The main objective of this thesis is to analyse the potential cultural heritage (i.e. castles) being reconstructed into hotels as means of improving competitive position of Croatian tourist offering. Based on well-known examples of European castles, it will be shown that this transformation was recognized already a century ago among European countries as a way of extending current customer value propositions for tourists. They emphasize cultural and historical heritage by integrating castles into hotels, thus truly expanding the interest of visitors from all over the world who wish not only to stay in the luxurious environment of the present but to learn and discover about the past. The aim of this paper is to define the possibility of implementing such a form in Croatia. Based on the results of the work, certain recommendations can be developed for successful management of castles in Croatia in the hospitality industry. The paper will use descriptive, analytical and comparative methods, outlining the most important facts and describing how castles in some countries have successfully become castles-hotels and how this could be applied in Croatia. The comparison will show opportunities for Croatian tourism by exploiting its castles for new castle-hotel business models. Today, castles in Croatia are underutilized, and this paper seeks to highlight this potential because the castle-hotels can unify in harmony both the museum and hospitality concept, thus satisfying the needs of the modern client, as well as securing the income and employment of the population and preventing the destruction of valuable cultural property - historical heritage of the country. Although some castles offer certain amount of tourist experience, the current offering is quite basic and modest when it comes to exploiting the full potential of this heritage. More importantly, this form of a castle-hotel would expand the tourist and catering product portfolio of Croatian tourism. Finally, the neglected Croatian castles would be restored and preserved as Croatian cultural heritage. This is certainly a recommendation to consider the reconstruction of Croatian castles into exclusive hotel-castles.