Business Management
6 min read

Is opening a hotel in a Swiss ski resort a good investment?

Pierre Verbeke
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Five years ago, the future of Swiss winter ski resorts was somewhat dim, after consecutive winter seasons with little to no snow and despite a relatively stable number of tourists. There was a perception at that time that existing resorts would be required to transition into four-season resorts simply to continue to exist. That dim view became somewhat rosier, when the snows returned and top resorts saw the return of skiers in record numbers of visitors for the next three winters, climaxing in 2019.

There was also another phenomenon at work. An increasing number of tourists, both an older age group that no longer was as interested in strenuous winter activity, and families with children who have environmental concerns and are geared toward a more natural, eco-tourism experience, visited Alpine resorts in record numbers during the summer.

With that influx of "second-season" tourism, that might in the future become four-season tourism, comes a new enthusiasm for development of infrastructure and facilities that support a different kind of traveler.

It is viewed as an exciting new direction that will add long-term resiliency to the market and open a new realm of possibilities for the hotel and hospitality industry.

Resort resilience, according to the Savills Ski Resilience Index, depends on five key metrics: snowfall, reliability, season length, altitude and temperature. The Swiss resorts of Zermatt and Saas-Fee garnered first and second spots on the index for three seasons in a row. But economic factors and infrastructure are deemed to be equally important indicators of investment value.

Investment plans, positive signs

With COVID-19, tourism changed drastically for alpine mountain resorts and for ski resort destinations worldwide. As travel came to a virtual standstill in March 2020, resort owners and operators were once again plunged into a downturn, this time one they had not anticipated. Nor were they able to do much about the loss of business. Numbers across the board were discouraging, with a severe economic crisis that has been compared to the period following the last war. According to Oxford Economics, Swiss GDP is expected to be a negative 6.4%, while Austria and France numbers were forecast at -4.1% and -8.6% respectively, for 2020. Interestingly, housing markets have remained "remarkably robust," due in part to rising prices, government incentives and continuing low interest rates.

During the three years prior to the pandemic, the number of skiers had also increased dramatically to exceed 350 million again for the first time in a decade. Approximately 46% of Swiss resort visitors are from another country.

Interest in summer and off-season travel also spiked, with a surprising large number of young families visiting the Swiss Alps to hike or to participate in eco-tourism activities. The International Report on Snow & Mountain Tourism noted that there was a 10.6% and 5.3% respective increase in visitors to the Swiss and French Alps between 2018 and 2019. That trend is destined to continue. American travel writer and tourist guide, Rick Steves, has aired several videos showing groups hiking in the Swiss Alps, visiting local villages and learning about local culture. He, too, sees the trend toward more natural, lower-cost vacations, and he is an advocate for authentic travel, encouraging tourists to "slow down" and experience the best of local lifestyles.

Hans Grueter, a retired bank executive who owns nearly 11% of Bergbahnen Engelberg-Truebsee-Titlis AG, the operator of one of Switzerland's publicly traded ski resorts, views a transition to four-season tourism as a good move, moving forward from the pandemic. He notes that summer operations are less costly and, therefore, more profitable than winter operations. He also points to the need for new snow-making equipment, new and refurbished lifts and updated accommodation. He and other resort operators note that such things are all costly, but they acknowledge that there is a particular need now for additional investment in infrastructure. Following the opening of about 100 new lifts in the Alps prior to the 2019 season, 117 new lifts were scheduled to open at ski resorts around the world for the 2020-2021 season, despite the pandemic, with about one third of them planned in the Alps.

Economic forecasts for the future, again from figures compiled by Oxford Economics, are that, over the next five years, France should see the strongest recovery, with a boost in GDP of 27.1%, followed by Austria at 24.6%, Italy at 19.3% and Switzerland at 18.3%.

Investment of another sort

Without question, Alpine ski areas are the best and most attractive in Europe, perhaps in the world. With varied personalities and attractions, the noted resorts pull thousands of tourists each season, to ski, eat, party, see and be seen. Continued growth of the noted ski resorts has also impacted another segment of the real estate market. There is strong demand in the luxury real estate market for rentals, and that has resulted in rising prices and stable sales at many of the noted resorts. A growing number of visitors either buy or rent homes for the season. The Alpine real estate market is strong.

There is new demand for getaway retreats at other times of year, and a new emphasis on summer hiking and trekking has breathed new life into smaller towns near the major ski resorts.

That's just another indication that there are immense untapped possibilities for expansion of not only the tourist trades, but also the vacation home and second home markets in Alpine regions. Rising prices and the shortage of a trained and willing work force may translate into future concerns, but for now the popularity of alpine property is a welcome trend.

According to the International Report on Snow & Mountain Tourism, there was a 10.6% and 5.3% respective increase in visitors to the Swiss and French Alps between 2018 and 2019. With continued demand, prices will no doubt continue to increase. Current low mortgage rates, the growing demand for rental units, the advantage of stable monetary systems - with both the Swiss franc and Euro considered strong currencies - and the expectation of positive ROI are factors that contribute to the viability of buying ski resort property. Negative interest rates adopted by the Swiss National Bank facilitate purchases of ski resorts by wealthy residents and promise a gross yield of around 2.5%

The Knight Frank Prime Ski Property Report contains an assessment of the luxury Alpine real estate market for 2020 in the French and Swiss Alps. Again, low interest rates and the probability of renting property at a profit and maintaining high occupancy numbers appeals to investors. The types of property available in various locations means that home and apartment purchases can be tailored to individual investor needs, making them even more attractive.

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Looking beyond the resort

Smaller villages adjacent to prime ski resorts are receptive to new ideas and are themselves open to new development and tourism ideas. Some, with long histories and local attractions, can become unique destinations for summer travelers. A new hotel project planned for the village of Gryon, near Villars, is but one example of the kind of development currently underway to accommodate a new and diverse vacation traveler. With a growing demand for lodging and the growing demand for lodging and services not only for the ski season but throughout the year, Gryon and other villages may well reap the economic benefits that accrue to them due to the invigorated ski resort industry.

EHL Advisory Services, along with Wuest Partner of Zurich, have been instrumental in the planning phase of the Gryon Hotel project for the developer GEME Developpement et Investissement SA.

Some key findings from that collaboration:

  • Community acceptance is vital, with the goal of retaining the heritage of each individual community if a development project is to be successful.

  • A "no-frills" simpler experience is the preference of summer travelers, with the emphasis on nature, hiking, trekking, swimming, bicycling, and culture.

  • If a community is located near an expensive ski resort, that's a plus, but alternatives to sking, such as snowshoeing, sledding and tobogganing are appreciated by both older and younger visitors.

  • Rates in these smaller communities should be lower than hotel rates in the big-name resorts, and they will attract the more value-conscious, independent traveler even during the height of winter ski season.

  • Amenities should be geared to a "total experience," with eco-friendly options such as an onsite indoor spa, or restaurant options that are geared to healthy choices and fresh, local ingredients rather than gourmet experiences and fine wines.

  • Distinctive hospitality choices are vital, whether for a hotel or an individual rental property. Features such as charging stations, complementary sports gear, maps, guides and suggested hiking and sightseeing itineraries, for example, would be welcome.

The reality of current demand

As the world emerges from the COVID-19 pandemic, it is certain that there will be residual effects throughout the hotel and hospitality market. Vacation travel may take some time to rebound to its pre-pandemic numbers, and the changes surrounding travel now in place in many countries are not likely to be repealed immediately. But, if anything, pent-up demand for travel is stronger than ever before, particularly for vacations in the open air, whether it is summer or winter.

The Swiss Alps, mountain villages and luxury ski resorts will see an upsurge of bookings, without a doubt, in the coming seasons.

So, is this a good time to invest in a Swiss ski resort hotel, or to buy property that can be rented out to tourists? The consensus is a resounding affirmative, with some reservations worth noting. Rising prices, of course, are a concern. Investment must be tempered by sound financial analysis, with an eye to the expected return on that investment, whether in the short term or over the long term. Those resorts and communities with infrastructure in need of updating must examine what needs to be done and how best to keep pace with growing demand. Sustainability is at the forefront of the discussion today, and is destined to become even more important for the future. Operators will want to gauge new services and amenities to the clientele, but initial assumptions are that the luxury traveler will still want luxury, and that a larger number of tourists will opt for more unique and affordable options. That does not mean that hoteliers must reduce their prices, but that the market can expand to serve a wider variety of paying guests.

Resort operators should place new emphasis on risk management and contingency plans for the future, and weigh all decisions in light of past experience and future gain. New technology has come to the Alps as well. More reliable communication networks make it possible to live and work in locations that were previously deemed too remote, and those areas may be ripe for development, attracting a unique breed of "global nomad."

In conclusion, existing ski resorts and smaller Alpine communities should look to the post-COVID era as a time to take stock, to evaluate the past in light of how the future might unfold, and to begin the process of reinventing themselves. That's actually a process that should be ongoing. The time to begin is now.

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Written by

Director Hospitality Advisory Services at EHL Advisory Services

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