World Economic Forum is taking place this week in Davos and Bloomberg TV had a piece today about the financial disaster that the InterContinental hotel has been there.
According to the article, the Davos hotels make 20% to 30% of their income during the World Economic Forum that lasts for four days.
Here is an excerpt:
So, what went wrong?
Opening a luxury hotel was always going to be a challenge. It takes four to five years to build up a stock of regulars. While many new hotels make a profit in their first year, this may not be enough to cover debt costs, according to Russell Kett, who heads the London office of hotel consultant HVS. It’s normal for a hotel to achieve a “stabilized operating performance” by the fourth year at the latest, he said.
Most Swiss luxury mountain resorts also close in the low seasons in Spring and Fall, while the Golden Egg — located on the outskirts of town and where an off-peak room can cost as much as 950 francs a night — stayed open, said Christophe Piffaretti, who took over management of the Credit Suisse fund this month.
To bridge the seasons, the InterContinental hopes to host national and international conferences. This may become harder after the Swiss National Bank yesterday decided to abolish its cap on the franc, pushing the Swiss currency to a record high. It traded at 1.0113 per euro at 3:06 p.m. in Zurich
The appreciation of the franc “of course affects our competitiveness,” General Manager Pedersen said yesterday after the SNB’s decision.
The TV piece was quite interesting, but the text version up on the Bloomberg’s website is more comprehensive.
Seems that there just isn’t enough demand for a five start hotel in Davos outside the very short World Economic Forum period. We’ll see what will happen with this InterContinental hotel in the future.