Demanding hotel in capital (7)
I believe the answer is:
tallinn
'capital' is the definition.
(capital of Estonia)
'demanding hotel' is the wordplay.
'demanding' becomes 'tall' (as in a 'tall order').
'hotel' becomes 'inn' (inn is a kind of hotel).
'tall'+'inn'='TALLINN'
'in' is the link.
(Other definitions for tallinn that I've seen before include "Capital on the Gulf of Finland" , "European capital" , "Estonian city" , "Capital of Estonia" .)