Regulations bring Tallinn better image, more spend
Regulations bring Tallinn better image, more spend
26 JUNE 2018 7:51 AM

Government officials in Tallinn, Estonia, hope new alcohol regulations can help curb the capital’s reputation as a destination solely for partygoers and generate more traditional tourism demand, and hoteliers have already begun to see the effects.

REPORT FROM ESTONIA—Tallinn, Estonia’s much-visited medieval capital, is seeking to change its reputation among travelers from just being a destination to host bachelor and bachelorette weekends and day trips from Finland to stock up on alcohol, according to sources.

That evolution is showing signs of progress, but hoteliers and analysts speculated that progress is a result of a number of causes, including government initiatives.

Kay Peter Bischoff, owner of hotel investment firm KPB Management OÜ and a former professor at the Estonian Hotel School in Tallinn, said the changes in the city are evident.

“It is changing,” Bischoff said. “There is a lower number of stag dos, but we have a lot of Airbnb, and that might be where that guest is going.”

Gints Dzirnieks, GM of the 390-room Radisson Blu Hotel Olümpia, Tallinn, said the Estonian government has put businesses and investors in the country in a favorable position.

“The biggest help from government came from not increasing (value-added/sales tax) and thus keeping Estonia in a competitive level with other Baltic states,” he said. “Keeping stable and reasonable taxation level gives positive signs to investors.

“The presence of strong international hotel brands and increasing number of direct flight connections will help. Tallinn is still quiet (an) undiscovered destination for most markets and has potential to attract more visitors as a compact, safe and fun destination.”

Sources said Europe’s established low-fare airline industry has over the last few decades seen a rise in bachelor and bachelorette parties that stay in Tallinn for long weekends, many of which were based around visiting bars.

“Stag parties have not totally disappeared, though, and added to that the city is affected by cruise lines; there are due to be 329 this year,” Bischoff said. “(Cruise passengers) walk through the town, so everything is packed, but all they might buy is a coffee and a bottle of water. No more.”

Bischoff and other sources said the Estonian Parliament, known as the Riigikogu, recently has tightened laws on the advertising and selling of alcohol, which now can be consumed only in licensed premises. Alcohol taxes were raised on 1 February and further tax increases are expected in 2019 and 2020.

The new laws, which came into force on 1 June, also require buyers to show proof of age. Shops selling alcohol have until 1 June 2019 to comply fully with the new law, which includes restrictions on advertising cheap and cut-price alcoholic drinks.

Heavy partiers are not the type of visitors cities wish to exclusively attract, sources said, although Dzirnieks said he would like to see more flights come into Tallinn, low-cost or otherwise.

Visitors from Finland—connected to Tallinn from Helsinki by an approximately two-hour ferry ride—often come to Estonia to buy alcohol, where it is cheaper, and do not stay overnight.

Data from STR, the parent company of Hotel News Now, shows the Tallinn hotel industry has not been affected in regards to occupancy, average daily rate and revenue per available room. In fact, metrics have improved across the board.

For full-year 2017, Tallinn occupancy improved 2.6% year over year to 69.3%, ADR improved 13.1% to €80.32 ($93.98) and RevPAR improved 16.1% to €55.63 ($65.09). According to 2018 year-to-date performance through May, Tallinn’s hotel occupancy increased 5.7% to 62.4%, ADR increased 4.8% to €77.61 ($90.81) and RevPAR increased 10.8% to €48.42 ($56.66).

Changing guest demographics
Kadi Saluoks, GM at the 423-room Original Hotel Sokos Viru—the first skyscraper in Tallinn when it opened in 1972—said she has noticed a few other recent changes in the guest profile.

“People are staying a little longer than they did one or two years ago,” Saluoks said, who added that a new early ferry from Helsinki has led to some ferry passengers booking long weekends in Tallinn.

Dzirnieks said he is worried about the sustainability of inbound travelers from Helsinki.

“The major feeder market Finland has been decreasing, and this is affecting all the hotels in Tallinn,” Dzirnieks said.

Saluoks said she is still seeing a steady supply of Finnish visitors, especially in her firm’s two Finnish-managed Sokos hotels in Tallinn, which she said shows the city’s diversity.

The two Sokos hotels, she added, could not be more different, with the new age Solo Sokos Hotel Estoria built in 2014 and the Original Hotel Sokos Viru with its links to its storied past and its shared space with the city’s KGB Museum.

Saluoks said other considerations changing the hotel industry in the Estonian capital are an increase in cultural events and international conventions, the emergence of the Kalamaja district as a new foodie haven and a rise in Asian guests, especially from Japan.

“We’ve seen weekly groups from Japan,” Saluoks said. “The Chinese still stay in all three Baltic countries (Estonia, Lithuania and Latvia), traveling to each by bus. Russians have also increased, and for them the exchange rate is not favorable.”

Bischoff, who is due to open the upscale 33-room Hotel Regent Tallinn on Tallinn’s notable Pikk Street in July, said average daily rates in Tallinn are increasing, something he partly attributes to a lack of supply.

“There are not so many new hotels,” Bischoff said.

Kimmo Virtanen, director of Scandinavia, Russia and the Baltic States at business advisory Christie & Co., said hotels were being developed throughout Estonia but added Tallinn still contains certain elements of low-cost tourism.

Bischoff said more needs to be done to market the city.

“There is not enough education,” he said. “The bureaus know tourists bring in a lot of money, but there has not been sufficient training. The city is not at the same level as 10 years ago, but there remains the need for real, service-minded people in the industry.”

Transportation also has improved, according to Dzirnieks.

“Tallinn has invested a lot in public transportation,” he said. “Just recently (the city) opened direct tram connection from the airport to downtown. … The taxi sector is also well-managed and regulated, and new sharing platforms such as Taxify and Uber are working side by side with traditional taxi companies.”

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