The Swiss hotel industry has a centuries-old history of success, prestige, and international renown. Alpine tourism especially developed during the 19th century and attracted a European clientele in search of tranquility, relaxation, and comfort.

Today, more than ever, Swiss Alps resorts are enjoying worldwide fame, particularly for their high-end accommodation services.

Beyond a personal interest in skiing or the mountain views, these destinations offer several attractions for hotel investors. The purchase of a mountain hotel can constitute an additional layer of diversification in a hotel portfolio, bearing in mind that the economic cycles of mountain establishments are not always synchronized with those of hotels in large lowland cities, for example, and sometimes the two sectors of the industry even evolve counter-cyclically to each other.

The hotel industry is the one that suffered the most from the COVID-19 crisis, but upon closer inspection, it is noted that mountain hotels have performed relatively well during the same period.

When purchasing a hotel, one is primarily buying a business. The establishment being intimately linked to its walls, part of the investment decision is based on real estate reasoning, but good management of the business is essential for investment success, which is not the case in most purely real estate acquisitions.

As a result, the profile of hotel buyers is particularly specific and interdisciplinary. Not only should the principles of a successful property acquisition be known, but also those of business management, preferably by the same person. Such a profile of specialization considerably restricts the number of competent investors, and this trend of market professionalization is increasing and discouraging more and more amateur buyers.

Hotel investment is therefore a niche market for connoisseurs, who may be interested in this activity for several reasons. Essentially, any player in a niche market who does master its fundamentals can make a handsome profit from his investments, provided he understands the risks and knows how to respond appropriately. In the field we're interested in, namely luxury hotels in the most famous ski resorts, becoming a palace owner could be an undeniable advantage, particularly for foreign investors keen to lay their hands on a "trophy". Being the owner of a well-known 5-star hotel is a calling card that opens doors and provides immediate information about a businessman's entrepreneurial skills.

To be able to buy such an asset, it is useful, if not necessary, to be particularly well surrounded. Although an entrepreneur can indeed master all the principles of a wise acquisition, no one can possess all the required skills by himself. Every hotel buyer should know how to communicate efficiently with local actors such as architects, consultants, brokers, operators, and financial advisors.

Two major hotel development projects in the Swiss Alps

Let's now move concretely to our case study of two major hotel development projects in the Swiss Alps, one in the resort of Crans-Montana and the other in Leukerbad.

In this case, the two locations differ mainly in their level of international reputation. Crans-Montana is known for the exceptional luxury experiences offered by some of its palaces, while Leukerbad is a less visible international destination that features several sources and thermal baths, making it a touristic destination since the end of the Middle Ages already. In terms of purchase prices also, a difference can be observed between the two cities, and there is no indication that hotels are less profitable in Leukerbad than in Crans-Montana. For some reason mentioned above, the profiles of potential interested buyers differ just as much.

Nonetheless, it is still possible to identify some common points between these two investments. Whether it be ones or the others, investors are progressing carefully, like any seasoned Alpine mountaineer. In comparison with major Swiss cities, these resorts could be more sensitive to demographic shocks or regional economic changes, but above all, global competition in terms of investment options increases the opportunity costs in the balance. Given that profit margins (like many percentages in the world economy since 2007) have decreased in the hotel industry as well, it is becoming less and less likely to observe an impulsive or emotional purchase. Each parameter is carefully weighed, and the parameters are sometimes complex between them.

Adding to the dismay of a modest intermediary in this sector, to globalization, which we were beginning to get used to, are the latest technological advances, notably the spectacular progress in artificial intelligence and the continuous development of information networks, all sources that broaden the scope of possibilities for the investor and consequently slow down the pace of the investment process.