We conclude this three-part series on China by taking an in-depth look at how the economic downturn in China is affecting tourism in one of Switzerland’s most emblematic destinations, Lucerne. A small lakeside city surrounded by towering peaks, Lucerne plays an outsized role in Swiss tourism and watch sales.
Would you be worried if one of your primary sources of revenue instantly disappeared or at least be hoping for a quick rebound? “We don’t have to hope. The rebound will happen automatically,” Conrad Meier said. And after more than a decade at the helm of the four-star Grand Hotel Europe Luzern, he knows his product.
The Belle Epoque, 177-room hotel on the shores of Lake Lucerne stands tall despite the spectacular disappearance of Chinese tourists. The volume of Meier’s Asian guests is down 36% versus 2019 but demand has been filled by other demographics. Around 90% of the hotel’s guests are part of tour groups. But the lobby on this gray Thursday in January is utterly devoid of guests, save for a walk-in customer sipping a cup of coffee.
Therein lies the paradox. Lucerne, a Swiss tourism hotspot, has seen one of its key market segments decline substantially, yet looks none the worse for wear. Let’s take a closer look at why.
Chinese tourism falls off a cliff
Back in 2019, some 1.4 million Chinese tourists discovered the natural wonders of Switzerland. Since then? The total for the past three years—combined—stood at a mere 275,000. An 82% drop. With fewer tourists, shouldn’t hoteliers be worried? For the Lake Lucerne region, overnight stays by tourists from mainland China were down 79% in 2023 (excluding December) versus 2019, according to the Swiss Federal Statistical Office. It was the biggest decrease of all Swiss regions.
The drop in Chinese tourism in the Medieval town has been as steep as, well, the mountains surrounding it.
Overall however, night stays remain remarkably buoyant. Some 17.4 million hotel stays were recorded last winter (Nov. 2022 to April 2023), which was a record. So they’re coming from somewhere else. The United States, for example, was up 20% (Jan-Nov. 2023 vs. 2019).
Perhaps one statistic depicts the situation most accurately: Lucerne’s hotels enjoyed an occupancy rate of 96% in 2019.
For perspective, back in pre-Covid times China was a global tourism powerhouse, accounting for one-fifth of international tourism spending ($255bn) in 2019, making it the largest outbound travel market in the world (both in terms of the number of trips and total amount spent). Times have changed.
The average Chinese tourist spends CHF 380 per day in Switzerland, which is just shy of levels spent by tourists from the Persian Gulf region. This stands in contrast to the average German tourist who spends just CHF 130. However, the Chinese zip through Switzerland, spending an average of just 1.3 nights, which is the lowest rate of any country (source: EPFZ).
Fewer flights mean exorbitant airfares
According to Switzerland Tourism, as of April 2023, capacity in terms of the number of international airline seats was just 37% of where it was before Covid. This number is creeping higher as carriers add flights but OAG, an aviation analyst, reported that, in December 2023, capacity had reached just 62% of December 2019 levels. But the key, according to the optimists, is the upward trend.
There’s no place like home
As elsewhere in the global tourism landscape post-Covid, Chinese tourists are looking inward. Domestic tourism in China has finally returned to 2019 levels, though spending has lagged somewhat.
According to tourism players in Lucerne, wealthier Chinese are choosing independent hotels rather than multinational brands and still intend to travel to Europe, unlike their more budget-conscious counterparts. Tour groups are less popular, in favor of more personalized experiences. The sputtering Chinese economy and persistently high Swiss prices have scared off many budget travelers.
Tourism trend in Lucerne: Fully independent travelers
Tourism players in Lucerne pointed to a new trend they are seeing: more Fully Independent Travelers, which may be a welcome development for townspeople in Lucerne who have long complained about overtourism. (In May 2019, some 12,000 Chinese tourists descended on Lucerne, putting a strain on the iconic covered bridge—said to be Europe’s oldest.) In that year, Lucerne beat out Venice and Paris for most tourists per capita. “Group tourism is a sensitive topic,” among locals in Lucerne, Martin Räber, Global Director of Tourism at Bucherer, said, “people are not happy to have tour buses in their backyard”.
The F.I.T. demographic also tends to have deeper pockets, pushing room rates in Lucerne even higher, according to Lucerne Tourism. For Räber, they are more elusive than working with wholesalers such as tour operators, “you have to grab them at the right spot”. With 50 years’ experience in Lucerne tourism, Robert Casagrande sees the future in four letters: vans. For him, 12-passenger vehicles will take market share from the ubiquitous tour buses.
Switzerland’s outlook is rosy compared to other countries that depend heavily on Chinese travelers such as Thailand (28%), Japan (30%) and Germany (16%). In 2019, 11 million Chinese tourists visited Thailand (where over 10% of GDP comes from tourism). And after Covid? Try 13,043 for all of 2021. Worse still, a bizarre story has emerged involving online scamming compounds, further discouraging Chinese tourism. In Japan, the release of contaminated water from the Fukushima nuclear site has turned off Chinese tourists. Economic and geopolitical headwinds are delaying European vacations for ordinary Chinese.
Confidence is the watchword
After the Place Vendôme in Paris and Plaza 66 in Shanghai, Lucerne is the biggest ‘supermarket’ for timepieces in the world. And some 40% of watches in Switzerland are purchased in Lucerne.
At Bucherer, a multi-brand watch retailer, the amount spent by Chinese tourists in 2023 was a mere 10% of levels recorded in 2019, the year before Covid. Yet, all around this picturesque town nestled in the mountains of central Switzerland, a quiet confidence radiates.
“We saw a drop, but it’s recovering. Other markets recovered much faster”
explained Räber laconically.
Räber explained that in the wake of Covid, economic uncertainty made many asset classes highly unstable. Not so Swiss watches, which maintained their attractiveness—particularly among local buyers during the pandemic. “Management changed their mindset a little bit. Locals were our priority: caring about customers is key and tourism is just a bonus. We’re not that dependent on China anymore,” Räber said before continuing, “Covid was a shock but it showed everyone that you shouldn’t rely on just one market”.
Glancing up at the closed-circuit television screen in his office, Räber remarked on the empty parking lot in front of the impressive Bucherer storefront on Grendelstrasse, a street in the old town. On this chilly day in January, which is historically a slow month, only 20 or so Chinese tour buses would be coming through town to shop at Bucherer, “not too many”, according to Räber. For perspective, the unofficial record is 250 in one day.
“A well-oiled machine”
The Chinese come to shop in Lucerne. In some ways however, 2013 presaged the Covid crisis. In that year, Beijing began its crackdown on corruption, levying a luxury tax on conspicuous goods in order to curtail lavish gift-giving to government officials. “We felt it”, admits Räber, but the timelessness and sterling reputation of Swiss watches kept sales buoyant. By some estimates, the average sales price of a Swiss watch for the Chinese tourist is about CHF 4,500. In a game as old as exchange rates and value added tax, many Chinese shoppers buy several watches that they resell to friends or acquaintances, which sometimes covers the cost of their European vacation. This arbitrage yields benefits for all parties. Tour groups, led by Chinese tour guides, tend to visit Rigi or Titlis, two nearby mountains, in the morning to see the snow and then shop and sightsee in the afternoon. “It’s a well-oiled machine”, Räber said. But why not buy your Rolex closer to home or in Dubai? “They want the story,” explains Christian Pfiffner, who runs Casagrande an upscale ‘souvenir shop’ also on Grendelstrasse. (It is said that $1bn in sales were generated by the luxury brands lining this tiny street in 2018.) For Räber, “lodging and food are not as important to the Chinese as buying something you can show off at home”.
Above his glittering shop containing Swiss specialties ranging from cuckoo clocks to music boxes, luxury watches and cosmetics, Pfiffner recounts that January 2020 was a record month then “nothing for the rest of the year”. Skipping ahead to 2023, turnover from Chinese shoppers was just one-quarter of where it was for 2019. Before Covid, China accounted for 50% of overall revenue for Casagrande, which was founded 75 years ago. Yet, Swiss products remain remarkably resilient. Almost all other nationalities, Pfiffner explained, have surpassed their 2019 levels.
What does the future looks like for Lucerne Tourism?
Casagrande has been a family-run enterprise for three generations. For Robert Casagrande, “the Chinese lost a lot of money in property and they’re not spending as easily. They have traditionally been savers, but now they’re in debt and going back to their roots of not spending on credit”. Time to worry? Not exactly. “Only five million have visited Europe. There are so many millions of Chinese who haven’t yet come here that we don’t have to worry. And if the Chinese don’t come, the Indians will come. And if the Indians don’t come, the Indonesians will come…” Casagrande concluded.
In the opinion of Manuela Casanova, Head of Markets at Lucerne Tourism, “the tour operator model will evolve towards a better understanding of everyone’s needs”. Indeed, changing tastes will continue to push tourism players to adapt but like its lakes, mountains and watches, the charms of Lucerne are seemingly timeless.