Despite a solid rise in the number of foreign visitors, hoteliers in the three Baltic nations — Estonia, Latvia and Lithuania — have few reasons to celebrate this year, with the economic situation in its hospitality industry and region leaving much to be desired.
This year, its hotel industry’s performance has been mixed as the national continue to feel the effect of losing Russian and Belarusian travelers but enjoys the benefit of lower supply growth.
There was an impressive number of conferences, major events and concerts by international performers — particularly in the capital Tallinn — in Estonia this summer. It helped to boost occupancy and visibility, but not all regions benefited equally, said Külli Kraner, general manager of the Eesti Hotellide ja Restoranide Liit, or Estonian Hotels & Restaurants Association.
“In southeastern Estonia and some inland destinations, demand was more weather-dependent, and the start of the summer was relatively cool,” she said.
Beyond the weather, Kraner said, the main challenges remain rising operational costs, higher taxes and reduced domestic travel. Estonian consumers are more cautious with their spending, she said.
In Latvia, hotel performance has been equally discouraging, said Andris Kalnins, chairman of the 205-room Islande Hotel in capital Riga and president of the Latvijas Viesnīcu & Restorānu Asociācija, or Latvian Association of Hotels & Restaurants. Occupancy rates in several regions are lower than last year, and the weather has been cold, he said.
All three capitals, including Vilnius in Lithuania, saw occupancy rise to an exceptionally high level, said Césarine Calafell, analyst, hotel transactions, at business advisory Cushman & Wakefield.
She said that despite complaints about the weather, occupancy in July and August in Riga, Tallinn and Vilnius exceeded 85%, among the strongest in Europe, and fears that the general, challenging economic situation in Europe would have hampered tourism flow to the region have not fully materialized.
“The economic health of feeder markets is important, as Nordic, United Kingdom and Western European travelers supply the bulk of visitors. Demand has remained solid despite some macro pressures,” Calafell said.
A noise in the background over the past few years, Kalnins said, is the political situation in the wider region, notably in Ukraine.
He said the number of visitors to Latvia in 2025 is approximately 15% behind its pre-pandemic high.
“The flow of Russian and Belarusian visitors, which used to account for around 30% of the country’s tourist flow, ground to a halt, and alternative feeder markets have not compensated for that loss,” Kalnins said.
Lithuania is performing noticeably better, with the Vilnius hospitality market surpassing pre-pandemic levels in 2023, according to Sigita Rudzeviciene, general manager of 93-room Grand Hotel Vilnius, Curio Collection by Hilton.
“Despite geopolitical threats, like the U.S. government’s strategy change, war in Ukraine and not many strong happenings this year, Lithuania has managed to grow in volume as well as in average daily rate,” Rudzeviciene added.
During the first eight months of 2025, occupancy of branded hotels was on an upward trajectory across all three countries, according to CoStar. In Estonia, occupancy inched up by 2% year over year to 70.4%. Lithuania registered a 2.6% rise in occupancy to 74.9%, and in Latvia, the figure increased 8.6% to 70.5%.
Among the three, Estonia was the only country where occupancy fell short of the overall 2019 levels. In Lithuania, occupancy was more than 10% above 2019.
Year to date through August, ADR in Estonia increased 2.5% year over year to €91.05 ($105.47). In Latvia, it increased 2.8% to €85.69, and in Lithuania, it increased 9.6% to €82.07.
Again, Estonia was the only country where ADR was lower in 2025 than it was in 2019.
Similarly, revenue per available room in Estonia was slightly below the pre-pandemic level, through it grew by 4.6% year over year to €64.13 during the first eight months of 2025. Latvia and Lithuania saw average RevPAR rise by 11.6% and 12.5% to €60.38 and €61.46, respectively.
Fragile profitability
Despite some positive shifts, rising costs and dwindling business profitability are a significant concern.
“Although average occupancy across [Estonia] improved slightly compared to last year, and ADR rose by about 3%, these gains are largely offset by the rapid increase in costs. Profitability, therefore, remains fragile,” Kraner said.
It's a similar story in Latvia.
“The industry continues to struggle with high costs driven by inflation — particularly energy, food and wages — as well as increased taxation,” Kalnins said.
High, and in some cases growing, hotel industry taxation has been an important part of the public discussion in the Baltic region during the past year.
“Domestic demand is also under pressure as households face declining purchasing power. Taken together, these factors create a fragile operating environment for many businesses,” Kalnins added.
Security risks that reportedly discouraged some visitors from coming to the region in 2022 and 2023 have largely wound down.
“Geopolitical risks related to proximity to Russia are noted, though their impact appears limited for the time being,” Calafell said.
The industry’s relatively weak financial performance also constrains investment activity.
“Compared to the pre-COVID years, the pace of new openings is lower, as rising construction costs, higher interest rates and increased value-added and sales taxes and input prices have made returns more modest,” Kraner said.
Kraner added investment activity remains regionally uneven, with the strongest momentum being in Tallinn, where several hotel renovation and expansion projects are underway.
“To truly improve operations, hotels need a stable tax and regulatory environment, plus measures that ease intense cost pressures so investment can resume,” Kraner said.
Investment activity in Latvia has also slowed compared to the pre-pandemic period, Kalnins said.
“Instead of large-scale new hotel openings, most investors are focusing on improving existing properties — renovations, energy efficiency and service quality,” he said. “Financing conditions have become more expensive, which also adds to the caution."
The short- to medium-term outlook remains wobbly, sources said.
Vilnius is facing an increase of supply due to a newly opened hotel that now makes up 9.5% of the city’s inventory in the four-star hotel segment, Rudzeviciene said, adding that it might translate into lowered ADR.
Another concern, Rudzeviciene said, is low-fare carrier Ryanair planning to decrease the number of flights into the city.
“Looking ahead, the outlook depends strongly on government policies and external factors. To improve performance, the industry requires a more predictable and fair tax framework, stronger tourism promotion and improved international connectivity.
“With the right policy support and strategic investment in destination marketing, the industry has good potential to return to sustainable growth,” Kalnins said.