“A third of Swiss hotels must close”

Sauna time? Things are also heating up for many Swiss hotel owners Keystone

The Swiss hotel industry might be picking up, but the head of the Swiss Hotel Association believes more than a thousand hotels might not survive the next ten years.

swissinfo.ch looks at the health of the sector and the various challenges facing managers at both ends of the star spectrum.

“Building a hotel where people can sleep, eat and drink is not good enough anymore,” Guglielmo Brentel, president of the Swiss Hotel Association (hotelleriesuisse), told swissinfo.ch.

“There are other reasons why people travel and you have to know what they are and offer the services they expect.”

Brentel, himself owner of a medium-sized hotel in Graubünden, points out that of Switzerland’s 5,500 hotels, 40 per cent account for 80 per cent of overnights. Sixty per cent share the remaining fifth.

“You can imagine what their occupancy is. I’d say half of those – a third of the total – won’t be able to compete in the future.”

He takes a Darwinian view. “Whether they disappear is not up to us – we’re not an assisted suicide organisation! It will be the market that decides.”

He admits however that when it comes to natural selection, the situation is particularly challenging for smaller, family-run hotels.

“The problem lies in structural deficits, lacking position, weak marketing power and lower costs. There’s always someone cheaper than Switzerland,” he said.

“Smaller hotels can’t compete with bigger ones on price. But if they say, ‘OK, I’m small but I know the region and my product – I can give a special experience to my guest’, they’ll find their market.”

B&B&B?

Pia Nussbaumer and her husband own the two-star Hobby Hotel in Vitznau, overlooking Lake Lucerne. A Swiss Historic Hotel (see link), the Hobby Hotel gets its name not from its owners’ casual attitude, but from the wide range of creative courses on offer, from jewellery design to iron sculpture.

“As a two-star hotel, one has to find a niche,” Nussbaumer told swissinfo.ch. “Ours is that in spring and autumn we offer courses in arts and crafts because we couldn’t live just off holiday tourism. We cater for guests who are looking for a bit of what I call ‘creative wellness’.”

She added: “Just today a five-star hotel hosted a management seminar for a leading pharmaceutical firm, and they then came to us for two hours to be creative – a collage painting course.”

So will bed and breakfasts have to add for example “and bicycle” to their signs? “B&Bs can be excellent,” Brentel said. “But people will not travel to you just because you offer bed and breakfast. The point is to offer not only accommodation but an experience.”

Nussbaumer says that while mountain regions for example might be happy to have these simple hotels, the less-is-more approach can be a “double-edged sword”.

“In July and August there are often people who are happy to have cheap, good-value accommodation and who don’t need all the extras. But obviously you can’t live from these two months – you should in principle count on 12 months.”

Underpriced luxury

Despite an Asian boom in Swiss hotels (see box), the major guest group remains Swiss, who, according to Brentel, are very critical regarding quality and price fluctuations.

“For years the Swiss have been used to stable prices, whereas abroad the price of a hotel room depends very much on supply and demand. Go to Germany and you can pay four times more for a room during an exhibition or a fair [than when there isn’t one]. In Switzerland that’s not acceptable.”

What’s more, in Brentel’s opinion there is room to increase prices in the top-of-the-range hotels, following a drop in rates during the financial crisis.

“Abroad, hotels will say the room is €1,000 – take it or leave it. We have another mentality. I think we might not have the courage to raise our prices. If you compare the prices of five-star rooms [internationally], we are average, and I think we could ask for a little more – especially for the five-star and top four-star hotels.”

Swiss quality

Christopher Cox, vice-president of marketing at luxury hotel group the Victoria-Jungfrau Collection, agrees.

“I think value for money in Switzerland is definitely sometimes higher than other European markets. If you compare Switzerland with Britain, Russia or Italy, the rates for a five-star hotel here are far more reasonable. But I wouldn’t call it too cheap.”

The Victoria-Jungfrau Collection owns four five-star hotels in Switzerland: the Victoria-Jungfrau in Interlaken, the Bellevue Palace in Bern, the Palace Luzern and the Eden au Lac in Zurich.

Cox says their biggest market is still domestic, but all their hotels, especially Interlaken and Lucerne, have this year seen an increase in Indian and Middle East business.

He adds that their biggest challenge is maintaining the business meeting segment, pointing out that many companies are no longer allowed to consider five-star hotels.

But in general he thinks the Swiss luxury hotel market is in good health.

“It’s all about quality, and Swiss quality is extremely high compared with other countries – and the perception is also very high. I also think there’s still the advantage that Switzerland is where the luxury hotel industry in Europe started.”

More authentic

One of the greatest challenges for Nussbaumer is overcoming the stigma attached to having only two stars.

“We’re looking to invest and become a three-star hotel. Two stars is enough for Swiss guests, but foreign guests or tour operators look for at least three. Also it can be easier to recruit staff when you have three stars,” she said.

“But on the other hand we have guests who like us being a historical house – they’re really bored with all the Hilton-type chains that are all the same and they think it’s great to stay in a house with a personal touch that might be a bit simple but is more authentic.”

Nussbaumer says this cultural aspect plays a large role.

“But it’s funny: some guests say ‘don’t change – leave everything as it is!’ and others say ‘this is like living 100 years ago, it’s terrible!’. To them I reply ‘well, if that’s the case, we’ve achieved our aim as a historical hotel…’”

Strong franc

Swiss hotels are not being helped by the strong franc, currently trading at SFr1.33 to the euro. British and American visitors are also feeling the pinch.

“Generally, nobody stays in Switzerland to have the cheapest possible vacation. This is not the goal. We cannot be cheaper; we can only be better. We can communicate that it’s still worth coming to Switzerland even though it’s more expensive,” said Guglielmo Brentel.

Late last year the Swiss had to pay around SFr1.50 for one euro. On July 1 this year the franc reached its strongest ever position, with one euro costing just SFr1.3070.

Brentel said: “Everything under 1.40 is a problem for us. 1.60 is a party, 1.50 is fantastic, 1.40 is OK and 1.30 is a headache.”

Pia Nussbaumer said business was worse than last year, “but that’s what we expected”.

“We’re a classic holiday hotel that is set up for the European market and we can really feel the euro exchange rate. It’s become ten, 12 per cent more expensive for them. And we’re obviously in a sector where ten or 12 per cent makes a big difference.”

Christopher Cox said: “I think [the strong franc] is a challenge for every hotel. We have seen some changes but not significant ones.”

Picking up

On August 4 figures published by the Federal Statistics Office suggested the Swiss hotel industry seemed to be picking up after being hit by the financial crisis: the 17.5 million overnight stays between January and June were 2.1 per cent up on the same period in 2009.

There was a 2.9 per cent rise in guests from Switzerland, who accounted for 7.5 million of those stays. There was a 0.9 per cent drop in European guests.

Meanwhile, the number of Asian guests is growing, with 16 per cent more than in the first half of 2009. In June 2010 there were 32 per cent more Asian visitors than in June 2009. Most came from China, but many were from Japan, India and the Gulf States.

1934-2009

The Federal Statistics Office has been keeping accommodation statistics for 75 years. Here are some of the main changes:

The number of hotels fell by 29 per cent from 7,756 to 5,533. But the number of beds available rose by 35%.

The number of overnight stays rose 2.5 times from around 14.3 million in 1934 to 35.6 million in 2009.

However, people are staying in hotels for less time: an average 2.3 nights (2009) compared with 4.2 nights (1934).

The origin of guests has flipped around: in 1934, 57% were Swiss and 43% foreigners, and in 2009 43% were Swiss, 57% were foreigners.