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Swiss Tourism: The Most Successful Winter Sports Destinations

New Credit Suisse Study: Tourism Benchmarking for Switzerland's 31 Largest Winter Sports Destinations

Credit Suisse today publishes a study entitled "Swiss Tourism – Competing Winter Sports Destinations." Credit Suisse economists have produced a benchmarking study of the 31 largest winter sports destinations in Switzerland. The study concludes that Zermatt and St. Moritz have the broadest offer, and are the most successful in terms of demand. Despite a considerably smaller offer, Gstaad and Engelberg also occupy top slots in the demand rankings. By contrast, Davos and Crans Montana exhibit only below-average success despite their strong offer. The focus on quality and an early response to climate change are important success factors for the tourism industry. An analysis of various quality indicators shows that Switzerland starts from a strong position.

The Swiss hotel and catering trade generated annual gross added value of around CHF 12 billion in 2010, thereby accounting for about 2.2% of the country's gross domestic product. This added value was produced by more than 182,000 employees (full-time equivalents). It means the industry is not only an important source of revenue but also an important employer (5.2% of Swiss employment). The highest shares of regional added value generated by tourism can be found in the rural regions along the Alpine divide – in the traditional winter sports destinations, in other words.

Challenges Remain for Swiss Tourism Industry
Switzerland's winter sports destinations face major challenges. The strong economic upturn in the period from 2005 until 2008 failed to offset the fall in the number of overnight stays between 1996 and 2001. In the winter season in particular, Austria – the most important foreign rival – shows a superior performance.

The strong Swiss franc is currently hitting businesses in the tourism industry. According to calculations by Credit Suisse experts, there is indeed a statistically significant relationship between exchange rates and overnight stays on the part of visitors from neighboring countries and the US, though the impact of the exchange rate on the development of overnight stays is relatively small. A 10% appreciation of the Swiss franc, for example, results in only a 0.8% drop in the number of overnight stays by German visitors. The current fall in the industry's turnover is driven more by price reductions than by a decline in guest frequency. Furthermore, economic developments abroad also play a decisive role.

Top Offer in Zermatt and St. Moritz; Variety in Davos
The offer available to visitors plays a central role in the choice of winter sports destination. The offer index in the tourism benchmarking study therefore systematizes the 22 most important components of an offer in the following categories: winter and summer infrastructure, climate and landscape conditions, food and accommodation, as well as entertainment. The individual components are combined into an overall index. The internationally renowned destinations of Zermatt and St. Moritz stand out due to the broadest offer. They are noted for their extensive shopping opportunities, high proportion of luxury hotels, numerous restaurants, as well as attractive summer and winter sports infrastructure. Davos gets top scores in the food, accommodation, and entertainment categories, and takes third place. Davos also earns top marks for its extensive network of mountain biking and hiking routes. Of all the destinations studied, Hasliberg, Meiringen, and Saas-Almagell have the least favorable offer. Their comparatively limited offer in terms of entertainment, food, and accommodation, for example, is ultimately due to size too.

Zermatt, St. Moritz, and Gstaad Enjoy the Greatest Demand
To measure an individual destination's success, Credit Suisse economists aggregated indicators for the development of overnight stays, bed occupancy rates, room rates, diversification by country of origin, seasonality, daily spend, and real estate prices to create a demand index. Zermatt, St. Moritz, and Gstaad enjoy the greatest demand. For example, beds there show above-average occupancy rates and can be sold at higher rates than those in other destinations. Gstaad and Zermatt also exhibit a comparatively low degree of seasonality. Their efforts at extending the season through cultural and sporting events seem to be paying off. Fourth-placed Engelberg's recipe for success is attributed to its focus on outdoor sports and families, as well as a strong profile in the Far East. Davos and Crans Montana perform less well in terms of demand. In particular, they are suffering from a sharp fall in the number of hotel beds. Numerous hotels have been forced to close in recent years, and have been converted into vacation homes. At the bottom end of the rankings lie Val d'Anniviers and Hasliberg.

Competition on Quality Rather than on Price
The level of price consciousness among consumers has increased markedly when it comes to vacations. In terms of price, however, the Swiss hotel and catering trade has a difficult hand to play. Comparable hotel and catering services are around one-quarter cheaper in the four neigboring countries that were analyzed. On the other hand, Switzerland starts from a fundamentally strong position as far as competing on quality is concerned. While the luxury segment is already very well positioned in terms of quality and enjoys a high level of international renown, there is room for improvement as far as the mid-range and low-budget segments are concerned. Structural change will therefore continue to gather pace in these two segments. Price-conscious consumers are prepared to concede some creature comforts, but still expect rooms to be functional, clean, and modern. Many Swiss low-budget hotels currently fail to meet these criteria. Credit Suisse economists also see a need for repositioning in the mid-range category. Mid-range businesses should endeavor to occupy a clearly defined niche such as family or sports vacations, or alternatively distinguish themselves more clearly in relation to the luxury or low-budget segment.

Dying Destinations in the Foothills of the Alps?
Climate change is becoming a long-term challenge for Switzerland's winter sports destinations. There are various processes of adjusting, ranging from protection against extreme weather conditions to the definition of a new strategy and unique selling proposition. The need for restructuring is particularly strong in the lower-lying destinations, as snow is becoming increasingly rare in these areas. Therefore, visitors will increasingly choose the higher-altitude regions of the Alps for their ski vacations. Although the summer season is not at risk, it is unlikely that the required infrastructure can be financed with just one season in the case of most destinations. An attractive new offer for the winter season is therefore of crucial significance. Should the regions affected be unable to make the transition from winter sports desination to wellness, outdoor sports, or cultural destination, for example, Switzerland is likely to see the death of some destinations in the foothills of the Alps – with serious ramifications for the local economy in these regions. An obstacle on the road to repositioning is once again likely to be the destinations' fragmented structure. This makes the necessary collaboration more difficult, and either delays the process of adjustment or renders it impossible. The high-altitude ski resorts of Valais and Grisons, alongside those in the French Alps, are among the beneficiaries of climate change.