ABSTRACT
Purpose - Tourism is one of the fastest-growing sectors in the world, and many developing countries saw it as the chance of economic development accelerating. However, tourism potential is different among countries as well as within one country. The scope of this paper is to reveal the regional differences in business conditions considering tourism development in Serbia. Methodology - Instead of using a wide number of different individual indicators measuring regions' tourism performances, it is more appropriate to use one composite indicator for depicting complex issues in regional tourism development - a composite index was developed using Data Envelopment Analysis. Data Envelopment Analysis is a sort of methodology that constructs an 'efficiency frontier' based on each region's individual data using mathematical linear programming. It determines the best practice by measuring the relative position of each of the regions in terms of the value of the set of observed indicators. Such presentation of the existing region's development in the tourism field and recommendations for possible improvement are clearer to the general public and non-scientific audience. The composite index is calculated as the weighted sum of the corresponding individual indicators, where the weights are endogenously determined by mathematical linear programming to obtain the maximum possible value. Findings - The results of DEA showed which parts of Serbia have the best business conditions for tourism development, considering the different factors (regional development index and subindexes). The results have been contrasted to chosen tourism statistics on the regional level, with a reference to the limitations during the research process. The proposed composite index is used to point the differences in regional business conditions which could be further influenced by government policies to tackle the specificities and needs of each separate region during tourism development. Contribution - DEA is a known methodology in regional development analysis, but it hasn't been so much used in business conditions regional analysis before. Having different indicators which shaped business climate within one region, using DEA one tried to analyze the entrepreneurship possibilities with a spatial reference to the tourism development. This is an important contribution in the context of local economic and social development especially within poorly developed regions in Serbia.