Recent reports about holidays in Bulgarian vary wildly -the country has been praised as an affordable holiday paradise and criticised for crowded beaches, substandard hotels and poor service. While there may be truth in both points of view, one common theme is clear. Bulgaria's tourism sector, despite, or because of, its recent success, may have reached its peak as a sun, sea and sand destination. It will now need to develop a clear strategy to make the most of its natural and cultural attractions and move up the value chain.

Bulgaria's tourism revenues last year topped $3.6 billion, up 10.8 per cent from 2006, according to the State Agency for Tourism (SAT), though the number of foreign tourists remained almost static at 5.15 million. In total, about 7.73 million visits were made to Bulgaria by foreigners last year, up three per cent from 2006, though this figure includes "shuttle traders" from neighbouring countries who often do not stay the night.

Tourism is a key part of the Bulgarian economy, generating about 10 per cent of gross domestic product (GDP) and helping counteract the country's yawning current account deficit. Analysts have suggested that the sector may be Bulgaria's largest foreign currency earner, overtaking energy since the closure of two nuclear reactors at the Kozloduy nuclear power plant in January 2007.

However, a recent article in the British press highlighted the challenges of the country's strained infrastructure, saying, "The season's first visitors to the Black Sea resort [of Sunny Beach] were stranded in lifts and went without food and drink after restaurants and bars closed due to [a] blackout". According to the article, tourism specialists are predicting difficulties this season because of power cuts and bankruptcies, as well as low standards of construction and poor service.

"Huge problems lie ahead," Mihail Popov, director of hotel management company Bora Consult, was quoted as saying.

While a previous British article had praised a holiday in the coastal city of Varna, Bulgarian tourist authorities may not have been flattered by lines such as "I have taken a holiday to the year 1977". Nostalgic charm is indeed an attraction for many visitors, but it may not be the image that the SAT is trying to promote.

Neither article paints an entirely fair picture. Facilities are generally of a decent standard, and such dramatic incidents as large-scale power failures are not commonplace and could also occur at beach resorts across southern Europe. Most foreign visitors still tell the SAT they would happily return.

To an extent, these challenges come as a result of Bulgaria's success, or the inadequate management thereof. Tourism has grown swiftly in recent years after a severe dip in the 1990s, following the collapse of communism. The economic crisis in Bulgaria and other former Warsaw Pact countries, whose citizens used to descend on the Black Sea en masse every summer during the 1970s and 1980s, led to a serious retraction in the industry.

However, a rapid rebound has seen increasing numbers of visitors from the UK, Germany and Scandinavia. Britons have been especially active in buying up Bulgarian property, either to let or for their own holiday homes. Tourism-related construction has continued unchecked in many areas, with some developers bypassing planning rules and building to low standards in order to turn a profit quickly. This has despoiled some of the natural beauty that draws tourists in the first place, both in Bulgaria's largest ski resorts and on the coast. While last year's results were good, the country may be nearing saturation point and for the future, a clear strategy is needed.

In a recent report, Bulgarian tourism expert Stanislav Ivanov and Craig Webster of the University of Nicosia, Cyprus suggested that "the accident of geography" defined the structure of tourism in Bulgaria. The country attracts a large proportion of its tourists from countries that are either nearby or easily accessible by air, and these tourists choose Bulgaria in part because of "travel costs and convenience, meaning that Bulgaria tends to attract less wealthy visitors," according to Ivanov.

Certainly, a large number of tourists do come from Bulgaria's neighbours. Last year, more visitors came from Greece than any other country -about 760 000, an increase of more than a third on the previous year, according to the national statistics agency. Meanwhile, the number of tourists coming from Bulgaria's fellow EU newcomer Romania more than doubled to 700 000. However, the number of tourists from Serbia and Macedonia has dropped significantly after the tightening of visa restrictions for those countries.

The recent influx of Romanians is in part due to the ease of travel afforded by common EU membership, and in part because of low standards in Romania itself. Many Romanians say that Bulgaria is cheaper, yet has better food, superior service and more appealing facilities.

Indeed, Bulgaria's success at luring holidaymakers across the Danube has occasioned something of an alarm bell to the ailing Romanian tourist industry. If it is heard, Romania could undertake an overhaul of its tourism infrastructure, meaning the flood of Romanian visitors, and foreign tourists preferring Bulgaria to Romania, may not be a permanent phenomenon.

Bulgaria's tourism market will have to remain competitive and, with costs rising, it will not be able to compete on price alone. The country is fortunate to have largely untouched mountains and forests, medieval cities and towns such as Veliko Turnovo and Melnik, traditional festivals and a range of historical monasteries. The scope for developing middle- to high-end cultural, adventure and eco tourism exists, and the SAT is developing a strategy of focusing on each in turn. However, officials will need to be vigilant not to repeat the over-construction seen during the success of the past decade. Bulgaria will have to encourage more careful development on the coast while encouraging higher-margin forms of tourism throughout the country.