Switzerland's hospitality sector particularly hard hit by COVID-19 pandemic.

Swiss hospitality sector breathes sigh of relief after troubled pandemic year.

The tables have been empty for long time, and receipts have plummeted. Switzerland's hospitality sector has had a tough time of it during the COVID-19 pandemic. Although the recent easing of the lockdown improves the outlook, how are things really for the restaurant and tourism sectors in Switzerland?

Massive loss of turnover for the Swiss hospitality sector

The Swiss hospitality sector can breathe a sigh of relief: The Federal Council decided on a further easing of lockdown measures at the end of May, thereby providing long-awaited light at the end of the tunnel. Fact is, it has been a tough year for the hospitality sector – which includes the restaurant trade and tourism. With a revenue shortfall of 40% for restaurants and a 67% drop in tourism, hefty losses occurred during the pandemic year of 2020.

Restaurant trade in major centers is hardest hit

Not all of Switzerland's regions have been equally badly hit by the sharp fall in sales and major job losses. The urban regions of Lake Geneva and Zurich, whose culture of going out greatly benefitted the restaurant trade, have suffered particularly badly over the past year. The curfew as well as the closure of clubs are likely to have had a more pronounced effect in cities. As well as foreign guests, Swiss tourists have likewise been absent from these regions. Domestic tourists have instead opted to vacation in Central and Eastern Switzerland, as well as Ticino, where they support the local hospitality industry. The shortfall in revenues is therefore less marked in these places.

Restaurant trade in major centers is hardest hit

Restaurant trade in major centers is hardest hit

Source: Monitoring Consumption Switzerland, Swiss Federal Statistical Office, Credit Suisse

The pandemic altered demand in the Swiss tourism sector

Urban regions such as Geneva, Zurich, and Basel were hardest hit by the pandemic-induced decline in tourist numbers across all types of accommodation. Typical domestic vacation regions such as the Bernese Oberland, Graubünden, and Ticino, on the other hand, all saw more domestic tourists than in the previous year.

While the slump in domestic tourists across the country hit three-star hotels in particular, the absence of international tourists caused a huge slump for four and five-star hotels.

It's interesting to note that the shift from higher to lower price categories, together with special campaigns, led to revenues from overnight stays falling more sharply than overnight stays themselves. Purely looking at the latter data therefore underestimates the economic loss. The same is true for non-hotel accommodation, such as campsites, group accommodation, and spa resorts. While revenues plummeted by 39%, the number of overnight stays was up 5%.

No increase in bankruptcies in Swiss hospitality sector

Given such a sharp fall in revenues, the question is whether the pandemic will lead to a wave of bankruptcies and therefore severe knock-on effects in the hospitality industry. However, it is clear that since the start of 2020 the restaurant sector has experienced fewer bankruptcies than in previous years. In the tourism sector, too, there is not yet any discernible trend to a higher rate of bankruptcies.

What initially comes as a surprise can be explained by government-ordered support measures such as the five-week suspension of bankruptcy proceedings, support for short-time working, and other regulations.

Despite the crisis there is still no discernible trend toward higher hospitality bankruptcy figures.

Despite the crisis there is still no discernible trend toward higher hospitality bankruptcy figures.

Last data point: March 2021
Source: Swiss Official Gazette of Commerce (SHAB), Credit Suisse

Ready, set, reopen – what's in store for Swiss hospitality?

The latest reopening is unlikely to result in an immediate jump in sales to pre-crisis levels or that seen last summer. Unlike in 2020, however, there are two factors that could develop to the advantage of the Swiss restaurant trade: First, the Swiss population is now likely to feel safer given the progress made on vaccinations. And second, revenues may be supported again by large-scale events where drinks and food are sold.

A return of foreign tourism would likely impact positively on the restaurant trade. However, uncertainty with regard to potential vaccination certificates and more difficult incoming travel rules continue to represent an obstacle to foreign travel. For many tourists, these points are likely to be enough reason to opt for a domestic vacation. That's why the non-hotel accommodation sector as well as Swiss vacation regions will in all probability be among the winners in summer 2021.