According to Paavo Nõgene, chair of Tallink's board of directors, the trend of Finns traveling to Tallinn but not staying overnight and returning home in the evening is concerning. The Riga-Stockholm route has not been opened at all because Swedes are hesitant to travel to the Baltic states.
On Friday, Nõgene spoke on Raadio2's morning show and discussed the new government's tax measures, which have a direct impact on the industry. Nõgene said that he supports the government proposal to modify the state budget, but that it should be done in such a way that the competitiveness of various sectors in comparison to their neighbors is not jeopardized.
"Nobody appears to be opposed to the fact that the national budget is messed up and has to be fixed. Let me offer you an example: if it is not fixed, the state is expected to pay €400 million in interest by 2025. That is more than the total budget of the Ministry of Culture, for example. Do we want that money to be wasted?" Nõgene asked.
He emphasized that with all of the tax hikes that the government is considering, particularly those beginning in 2025, it would be prudent to carefully examine if this adjustment will actually produce the desired result for the country.
"The statistics have also changed here over the last week. While the state's population was originally expected to be €38 million, it has now been reduced to €20 million. As a result, there is no analysis or it is done swiftly. After all, it's not just about the VAT on hotels; it's also about what these people consume locally and the VAT they receive from it. And, according to Tallink, people from our main market in Finland are visiting Tallinn but returning home in the evening. Perhaps the trend of staying overnight is decreasing, which is a warning sign," Nõgene said.
He made the contrast that if the hotel sector made a total profit of €29.5 million in the pre-crisis year of 2019, there must be some error in the figures, if the government believes the VAT rise will bring in €38 million.
"I understand that the VAT on tourist accommodation must be raised, but does it have to be 13 percent all at once? There must be alternative methods to do it and at a slower pace. Also, in the long run, sending a signal to neighboring countries that this is the way to go. This tax hike should be considered in relation to neighboring countries, reducing our competitiveness. But everyone understands that it must be raised," Nõgene said.
Simultaneously, he said that if inflation is high and new taxes are imposed, there will be more competition for what people can spend their money on.
"The market is down 79 percent between Tallinn and Helsinki compared to 2019, so it has not recovered so far. As a result, price-conscious buyers exist in Finland. Finns do travel, but we believe they do so less frequently. High inflation has now reached Finland and Sweden, which is a positive paradox for us. As a result, Estonia becomes a little less expensive in this perspective."
Fear of Swedes prevents opening of Riga-Stockholm line
At the same time, there is apprehension among Swedes about visiting the Baltic states as a result of the conflict in Ukraine. According to Nõgene, the concern is more prevalent in Latvia and, in particular, Lithuania.
"This is also why the Riga-Stockholm route has not been reinstated," he said. "The common view in Sweden is that if it is possible to travel somewhere else (other than the Baltics - ed.), they will do so."
Nõgene was unconcerned about the increase in alcohol excise tax and the potential loss of Finnish tourists, owing to the large disparity in excise duties between Estonia and Finland.
"Rather, I hope that it will be completed in tandem with the Latvians. There will be no problem if Estonia and Latvia agree to collaborate," Nõgene said.
Editor: Urmet Kook, Kristina Kersa