The Golden Pit

Janis Domburs, Ieva Skrastina, Ruta Slushnyte (Lietuvos Rytas), Hannes Tamme

The potential resources in the field of tourism in Latvia have not yet been put to full use. During the last two years, the total number of visitors has diminished (from 1.84 mn in 1997 to 1.78 mn in 1999), and the total expenditure of international tourists is decreasing continuously. The average duration of a visit to the country has also shrunk - in 1996 visitors spent an average of 2.9 days here, in 1998 they stayed only 2.1 days. In 1998, there were 211 hotels and other places for accommodation of visitors recorded in Latvia (totalling 17 800 beds).

The Association of Hotels and Restaurants carries out evaluation and qualification of Latvian hotels according to standards set by the government. Unlike many other countries, it is the facilities for providing services (registration of visitors, catering complex, hotel rooms, qualifications of the staff, extra services, etc.) and not the services themselves that are evaluated.

By July 1, 2001, all Latvian hotels and boarding houses have to be classified according to new standards, which will be stricter than the old ones. Experts believe that new hotels, which have been attributed a certain number of stars based on the old system, already qualify for the same rating under the new evaluation standards. Arild Sjodin, Executive Director of Park Hotel Ridzene is certain: «If our hotel was moved to London, New York or any other place in the world, it would still deserve the five stars it has got.»

On the other hand, Raivis Chilipans, Marketing Director of Riga considers that there is still much to be done in the field of evaluation: «The Latvian rating often differs from international standards. A lot of work has to be done to ensure quality, and this process is already under way. This is particularly important because Latvia is developing as a conference venue, as a place for extensive business events - these customers are extremely demanding and force us to raise the standards. One more thing is the reorientation of the market. A couple of years ago there were huge numbers of visitors from the former USSR countries, but their activity has ceased now partly due to difficulties in obtaining visas. It has become an expensive pleasure. People from the CIS can fly to Cyprus for the same price, so our Jurmala, and to some extent Riga too, have become half empty.»

At present there are two five-star hotels in Latvia - Radisson SAS Daugava and Park Hotel Ridzene. The latter resumed operation in August 1999 after a year of reconstruction. Arild Sjodin told the BC that USD 12 million has been invested in Park Hotel Ridzene, and that reconstruction touched both the appearance of the hotel and the communication system in the building, as well as other technical details. Instead of the former 48 rooms, 95 are now available to visitors, including a Presidential Luxury apartment. Visitors are provided with a full scope of services, from air-conditioners and silence, to good working and recreation facilities, including a bodybuilding gym and sauna.

Raivis Chilipans has stated that the four-star hotel Riga is also planning serious reconstruction work after the end of the season.

Meanwhile, three large systems have been updated at hotel Riga thanks to an accumulation of funds - (1) property management and magnetic cards, (2) connection to the telephone exchange ensuring prompt communications, (3) Internet connections for businessmen. «It is just like building a house - first of all, you have to arrange the foundation which is vitally important to ensure the stability of the house, although that cannot be noticed at a glance,» explained Raivis Chilipans.

In accordance with regulations for privatisation of the three-star hotel Latvija, the strategic investor Linstow International must invest USD 25 million in reconstruction. Immediately after the EBRD meeting in June 2000, the hotel will close for nearly one year and, according to Vladimir Blinov, President of hotel Latvija, almost everything in the hotel will be reconstructed including both the facade and the interior. New communications will be installed to meet the requirements.

New hotels are also being built in Latvia. This spring the real estate company OberHaus finished its first hotel - Grand Place Hotel, laying claim to five stars. The gross value of the project amounts to USD 7.5 million, but the owners expect a return on their money within 4 to 5 years. The upper three floors of the four-storey building will comprise of 56 rooms, the ground floor will include a greenhouse, two restaurants and a bar, while the basement will accommodate a health centre.

In the spring of 2001, another hotel will rise in Old Riga, next to the Blackheads' House. The project envisages investment of USD 2.5 million.

On both international and local tourism markets, the most popular products of Latvian tourism include the following - holidays in the countryside, at the sea, at the lake, as well as various kinds of hiking, horse-riding, fishing and several-day trips around the beauty spots of Latvia - Sigulda, Rundale, Tervete, etc. There is an increasing number of farms going into the rural tourism business every year.

Full-blooded development is hindered by poor infrastructure - lack of various kinds of communications, poor roads, insufficient information sources and the low quality of accommodation.

Outside Riga, there are also two four-star hotels - Rigas licis in Jurmala and Hotel Amrita in Liepaja. Three-star hotels can be found in Kekava, Ventspils, Liepaja, Talsi district and Jurmala.

The hotel business in Lithuania is not enjoying its best times right now; however, experts predict serious changes. Altogether, there are over 500 hotels, motels, etc. with 36 100 beds in the country.

It is well known that global hotel networks help attract more clients, especially businessmen. International hotel groups are now slowly entering Lithuania. Hotel Villon, located approximately 15 km from Vilnius, has recently become a part of the global Le Meridien system. Two more famous names in the hotel market of Lithuania - SAS Radisson Astorija Hotel and Relais & Chateaux Stikliai.

According to the State Tourism Department the number of visitors decreased by 12% last year. Large hotels have suffered the most from this fall in tourism. These hotels lost mainly Russian visitors - in 1999 their numbers diminished by 50%, the number of visitors from other CIS countries decreased by 42%.

At the same time, the number of Polish, Latvian, Estonian and Scandinavian tourists has increased. As a rule, however, they prefer smaller hotels.

Several large hotels have managed to revive their business despite the hard times. The hotel Naujasis Vilnius, for instance, has invested around 12 million lits in reconstruction, and is quite satisfied with the present situation. In 1999, Naujasis Vilnius was attributed «four stars».

Meanwhile, Lietuva located on the bank of the river Neris, needs reconstruction, but the Norwegian company Linstow, which holds 70% of the shares of the hotel, has put off the reconstruction several times. Of course, hotels cannot be attractive to clients in such a condition.

Some hotels hope to attract the interest of foreign investors. Per Kjellstrom, consultant of the Finnish company HotelPro, noted that the low employment rate was a serious barrier to investment. Nevertheless, he forecasts that in the nearest future several Lithuanian hotels or new projects will receive the attention of foreign investors.

Rimantas Miknius, the leader of the Lithuanian Hotel Association, is also certain about the auspicious prospects of the hotel business in the country, as the flow of people, money, goods and services will grow along with integration into the European Union.

This year, the «star boom» is expected to start - such is the forecast of the members of the qualification commission. Experts believe that most of Lithuania's 192 hotels can lay claim to three stars.

The 1988 Tourism Law sets out a five-star qualification system for hotels. So far, the highest ranking in Lithuania (four stars) has gone to the hotel Naujasis Vilnius in Vilnius, Santaka in Kaunas and Saulys in Sauliai. Karolina and Balatonas in Vilnius and Minotel in Kaunas have received three stars, while Zaliasis tiltas in Vilnius and Aukstaitija in Visaginas have been given two stars.

Both the people in the hotel business and representatives of state institutions dealing with tourism acknowledge that Lithuanian hotels are not too eager to gain their stars. Rimantas Miknius suggests that many hotels want to carry out reconstruction before claiming additional stars.

Gintautas Indriunas, Head of the Division of Tourist Services at the State Tourism Department doubts if any of the Lithuanian hotels might claim five-star ranking. Nevertheless, Ingo Horneke, Director-General of the hotel Le Meridien Villon in Vilnius, declares that his hotel deserves five stars.

Le Meridien Villon is a hotel beyond competition in conference arrangement. Four conference rooms are wired with top-grade equipment. The largest of the rooms can accommodate up to 600 people. Other popular hotels that handle conferences are Sharunas, Draugysto and Lietuva in Vilnius, Takioji Neris in Kaunas and Klaipoda in Klaipeda. Nearly all of these hotels provide additional facilities and services such as well-equipped gyms, swimming pools, sauna, and massage.

Estonia: In the Lead

The World Tourism Organisation estimates that Estonia has taken the leading position in Europe in its rate of development in the tourist business last year. The rush of visitors increased by 15%, while profit gained from tourism grew by 11%.

There are 246 establishments in the country offering at least simple lodging opportunities. The 60 hotels, 50 boarding houses, 19 hostels, 9 camping-places and 50 holiday homes, as well as the 57 private lodgings account for 4900 rooms and 10 100 beds. Moreover, although about 50 tourist recreation places in the countryside do not correspond to standard requirements, some of them may still be considered exclusive.

With regard to the «star ranking» of hotels, the situation is as follows. Five stars - Park Consul Shlossle Hotell; Four stars - Palace, Olumpia, Grand Hotel Mercure, Park Hotell & Casino, St. Petersburg (all of them situated in Tallinn). Three stars have been given to eight hotels, two stars - to seven hotels, and a single star - to one hotel. Thirty-eight other hotels have not received any stars. Evaluation for the past year has not yet been completed, so this data may change in the near future.

Last year, the Finest Hotel Group (part of the famous Scandic hotel network) obtained large properties in Estonia. In Tallinn, the group owns the hotels Palace (The Rolling Stones and other celebrities chose to stay there during their visits) and St. Bernard, in Parnu - Rannahotell, in Otepee - Karupesa. The most expensive hotel ever built in Estonia will be the Radisson SAS which is currently under construction and is expected to cost over 600 million kroons. The largest hotels of the capital city are Viru, owned by the Finnish SRV, and Olimpia privatised by the Estonian Reval Hotelligrup, an exchange company whose share price has been rising for the last three months.

The average price of a room in Estonia cost 765 kroons (approximately USD 50) last year. The average occupancy rate of the hotels is 55.7% (59% in Tallinn). In 1999 the turnover of hotel business amounted to 762 million kroons, which exceeded 1998 indicators by 10%. The gross turnover of the tourism branch reached 10.4 billion krons in 1999, with Tallinn accounting for 80% of the total.

«Competition is severe, nonetheless, there are new hotels established all the time, especially in Tallinn,» said Donald Visnapuu, Director of the Estonian Union of Hotels and Restaurants. He stated that the number of visitors at the hotels was continuously growing. One reason for this increase is the Finns. They come to Estonia to rest and to purchase food and, especially, alcohol. Tourists staying overnight in Estonia spend an average of 4000 kroons.

«I believe that future success will lie in the Baltic packages, where travel agencies offer the route Finland - St. Petersburg - Estonia - Latvia - Lithuania,» states Donald Visnapuu. A tourist will not come from afar to visit just one country, so more co-operation is needed: «We have to make the Baltic States attractive to exotic tourists». The words of Donald Visnapuu are exactly on the ball, for statistically 88% of the gross turnover of tourism is from foreign guests. For comparison, in Scandinavia the same indicator is only 40%. Donald Visnapuu also hopes that tourism among the Baltic States will gain more popularity in the near future. Latvians are already the second largest group of tourists visiting Estonia.

Lately, exotic kinds of recreation have become increasingly popular. Several country-farms offer opportunities for horse-riding sports or simple horseback riding (hotel Pesa in Pilva, Vidrike in Otepee). People can fish and catch trout, salmon, carp or crayfish, particularly in Southern Estonia. European tourists are very fond of hunting. Many hotels have arranged facilities for tennis and mini-golf. In Tallinn, genuine golf is offered at the hotel Niitvalja. They also have large stables. Hotels in Saaremaa, Haapsalu, Parnu and Varski offer remedial mud baths.

Old and beautiful small palaces and villas have also been transformed into hotels, such as Ammende in Parnu, Sagadi and Palmse in Northern Estonia, and Padaste on the island of Muhumaa. There are skiing resorts in Southern Estonia - in Otepee, Kuutsemee and Kutioru. Artists and writers have taken a fancy to a country-house in Leigo near Otepee. Tinu Tamm, the owner of the house, arranged two large open-air concerts there in the summer of 1999. The orchestra was seated on an island in the middle of a lake, while the audience sat on a hill.

Riga-Vilnius-Tallinn

Radissoin and Linstow Form a Baltic Network

Paul Taylor, Sales Manager of Radisson SAS Daugava:

The main positive difference in Estonia lies in tax conditions. If you are an Estonian-based hotel operator or travel agency you are entitled to reclaim part of your taxes back. Such measures were taken by the Estonian government in order to attract tourists to Estonia. That means Estonia can sell this product at a cheaper rate.
From the hotelowner's point of view, leisure is increasing in the Baltics, especially from Finland to Riga. Significant growth can be observed in coach traffic from Finland and from Germany. The Via Baltica highway holds huge potential for the future. We do not see any great increase in corporate business travellers in Latvia. On the positive side, I can see a ferry operating between Sweden and Riga in the future. That could bring a huge boost for the economy.
I am of the opinion that the country could do much more to promote Latvia. Since last year, there has been some improvement. I believe that the government is realising that tourism is an invisible export.
The core factors facilitating our business are the leisure industry itself and flexible rates, so that Latvia would be an attractive destination financially and we could compete with places like Prague and Budapest. Today, for European tourists, they are cheaper places to visit than Riga. We have to be very flexible with our rates in order to make Riga more attractive. We also see an increase in comfort inquiries.
Within the Baltic States, Riga holds the leading position in conference arrangement, and I see this as a very good market. After the EBRD meeting we should bring a lot of publicity and also increase the meeting space of the city. Money should be invested in order to promote Riga as a serious conference destination.

Egil Bauer-Nilsen, President & CEO of Linstow International:

Linstow International (LI) works in several directions in the field of property development - trade centres, offices and hotels. For now, we own two hotels in Norway, and outside Norway, we are currently only in hotel business in the Baltic States. World Trade Center Hotel in Tallinn is still under construction with opening envisaged next spring. LI holds 50% of the Park Hotel Ridzene in Riga and the majority of shares of the hotels Latvija in Riga and Lietuva in Vilnius.
Among the three countries, Estonia can be particularly distinguished as having a significant impact of Finnish travel agencies who influence the hotel business notably. In short-term, Riga seems to offer more opportunities for rapid development. In Vilnius, development takes a slower pace. On the whole, however, all of the three countries have good prospects. I feel that competitive disadvantage is currently the policy of airlines - for now, a flight from Oslo to Riga costs more than a flight from Oslo to New York.
When characterising the situation in Latvia in connection with the main event of this spring - the meeting of the EBRD - one more thing should be mentioned. The reconstruction of the hotel Latvija was planned to start half a year ago, but the Latvian Privatisation Agency asked to put it off till the end of May when the financiers' meeting would be over. Such a request made us pause - on the one hand, we have to receive high-ranking guests in a hotel of low standards, on the other hand, in cases of huge demand, there are not enough rooms in the hotels of Riga. Nevertheless, the hotel will be closed immediately after the EBRD forum, so guests of the EBRD can feel free to destroy some partitions of Latvija when leaving the premises, as it will not do any loss to the owners, but facilitate the start of the reconstruction work instead.

Riga