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Hotels adapt to challenging market

  • 2009-07-29
  • By Ella Karapetyan

ROOMS AVAILABLE: Lower rates and improved service should attract guests.

TALLINN - The hotel industry is facing tough times, with the ongoing global recession putting the economy into headline news daily, as we've seen in recent months. In these tough times many people are fearful of losing their jobs and lifelong investments.
One could sit and argue over which sector has been the most hit by the global financial crisis; we could point to the entertainment industry, or to hospitality services. Entertainment, leisure and tourism are very vulnerable to economic uncertainty and volatility as most travel and tourism activities involve optional, or discretionary, expenses.

As reported in the media, the economy has an impact on people's traveling habits. Some experts consider that the key to success for the hotel industry depends on flexibility and being pro-active.
As most surveys show, during times of economic recession, people will conserve money to cover the essentials, such as food, their housing and family necessities. But they don't necessarily all stop traveling.

According to some observers, it is possible to survive in the tourism and hospitality industry if they can adapt to the new circumstances. According to the analysts, those tourism and hospitality businesses need to adapt their offering to travelers on a tighter budget, and if they are able to do this, will do well.
Analysts claim that the demand for the luxury end of the market is likely to decrease, while demand for either low cost, or perceived good value products and services, is likely to grow; this concerns mostly airlines and hotels which need to rapidly adapt to this trend.

According to Michael J.J. Stenner, managing two establishments, Three Sisters Hotel and Hotel Telegraaf, in Tallinn, he feels that both the Estonian government and the city government of Tallinn see tourism as only a minor player in the economy. "Of course, the worldwide economic crisis has influenced our businesses," he says.
"Here in Tallinn we have more than this one challenge, and that is, the restricted possibility for low-cost airlines to use Tallinn airport as a hub, lacking an international conference center and an oversupply of hotel rooms, which reminds me personally of the situation in Berlin at the beginning of this decade," says Stenner.

He mentions that "both of the hotels I manage have seen falling occupancy rates." Moreover, he sees that there is less demand from the customers that arrive, in the restaurant, services and most of all, in fewer companies organizing conferences.

"It is true that times are challenging, but they are not hopeless. We saw some improvement recently, which, however, could have been influenced by the Tallinn Song and Dance Festival, which was held at the beginning of July," he says. "The upcoming months have to forecast the future, and I believe that whoever survives the next winter will also survive for the long term," Stenner added.

He says that in order to attract business, his hotels have lowered rates and created lots of well-inspired accommodation packages and events, which he says "already now seem to be working."
According to a survey made in March 2009 by the European hotel market - STR Global, turnover in the Estonian hotel market, during the first three months of this year, fell by 17.3 percent in comparison with the same period the year before. And for the full year prediction for 2009, STR Global expects a 20 percent decrease in Estonian hotel revenues.

As the surveys showed, neighboring Finland is a more preferable destination for tourists, as it has a more developed tourism infrastructure. The Russian tourists put Finland in fourth place for vacations, after Turkey, China and Egypt. Estonia comes up in popularity ratings in the survey back in 30th place.

The analysts forecast that the situation in the hotel industry in Estonia could be dragged along for many years, as happened in the 1990s in the U.S., and from which it took almost six years, until 2000, before they returned to normal operating levels.