At least €65 million will be invested in new hotels in the region, with new properties expected to open this year and next. The EU's Just Transition Fund (JTF) will cover about 45 percent of the cost.

Projects are planned in Sillamäe, Narva, Jõhvi and Uusküla, including a boutique hotel and 100-capacity spa in Sillamäe. Only the facade of the existing Sillamäe building will remain, with developers promising modern interiors.

The expansion will significantly increase local accommodation capacity, said Ida-Viru tourism coordinator Kadri Jalonen.

"It will add the kind of accommodation we've been lacking," she said, noting the additions could boost supply by nearly a fifth and help drive visitor numbers in the region.

In Jõhvi, construction is underway on a 72-room, three-star hotel aimed at business travelers. Developer Janno Meriloo said the city as a location has potential, but risks remain.

"The key question is how to make the hotel and the region attractive enough for people to come, and what prices would be reasonable," Meriloo said, noting that these aren't easy issues to solve.

"Even with this degree of support, the risk is still there," he added.

Outcomes depend on tourist numbers

While an in influx of tourists could be a boon for existing hotels in the area, existing operators are watching closely, concerned about demand in a weak travel market.

"If there are more beds than tourists coming to Estonia, that will definitely spark price wars," said Karina Küppas, CEO of Narva-Jõesuu Medical Spa.

She warned falling prices could affect profits, investment and even job creation.

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