While Estonia is seeing a slight uptick in tourism, hotels and restaurants are struggling and their profitability is declining.

Estonian Hotel and Restaurant Association CEO Külli Kraner said she cannot say exactly what the impact of global platforms like Airbnb and Booking.com on the sector is.

"This is quite a black box and a gray area for us. We can only estimate. It may vary significantly by region, but it could be somewhere in the range of 25 to 35 percent," she told ERR.

"The situation today is that no one knows the exact share of this market. And who stays there, how long they stay, for what reason—whether they're on holiday or traveling for business," the CEO added.

The study commissioned by the Ministry of Economic Affairs estimates the market volume at between 30,000 and 50,000 beds. The largest supply is in Tallinn and Harju County, as well as in Western and Southern Estonia.

According to 2023 data, there were about 5,400 economically active short-term rental properties listed on platforms. Short-term rentals accounted for 21 percent of all overnight stays.

The average rental income per accommodation was €5,900 per year, with properties rented out an average of 33 nights per year in the counties and 66 nights in Tallinn, Tartu, and Pärnu.

Effect 'limited and localized'

Ministry of Economic Affairs Tourism Adviser Kati Kikas said the short-term rental market is an important part of Estonia's tourism sector.

Foreign tourists using these services contribute €135 million per year to the Estonian economy, according to the study. Total platform-based sales revenue reached €32 million in 2023.

Kikas noted that while there are many signs of a positive impact, the study also highlighted some negative effects.

"We see that an active short-term rental market has reduced supply in the long-term rental market and increased prices. These effects have been limited and localized. For example, Tallinn's Old Town has become a hotspot where a large portion of apartment listings are concentrated," she explained.

In Tallinn's Old Town, there are 139 short-term rental beds per 100 residents. The study found that, in addition to the Old Town, the Rotermann Quarter and the Pärnu also have a notable number.

Kikas said the situation varies greatly across different regions of Estonia, and there is no one-size-fits-all solution to mitigate the negative effects.

"The need for broader nationwide regulation is currently highly questionable. However, we do want to ensure legal clarity," she said.

The regulations will be reviewed if there is an indication that businesses find them unclear, Kikas said. For example, who qualifies as a provider of accommodation services and what requirements they must meet.

"For example, one issue raised in the study was that fire safety in larger apartment buildings may not be adequately ensured. We intend to analyze all such findings thoroughly and eventually compile comprehensive guidelines," the advisor said.

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