share Alike 2.0 Generic licence.
Source: T. Lindstrand, http://www.flickr.com/photos/international-festival/3747829716/. Licensed under the Creative Commons Attribution-Share Alike 2.0 Generic licence.
Source: T. Lindstrand, http://www.flickr.com/photos/international-festival/3747833062/. Licensed under the Creative Commons Attribution-Share Alike 2.0 Generic licence.
Horvat, N. (2008). Armenski trgovac dijamantima nudi Haludovo na prodaju. Slobodna Dalmacija, 27 August 2008. Available at http://urednik.slobodnadalmacija.hr/Novosti/Hrvatska/Hrvatska/tabid/66/articleType/ArticleView/articleId/20078/Default.aspx. Accessed 27 July 2012.
Pulko, H. (2007). Hotel Haludovo, Krk Island, Croatia: concrete time capsule. Available at http://pulko.de/sites/projects2_07_en.html. Accessed 27 July 2012.
Stanković, S. (1972). La Dolce Vita: A Formula Against The Cold War. Radio Free Europe, 10 July 1972. Available at http://www.osaarchivum.org/files/holdings/300/8/3/text/126-1-123.shtml. Accessed 27 July 2012.
Stanković, S. (1973). Gambling in Yugoslavia: Self-Managing Socialist Casinos. Radio Free Europe, 24 January 1973. Available at http://www.osaarchivum.org/files/holdings/300/8/3/text/81-1-310.shtml. Accessed 27 July 2012.
Yugoslavia Virtual Museum (2009). Penthouse Adriatic Club Casino in Yugoslavia, 1972. 26 May 2009. Available at http://yugoslavian.blogspot.ca/2009/05/penthouse-adriatic-club-casino-in.html. Accessed 27 July 2012.