Tourism creates a significant share of the GDP of the Republic of Croatia and is the most important economic sector. The quality and competitiveness of the tourist product are crucial factors in the sustainability of the Croatian economy. A very important part of the tourist product is the accommodation offer which is lead by the private accommodation with around 60% share in the total number of accommodation capacities. Therefore, the improvement of the existing business framework of private accommodation is necessary for the development and growth of this important part of the tourist offer. The challenges that are caused by the multidimensionality of the tourism phenomenon and the potential offered by the possibility of improving private accommodation have never been more pronounced. The purpose and goal of the thesis are to analyze principal characteristics, challenges, and opportunities of private accommodation facilities in the Republic of Croatia and to explore ways of using the full potential and also improving the recognition and competitiveness of private accommodation. In addition, the thesis investigates the attitudes of private renters as guidelines for achieving the goals of the development set by the national tourism policy, which have not been realized so far. All of the above, is analyzed through the basic conceptual definition and analysis of the structure of the accommodation offered, the theoretical and legislative framework and the SWOT analysis of private accommodation. The potential of the private accommodation segment is shown by emphasizing the importance of quality and timely response to the trends of today's tourism market and the transformation of private accommodation into new forms of accommodation – diffuse and integral hotels. The paper focuses on the role of the state as a regulator of tourism activity, the role of the European Union as a broader framework for the business of tourism offer entities, and the potential for progress shown through a critical review of conducted survey research on the attitudes of private accommodation renters.