Master's thesis ''Small family hotels as the possibility for development of Croatian tourism'' aims to show the small family hotels as a specific form of accommodation which contributes to the development of the overall Croatian offer. The paper consists of two parts. The first part theoretically defined hospitality and hotel development in Croatia. In the second part the emphasis is placed on small family hotels and the research conducted on the satisfaction of tourists staying in small family hotels. The lack of statistical data also tells us that a small family hotel in Croatia doesn't have the status of a specific form of accommodation. Small family-run hotels are characterized by: hospitality, family atmosphere, authentic experience and top quality. According to all of the above, they meet the needs of modern tourists and should be recognized as such. Therefore, according to their characteristics, they can represent a specific product on which Croatian tourism will be positioned. The problem of development and competitiveness of small family hotels is the unfavourable accommodation structure which a small number of the hotels, as well as a very large proportion of the private accommodation with insufficient and unprofessional service. The legislation is not adapted to the development of small family hotels and their capabilities and the potential entrepreneurs do not have an interest in investing in this type of object. The National Association of Small and Family Hotels which has more members each year, seeks to provide improved conditions for development of small and family-run hotels. Small hotels, characterized by a varied and quality services, are recognized as a product that will significantly reduce the problem of seasonality and increase the number of tourist visitors out of season. Croatia, as a tourist destination, has a lot of qualities for the development of tourism, not only in the Adriatic, but also in the mainland, and small family-run hotels have a predisposition to complete the offer and become representatives of the Croatian identity. A preliminary research using a questionnaire has been made in the small hotels of Trogir and Split. This research shows how important it is to invest in a small family hotel which has the role of the specific product of the country. Using the analysis of hi-quadrat it is proved that the quality of services and contents in the relationship between the quest and the owner influences whether the guest will return or not.