One of the most important sectors of the global economy and one of the largest in terms of employment is the hotel sector. The hospitality industry creates jobs in all nations, including those where unemployment is at a critical level. The tourism and hospitality sector of the economy of Latvia is expanding quickly. Geographically advantageous location, natural resources, a rich cultural and historical history, as well as a growth-oriented workforce, all contribute to its successful development.
The opening of new hotels by national and international corporations is helping Latvia’s hotel sector grow quickly. The hotel sector is dealing with several difficulties as a result of rapid development. Understanding these difficulties can enable hoteliers to grow their business while guests are waiting. Hotel owners could maintain their competitiveness by keeping up with industry changes. The massive hospitality industry, which provides lodging to travelers, includes the hotel sector.
The hotel industry in Latvia: trends and challenges
Here are some of the trends:
Technologies in the hotel industry
It is generally known that the needs of customers have traditionally been the primary factor in determining the standards that apply in the hotel industry. Because of recent developments in technology, the term “consumer-driven economy” now has a completely different connotation than it did in the past. In addition, hoteliers tend to underestimate how quickly the hospitality business will be disrupted by technological advancements. Sixty-four percent of those who stayed in hotels in the United States felt that continuing to invest in technology was either very or extremely vital for hotels to improve the visitor experience. One method that many hoteliers are taking advantage of digital improvements is by creating homepages for their establishments that provide booking and advertising options. Even the smallest hotel, such as a bed & breakfast, can have a greater internet presence than the largest five-star hotel if it has a website.
Taxation in the hotel industry
The Latvian Ministry of Finance proposed raising the VAT on lodging services from 12% to 21% in 2017, by the World Bank’s recommendation. The current rate was 12%. The perspective of the lodging businesses is that this action will seriously harm the sector and send the wrong message to investors and the economic environment in Latvia. If the proposed VAT increase is carried out, Latvia’s lodging tax will be more than twice as high as those in Estonia or Lithuania and three times higher than those in Poland. All of the Baltic States is commemorating the 100th anniversary of the founding of their respective republics in 2018. Tourists as well as residents from the area will attend these events.
Almost all countries offer a reduced rate of VAT for accommodations for visitors; 25 of the EU’s 28 member states do. For instance, the tax rate is 9% in Estonia and Lithuania and 7% in Poland. Only Denmark, Slovakia, and the UK now offer this service with the full 20% and 25% VAT rates. Latvia would have the second-highest VAT rate in the EU if the government increased the VAT to 21%.
Marketing in the hotel industry
The primary goal for new hotels, as well as for the other hotels, is to handle the increase in tourist flow — not by redistributing existing customers, but by proactively luring new ones. The marketing sector needs a lot of work, and Riga should be promoted as a desirable travel destination. Hotels are already working to improve their marketing strategies. They collaborate with travel agencies and take part in international exhibitions. Filling the conditional vacancies during the off-season, which lasts from October to April, is a significant difficulty for the Latvian hotel industry. There should be an increase in business travelers, conferences, and major events during this time.
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