Tourism is one of the most massive and dynamic socio-economic phenomena of modern times, and as such, it is undergoing major changes and is constantly growing. As one of the largest economic sectors, the tourism sector creates jobs, drives exports and generates prosperity around the world. It is an extremely dynamic sector and the tourism supply seeks to adequately respond to the constant changes in tourism demand trends. Contemporary tourists are encouraged by new motives that shape their expectations of the service and destination, and there is a growing demand for a unique experience and greater value for money. In response to the tourist offer, niches are being created within which tourist facilities are constantly adjusting their offer to the needs and wishes of guests. One such niche market is small and family-run hotels, specific in tailoring their offerings to the individual needs of guests, to provide an authentic and authentic experience of the climate in which they are located. Small and family-run hotels are among the most sought-after Croatian tourist products on the European tourist market. This paper describes the development of small businesses in the hotel industry, the characteristics of small and family-run hotels and their positioning in the tourism market. Tourism trends relevant to small and family-run hotels are defined, especially supply and demand features. The analysis of the selected small and family-run hotel in the Adriatic addresses its business model: service design, customer identification, communication, key resources, activities and partners, and cost and revenue structure. With a critical review of the studied business model, further development opportunities are identified, not only for the selected small and family-run hotel but for this tourist product in Croatia.