Rouble investors keeping step with growing tourist trade from the east
Russian capital buying up hotels and holiday village developments in Finnish Karelia
By Juhani Saarinen in Ruokolahti and Kotka
Even though it is more than 80 years since members of the Romanov dynasty left the imposing art nouveau residence of Rantalinna, on the shores of Lake Saimaa in Ruokolahti, there is still something of the Russian Imperial opulence to be seen there.
The ceramic frogs that grin from a corridor in Rantalinna were a wedding gift from the Khedive of Egypt in 1868. An ornate wooden table in the Princess Room is a present from the Shah of Persia.
These little details say something about the early owners of Rantalinna, built in 1913.
Two years after its completion, the luxurious stone-built villa was sold to Princess Eugenia Maximilianova Romanovskaya (1845-1925) and her husband Prince Alexander von Oldenburg (1844-1932).
In 1916 they visited for the summer, but from 1918 they lived year-round here.
Eugenia was very well-connected: her mother, Grand Duchess Maria Nikolayevna, was the daughter of Czar Nicolas I of Russia and her uncle was Alexander II. It was for Maria that the Mariinsky Palace in St. Petersburg was built and named.
After the Romanov connection was broken in the late 1920s, the building has served variously as a rest-home for railway conductors, as a field hospital, and now as a hotel.
Nonetheless, the historical link with the Russian Imperial Court is quite clear. And so when the property's owners Head Invest decided to put Rantalinna on the market at a price of EUR 4.2 million, their eyes turned towards the east.
"Rantalinna has the sort of history that might prompt interest across the border", says Head Invest CEO Arto Ylimartimo.
The marketing of Rantalinna behind the Russian border could well reap dividends, since Russian investors have been buying up hotels and holiday villages in Eastern Finland at an increasing rate lately.
In the past weeks two deals have seen millions of euros changing hands as Lomakeskus Saimaanranta in Taipalsaari and Hotel Leikari in Kotka were sold off to companies with a Russian background.
On other fronts, things have been rather quieter. The oil company Teboil and the Harjavalta Nickel smelting plant have passed into Russian ownership, but there have been no other significant corporate takeovers involving rouble capital.
The steady flow of tourist roubles over the border has been noted by Invest in Finland, an organisation promting foreign direct investment in the country, and funded by the Ministry of Trade & Industry.
Investment Manager Pentti Pitkänen confirms that there has been an increase in interest from Russian sources.
"Investments have been directed mainly towards Eastern Finland and to the needs of Russian tourists" says Pitkänen.
There are plenty of reasons for the Russian investment zeal. Russians are spending more and more money on tourism, and travel to Finland is on the rise. On top of this, Finland is regarded as a safe place to put your money.
The current rash of rouble capital is looking for suitable purchases not only in eastern districts but also from the ski-resorts of the north and from neighbouring countries.
Pitkänen points out that for Russian investors Finland is seen as a bridgehead or gateway to other European Union countries.
"I somehow don't believe that the Russians are going to leave it at investing in Eastern Finland and the frontier zone."
Tourism provides a relatively easy option for Russians in learning the ground rules of Western business, since they have their own expertise to bring to the branch.
"Not surprisingly, the Russians understand the needs of Russian tourists rather better than the Finns do", explains Mirja Tiri, Managing Director of the Finnish-Russian Chamber of Commerce.
In the south-eastern corner of Finland, the Russian businesses and in particular the Russian enthusiasm for buying up lakefront properties has divided opinions.
More than 2,000 people have signed an online petition that seeks to prevent the shores of Lake Saimaa from becoming a series of dacha villages.
The opposition is not an entirely new phenomenon. At Savitaipale in Southern Karelia there was quite a hue and cry in 1995 when the municipality revealed plans to convert a historic manor house at Olkkola for development into a vacation and course centre for Russian visitors.
The resistance caused the local officials to change the plans from selling the property to renting it out instead, but this was not enough: the locals pressed their demands with such vigour that the town council eventually took the unusual step of arranging a referendum on the issue.
As it turned out, nobody needed to vote, since the Russian side of the planned venture saw which way the wind was blowing and withdrew from the project. These days the Olkkola property is operating as a hotel and restaurant - under Finnish ownership.
Some local misgivings in the region have also been sparked by hiccups along the way.
For instance in Mikkeli a Russian businessman bought Hotel Varsavuori in 2003, but after running at a loss for a while, the shutters were put up last winter.
A similar scenario was played out with the Joutsenranta Hotel in Joutseno, the ownership of which is something of a mystery. This place, too, closed its doors a couple of years back, although a ghostly website still exists with room tariffs from 2004.
Municipal officials from Kangasniemi, a little town north-west of Mikkeli, have travelled all the way to Moscow to enquire as to when a Russian businessman intends to start construction work on the 5-star hotel he promised to build there in 2005.
In Pentti Pitkänen's view there are risks involved in the Russian investments, but the same could be said for any foreign investments.
Difficulties can surface when efforts are made to dig up the backgrounds of the companies concerned.
"It does not perhaps go quite as simply as a similar search in the West, because Russia does not have an established business practice culture, where the information could be easily picked up."
In Kotka, meanwhile, the latest Eastern buy-in has been eagerly welcomed. A local bank, having tired of the hotel business, had tried to sell off the 102-room Hotel Leikari for four years before a purchaser turned up in June.
The building, handily placed along Highway 7 (the E18, running from St.Petersburg across to Turku and beyond), cannot compete with the beauty of Rantalinna in Ruokolahti, but the aesthetically-challenged look of the 1970s edifice did not deter Vladimir Smirnov, Director of European Business Consulting.
Smirnov spreads out his plans for the place on a large table: a complete refit for the swimming pool and sauna department, Russian performers on stage, and an spa extension.
The company got its feet wet in this market in 2005 on a smaller scale, buying the 20-room Lintulahti Hotel in Virolahti, right next to the border. In both cases, advertising for hotel customers will be directed towards Russia.
The price of the Hotel Leikari deal has not been made public, but Smirnov says he has invested a few million euros in his hotel ventures. The capital has been collected through consulting work for Russian companies and in property dealing.
"The same sort of investments would have a better yield in Russia, but there the risks are also greater", notes Smirnov.
He believes that tourism from Russia will grow for at least four or five years more, and takes the view that there will be more investment of this sort in Finland, if the rate of economic growth in Russia can maintain its current pace.
Pentti Pitkänen says that rouble-denominated capital can come in handy where there is not the domestic funding to satisfy the demand for services.
"It has frequently been pointed out that there is a shortage of free capital in the tourism business", he says.
Bringing in investors from abroad is also one of the targets of the Ministry of Trade & Industry's tourism strategy.
In many small communities it is precisely the influx of tourists that is seen as a way of creating much-needed new jobs.
The Ruokolahti Town Manager Vesa Jäppinen believes the business is the key, and not the owner. The municipality benefits from the operations of hotels and holiday cabin villages, regardless of whether they are owned by Finns or by Russian companies.
"It is the way of the world, and we have to live with it", he says.
Helsingin Sanomat / First published in print 29.7.2007
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JUHANI SAARINEN / Helsingin Sanomat