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Finnish hotels cash in on tourism
Hotel & Motel Management / September 21, 1998

By Larry Luxner

HELSINKI -- During the Cold War, Finland -- forced by geography to walk a deli-cate tightrope between the Eastern and Western blocs -- was one of the world's biggest spy dens. A reminder of this mistrustful period can be found at Helsinki's downtown Hotel Torni, where a plaque in the lobby notes that this tall building once served as the headquarters of the notorious Soviet control commissioner, Andrey Zhdanov.

Says a guidebook: "Finnish policemen stood on guard outside the hotel day and night while Soviet soldiers kept guard inside. After the control commission left, an inven-tory was made at the hotel: the furniture had to be replaced, as well as the phone systems."

Today, the KGB men are gone. Instead, hordes of Russian-speaking tourists now flock to Helsinki's department stores and hotels for a weekend of shopping and relaxation.

"We're coming out of a heavy recession, and we had a lot of hope for European and U.S. tourism passing through Helsinki to make side trips to St. Petersburg," said Olof C. Jurva, managing director of the five-star Inter-Continental Hotel Helsinki, the largest hotel in Finland and the second-largest in Scandinavia. "But that hasn't happened. Instead, lots of nouveau riche Russians are coming for shopping, and that's compensated for it."

Business guests now make up 85% of the clientele of the 512-room Inter-Continen-tal, which is owned 60% by Stockholm-based Scandic Hotels AB and 40% by Finnair, the Finnish national airline. Broken down by nationality, the property's guests are from the United States (24%), Finland (17%), Great Britain (8%), Japan (8%), Germany (7%), Belgium and the Netherlands (5%), other Scandinavian countries (5%) and Russia (4%). Its biggest rival, SAS Radisson, is right next door along Mannerheimintie, across from the National Opera and Finlandia Hall on Helsinki's Töölö Bay.

Both properties will get a big boost on July 1, 1999, when Finland takes over the rotating chairmanship of the 15-member European Union.

"We have calculated there will be at least 90 EU meetings over a 12-month period," says Pekka Ropponen, manager of the Finnish Hotel and Restaurant Association. "Maybe half of them will be in Helsinki, and the other half in other parts of Finland. In December 1999, all 15 EU heads of state will meet in Saariselka, in Finnish Lappland, over 1,000 kilometers north of Helsinki."

According to Ropponen, Finland has 48,000 rooms in 765 hotels and motels, of which 200 belong to large chains. The average room rate is $61, and the average occupancy rate last year was 48% (up from 45.7 in 1996 and 41.4% in 1993), though at the Inter-Continental, occupancy hovers around 70%.

Jurva says that despite the increase in visitors from Russia and nearby Estonia -- only 50 miles across the Gulf of Finland -- ""our real opportunity is from the EU. Finnish companies like Nokia have invested a lot in Europe, and we are getting more and more business from there."

In addition to getting the chairmanship of the EU, Helsinki will also be hosting some major sporting events, including a world figure-skating championship next March. The city is also bidding for the 2006 Winter Olympics; if it wins, the Finnish Olympic Committee has designated the Inter-Continental to be the event's official headquarters.

Indeed, Helsinki is in the midst of a five-star hotel building boom. Next May, Sheraton will open a 200-room property. The Scandic chain recently paid $101 million for Finland's rapidly growing 4,000-room Arctia chain. And SAS Radisson, which already has two hotels, plans further expansions of its own. For now, Finland's most luxurious hotel is the 200-room Strand Inter-Continental, ranked as one of the world's 20 best hotels.

But the industry is not without its problems.

"On July 1, 1999, a new tobacco law goes into effect," says Ropponen. "In all restaurants, 30% of seats will be reserved for non-smokers, and by 2001, it'll go up to 50%. We are lobbying against this law, and Philip Morris is helping us."

Another, more serious problem is Finland's unusually high liquor taxes, a result of social policies adopted long ago to curb alcoholism. Since the Cold War's end, Finns have been flocking to Estonia, where they can buy booze much more cheaply, and in many cases, resell it back in Finland for a hefty profit. For the past year, however, travelers must be away from Finland for at least 20 hours in order to take advantage of the liquor tax exemption.

"We were lobbying to get that 20-hour limit," said Ropponen, noting that ferry companies offer 22 trips a day between Helsinki and Tallinn, the Estonian capital. "Many people were making three or four trips a day, selling liquor cheaply in the streets. That was a real threat to our members."

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