STR: Estonian Hotels’ Recovery Lag and Hotel Development

Tallinn is the cultural and archeological hotspot in Estonia. Estonia shares a 180 mile border with Russia. Russia’s invasion of Ukraine has impacted Estonia’s economy through supply difficulties and higher inflation. Estonia has donated one-third of its military budget to Ukraine. Additionally, the country has welcomed around 40,000 Ukrainian refugees since February 2022.

The country made slow economic progress from the negative impact of the Covid-19 pandemic since March 2020. According to Visit Estonia, many of the hospitality and tourism companies are utilizing the “Covid-19 Safe & Clean” label and the website suggests that this is maintained 24/7, 365-days a year. It is a violation to show this label if the establishments violate the rules.

The hospitality and tourism industry in Estonia may not gain momentum for the remainder of 2022. While the hotel management may lack confidence regarding the trajectory of occupancy % for the remainder of the year they can proceed to make plans for 2023.

There are 157 hotel properties that provided STR data. Out of the selected Estonian properties, some of the hotel properties closed, and STR provided class category information for 77 of these properties. The majority of the hotels are located in major cities such as Tallinn, Narva, Tartu, Parnu. 40.26% of the hotels are midscale class, followed by 25.97% are upscale class, 11.69% are upper midscale class 9.09% are upper upscale class and luxury class has the least number, 5.19%, as shown in the pie chart below:

The average occupancy % for 2019 was 71.1%, and the Covid-19 pandemic negatively impacted the OCC%, as it was 26.3% and 37.3% in 2020 and 2021 respectively. The OCC% is 42.4% in 2022 year to date. The Revenue per available room was 65 Euros in 2019, followed by 17.9 in 2020, 21.7 in 2021 and 26.9 in 2022 (year to date). Similarly, the revenue for 2019 was around 14 million Euros and only 3 million in 2020 and 4 million in 2021. The figures are improving in 2022, but it is not pre-pandemic numbers.

The rich preservation of historical and cultural heritage makes Estonia an attractive location in Northern Europe. The majority of the country is covered in forest and has over 2000 islands. It is known to be a place to get some peace, quiet and solitude, and its population is increasing with immigration numbers rising on a yearly basis.

The Estonian Tourist Board plays a key role in strengthening destination management organizations and coordinating tourism product development and activities to ensure that the best tourist experience. The food and beverage industry employ most people in Estonia, followed by the hotel industry. The development of hotels will benefit the growing tourist population and increase employment numbers of local people. There are 5 properties projected to open between 2023 and 2026. The Hampton by Hilton Tallinn, an upper midscale property, is in-construction phase and likely to open in the month of April 2024 as per STR.

Rachel Mammen
Ph.D. Candidate in the Department of Hospitality and Retail Management at Texas Tech University
+1 806 834 3471
Texas Tech University