Viru hotel to lay off one third of staff

The iconic Viru Hotel in Tallinn.
The iconic Viru Hotel in Tallinn. Source: Siim Lõvi /ERR

The Viru Hotel in central Tallinn is to lay off up to one third of its employees as the impact of the coronavirus pandemic and its effects on the tourist industry continues to bite.

Klaus Ek, managing director of the hotel, owned by Sokotel, said Tuesday afternoon that: "Due to the corona epidemic, hotel sales have been 99 percent lower than usual since mid-March."

Sokotel has started talks with the national trade and service workers union, the Eesti Teenindus- ja Kaubandustöötajate Ametiühing, with layoffs due to taken place on July 1.

Klaus Ek said that the state support system for employee salaries had been a help through April and May, but rental costs and other fixed costs have found no state support, adding that only small tourism businesses can apply for support from Enterprise Estonia, and not a hotel of the size of the Viru.

"According to current forecasts, travel will not recover its former volumes in the short and medium term. But in the long run, we are actively negotiating the expansion of our hotel chain in Estonia," Ek went on.

The Estonian border is likely to open to Finnish tourists from mid-June, but the hotel expects a 40-60 percent drop in turnover by the end of the year, which will mean a loss of several million euros for 2020, the hotel says.

"Unfortunately, we have to make painful decisions which affect our employees. We will consult with unions on collective redundancies and we will lay off an estimated one third of workers from 1 July. This is a very difficult decision for the company, but an even harder blow for individual redundancies," Ek continued.

"It is a great pity that we have to make such a decision, but there is no other option. We fully understand that redundancy is a very difficult decision from both an economic and a spiritual point of view."

Collective redundancy negotiations with the union are set to last two weeks. AS Sokotel will then notify the Unemployment Insurance Fund (Töötukassa) of the collective redundancies, with employees receving layoff notices at the end of June.

The government wage support scheme, which the Viru took advantage of, provided up to €1,000 per month and/or 70 percent of the worker's wage, was issued in March in response to the pandemic, but as its shelf-life was two months, those companies which signed up to it in the beginning have now reached the end of the support package.

The Viru Hotel is, along with the Olümpia, one of the two most iconic hotel buildings in the Estonian capital and was opened in 1972, being then operated by the Soviet tourism agency Intourist. It has over 500 rooms.

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Editor: Andrew Whyte

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