Switzerland Hotel Market Snapshot
Snapshot of the Swiss Hotel Market from recovering hotel performance and growing interest in resort locations, to value-add and repositioning opportunities.
- Heidi Schmidtke
- Georg Klormann
- Jan Eckert
- Stephan Allemann
- Daniel Stocker
- Jessica Jahns
Recovering hotel performance
Geopolitical tensions, rising interest rates, high inflation and an overall slowdown in economic growth have had limited impact on Swiss hotel market performance in 2022, reaching close to pre-pandemic levels. Markets reliant on international demand recorded particularly strong growth, fueled by pent-up demand, while domestic overnight stays stagnated compared to last year, due to the re-opening of international travel destinations. The further easing of Covid restrictions and associated revival of global tourism, especially from outbound group travel from Asia, may lead to demand growth outweighing the current economic uncertainty and restrained business travel.
Growing interest for resort locations
Resort locations continued to drive performance in Switzerland, while overnight stays in key cities including Zurich, Geneva and Basel still lag behind pre-pandemic levels. Destinations with a high volume of international demand such as Jungfrau Region, Zermatt and Verbier recorded the strongest overnight growth rates compared to the previous year.
The strong resilience of resorts during the Covid pandemic have captured investors’ interest, underpinned by a shift in the risk-return perception of resorts and supported by continuously sharp yields for city centre hotels. As such, latest transactions include the acquisition of three mountain hotels in Wengen by Beaumier as well as the non-operational Hotel Regina in Grindelwald by Fortimo AG. In addition, Urs und Simone Wietlisbach acquired the Hotel Kulm in Arosa, with the Egyptian developer Samih Sawiris taking a minority stake.
Value-add and repositioning opportunities
Despite hotel fundamentals improving across Switzerland, transactions of closed or non-operational hotel assets have driven activity in the last 18 months. Notable transactions included the Grand Hotel Sonnenberg in Seelisberg and the Grand Hotel Locarno, acquired by the Swiss developer Halter AG and Artisa Group¹ respectively. In addition, high net worth individuals continued to buy iconic assets, such as the Hotel Florhof Zurich and Hotel des Trois Couronnes in Vevey with refurbishments in planning. Further strategic transactions included the Hotel Ascot Zurich by Edyn Group and the Congress Hotel Seepark in Thun by Artisa Group. We are observing that most transacted hotels will continue to be operated as hotels albeit being repositioned in different segments.
Looking ahead, in light of improved performance levels and the overall resilience of the Swiss economy, we expect hotel investment opportunities to continue.
While we will see continued activity in the value-add segment given deferred maintenance and required property improvement programs, we anticipate core products to come to the market as well underpinned by the stability of the Swiss real estate market.
It is all about debt
Although at a more moderate level compared to other European countries, there has been significant capital market volatility tied to the Swiss National Bank’s policy rate increases. As a result, the 5-year swap rate has increased from -0.23% in December 2021 to 1.85% in December 2022.
Despite debt market volatility, hotel loans remain available, however, lenders have become more selective with many offering tighter leverage and higher spreads.