Cancellations hit tourist industry following rise of Swiss franc
Waving goodbye? Tourism chiefs are worried that foreign tourists will stop coming to Switzerland
swissinfo.ch
Tourism bosses have warned that the Swiss tourism industry is facing a “serious” situation, already feeling the effects of Swiss National Bank’s decision to scrap a minimum exchange rate with the euro.
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“We have already seen lower bookings and more cancellations,” the Swiss Tourism Federation, an umbrella organisation representing the industry, said in a statement on Friday.External link
“The tourism industry cannot take advantage of cheaper imports, nor can it move working processes abroad, like other industries can. Therefore it must be stressed once again that tourism is being affected by exchange rate movements more than any other industry,” it continued.
If the franc’s value rises by 1%, the ensuing fall in overnight stays is between 0.5% and 1% – and could be more, said the federation, Alpine and country tourism is the most affected.
The federation’s warning comes just days after the director of Switzerland Tourism,External link Jürg Schmid, said the domestic tourism sector was facing “crucial days”. He also pointed to telephones no longer ringing and online reservations not being made.
He added that the timing of the central bank’s decision on January 15, so close to the high tourist season, had triggered uncertainty among foreign customers and that Swiss tourism was still “in shock”.
Ditching the franc cap, which had been in place since September 2011, caused the franc to surge against the euro and dollar, sending shockwaves through the global financial system.
Even Swiss tennis star Roger Federer has got involved in doing PR for his homeland. “Still think it’s a wonderful place to visit, so please come,” he said,when asked about the effects of the SNB’s decisionExternal linkat a press conference during the Australian Open on January 20.
According to the Swiss Tourism Federation, tourism accounted for CHF35 billion gross value ($40 billion) added in 2013, of which around CHF16 billion came from foreign tourists.
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Shoppers bombarded by discounts after franc shock
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Retailers are rushing to offer bargains to Swiss shoppers after a shock surge in the franc, taking advantage of lower import costs but also fearful of losing custom to cheaper rivals over the border in France and Germany.
Until last Thursday, the Swiss National Bank (SNB) had capped the value of the franc at 1.20 per euro. The surprise decision to remove that limit has left the currencies virtually at parity, with one euro buying 1.01 francs on Tuesday.
The rise in the franc is expected to have a painful impact on Swiss exports and tourism, but it is a boon for Swiss residents buying imported goods or tempted to shop over the border in eurozone countries – Germany, France, Austria and Italy – and Swiss retailers are scrambling for their customers.
Chic clothing store Grieder in Zurich, near the headquarters of banks Credit Suisse and UBS, has knocked a fifth off its prices. Watchmaker Roger Dubuis is lowering prices by up to 6% while rival Audemars Piguet may follow.
A new Mercedes has now been discounted by 18% in Switzerland. Rival Audi is also considering an “adjustment” for its Swiss customers.
Swiss media say furniture stores, travel agents, supermarkets and petrol stations have all cut prices too.
Burgernomics
But rather than expecting a sales boom, many retailers may simply be worried about Switzerland haemorrhaging retail demand to the eurozone, where prices have long been cheaper – and just got cheaper still.
Even at 1.20, the franc was highly valued compared with before the 2008 economic crisis, when one euro would buy around 1.55 francs.
A survey by Deloitte found about 80% of chief financial officers regarded a rate around parity as a disadvantage for their firm, while 1.20 was neutral and 1.30 would help them.
At IKEA in Switzerland, a Frostig refrigerator costs CHF1,299. The same model costs €599 across the border in Germany or France.
McDonald’s Big Mac costs CHF6.50 in Switzerland, roughly 50% more than in France. For residents of Geneva or Basel, it is little more than a drive across town to take advantage of such discounts.
“Companies are barely out of crisis mode, yet now they will need to focus on coming to terms with the appreciation of the franc,” said Michael Grampp, chief economist at Deloitte in Switzerland.
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The number of European customers in Swiss alpine resorts has continued to decline in recent years, because it is more expensive to ski here than in neighbouring France, Germany and Austria. But when the Swiss National Bank abandoned its currency cap with the euro on January 15, this made the value of the franc rise…
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