Herceg Novi, positioned at the entrance to the Bay of Kotor and bordering Croatia’s Dubrovnik-Neretva region, is one of Montenegro’s most strategically located coastal municipalities. It is a city historically defined by trade, craftsmanship, maritime culture, thermal springs and tourism, yet today it is evolving into a sophisticated residential, wellness and services centre with growing relevance for investors, foreign residents, remote workers and regional commerce.
The identity of Herceg Novi is built on contrasts: Mediterranean seaside charm on one side, mountainous hinterlands on the other; historical stone architecture integrated with modern tourism complexes; a relaxed lifestyle combined with strong entrepreneurial culture. Its geographic position has always defined its economic patterns. The city sits on a natural corridor linking the Adriatic to Trebinje, Dubrovnik, the broader Dubrovnik Riviera, and the inland Herzegovinian markets. This cross-border orientation remains essential for its long-term economic prospects.
Unlike Budva or Tivat, Herceg Novi’s tourism model is not based solely on luxury or nightlife. Instead, it is rooted in health tourism, winter-season visitors, wellness retreats, long-stay residents, medical tourism and cultural heritage. The presence of the Igalo Institute, one of the most renowned rehabilitation and medical-wellness centres in the Balkans, makes Herceg Novi a unique tourism destination. Igalo’s healing mud, mineral springs and medical specialisations attract guests year-round, giving the city a level of seasonal stability unmatched by other coastal towns.
Herceg Novi’s promenade, stretching several kilometres along the sea, is one of the longest on the Adriatic. Its cafes, restaurants, beaches, marinas and restored stone buildings give the city a warm and human scale. The old town sits on a hillside with fortresses, churches, museums and stairways that define its architecture and cultural identity. The city’s artistic tradition remains strong, with festivals, galleries, cultural events and international residents contributing to its creative life.
Tourism, hospitality and services are the pillars of the local economy. Private accommodation, boutique hotels, family-run apartments and guesthouses dominate the hospitality sector. In recent years, larger investments — particularly Porto Novi in Kumbor — have transformed the luxury tourism landscape. Porto Novi, a multi-billion-euro marina–resort complex, has brought new levels of high-end tourism, real estate investment and international visibility to Herceg Novi. With luxury residences, hotels, restaurants and a world-class marina, it has positioned the municipality as a rising competitor to Tivat’s Porto Montenegro.
Real estate is one of Herceg Novi’s main investment magnets. The municipality attracts buyers from the EU, Russia, Ukraine, Serbia, Western Europe and increasingly the Middle East. Many investors choose Herceg Novi for its quieter lifestyle compared to Budva, its proximity to Dubrovnik, and its attractive pricing compared to Croatia. This produces strong demand for apartments, villas, coastal houses, and properties with sea views.
The construction sector, supported by both tourism and real estate, remains strong. Renovations of old stone houses, construction of new apartment buildings, and development of tourism complexes create employment and stimulate SME activity. However, the city must balance growth with heritage preservation and environmental protection.
The service economy is expanding rapidly. Herceg Novi has become a centre for wellness services, private clinics, dental tourism, physiotherapy, sports medicine and spa hotels. The town also attracts remote workers seeking peaceful long-term stays, mild winters and good connectivity. Digital services, co-working spaces and international business networks are slowly emerging.
Herceg Novi’s hinterland — including the Orjen and Vrbanj regions — offers significant opportunities for mountain tourism, hiking, outdoor sports and rural hospitality. Combining coastal and mountain tourism could strengthen the municipality’s four-season model.
Cross-border trade remains relevant. The border with Croatia and the connection to Trebinje make Herceg Novi a gateway for commerce, retail and service flows. Its strategic position allows businesses to serve multiple markets.
Challenges include infrastructure needs, traffic congestion during peak summer months, urban planning issues, and the need for stronger public investment in utilities, promenades, marinas and waste management. Seasonal employment fluctuations also affect the labour market.
Still, Herceg Novi’s economic future is promising. The municipality has the strongest winter-season potential on the Montenegrin coast, a growing high-end tourism segment, a strategic border position, and an increasingly international resident base. Its wellness identity, combined with marina tourism, boutique hospitality and cultural heritage, positions the city as one of the Adriatic’s most distinctive destinations — a place where tourism, real estate, health services and coastal lifestyle converge into a resilient, year-round economy.
