Zurich Suffocates Selling to Tourists as Franc Makes All Pricey

The Swiss franc’s 11 percent appreciation against the euro this year is forcing Urs Boehler, who runs Zurich’s Les Millionaires jewelry store, into lower-priced watches he has never sold before.

He now markets rings, necklaces and other jewels from Bahnhofstrasse, the city’s ritziest shopping street, for prices of as much as 150,000 Swiss francs ($152,393). In late November, he plans to start selling watches for as little as 3,000 francs.

“We wouldn’t have taken this decision if we hadn’t had to,” Boehler said. The franc is “hurting us enormously. It’s cutting our air off,” he said.

The country has become 15 percent more expensive for tourists from the euro region because of the franc’s rally, said Juerg Schmid, the Zurich-based head of Switzerland Tourism marketing group. A global survey of 73 urban centers by UBS AG (UBSN) found that Zurich is the second-least affordable city after Oslo.

Switzerland lost about 2 percent of hotel visitors from Germany, Europe’s biggest economy, during the first half of the summer season, according to the BAK Basel Economics research institute. As the country’s central bank stops trying to suppress gains, the currency may rise further with investors concerned about a global economic slowdown seeking the safety of the franc.

The Swiss currency strengthened to a record 1.2766 versus the euro on Sept. 8. It advanced 4.7 percent against the dollar this year, reaching parity on Sept. 14 for the first time in almost 10 months.

Rising Costs

“We were warned that everything is very expensive,” said Rudi Vaff, a 65-year-old visitor from Phoenix. “Food and hotel prices are out of this world.”

Rita Rossi, Vaff’s partner, said they may go somewhere else in Europe for their next vacation rather than return to Switzerland.

In Zurich, where artists from Lauren Bacall to Andy Warhol dined at the historic Kronenhalle restaurant, tourism accounts for 3.2 percent of gross domestic product. That compares with 5 percent in Vienna and as much as 6 percent in London.

Daniel Lehmann, head of Zurich’s Marriott Hotel, said he offers customers who organize conferences prices at the current exchange rate so they can minimize potential losses from the currency market.

“The question is, how long will a family with an average income be able to afford a trip to Switzerland?” Lehmann said. Business travelers are less affected “as they just have to come here,” he said.

Four-Star Hotel

The average cost of a room at a four-star hotel in Zurich rose 0.4 percent to 290.23 francs in June from a year earlier, according to the Zurich Hotels Association. That’s up about 16 percent when converted into euros.

“We’re feeling the difference in price,” said Klaus Matthies, 63, a pensioner from Hamburg as he strolled past the restaurant where poet Johann Wolfgang von Goethe used to dine. “We’re holding back and looking for cheaper places to eat.”

A McDonald’s Big Mac costs $6.19 in Switzerland, compared with $3.73 in the U.S. and $4.33 in the euro area, according to data compiled by The Economist. The figures are based on so-called purchasing power parity, which states that the dollar should buy the same amount in all countries.

“I spent 13 francs on a McDonald’s meal and I didn’t even get a refill,” said Julio Cesar Ponce, a 30-year-old computer-science researcher from Aguascalientes, Mexico, who was standing on a Zurich bridge overlooking the Limmat river. In the U.S., that meal would have cost about half the money, he said.

Swatch Purchases

Some visitors are already looking at less-expensive brands. Linda Hofer, head of Swatch Group AG (UHR)’s namesake watch store at the start of Bahnhofstrasse, said people are turning to cheaper Swiss watches as “something they can afford.” The street further up hosts luxury watch stores that include brands like Patek Philippe, Audemars Piguet and Rolex.

“People come first thing in the morning,” she said. “Then they walk up the street and all they see are higher prices before they finally come back to us.”

Swatch, whose products range from budget plastic watches to pricey Omega and Breguet timepieces, reported last month that first-half profit rose 55 percent to 462 million francs as revenue climbed to a record. Shares of the Biel, Switzerland-based company advanced 37 percent in Zurich trading this year, compared with the 3.1 percent decline of the Swiss Market Index.

‘Expensive Holiday’

Martin Lohmann, a professor at tourism research institute N.I.T. in Kiel, Germany, said that while some European visitors may choose more affordable hotels, Switzerland has always been considered “an expensive holiday destination.”

“Those who find Switzerland too expensive, didn’t show up a year ago either,” he said. “But generally tourists visiting Switzerland are able to afford higher prices. They might be annoyed, but they won’t be deterred.”

The franc will probably remain close to a record high against the euro for the next three months, according to Beat Siegenthaler, a currency strategist at Zurich-based UBS, the country’s biggest bank.

Back on Bahnhofstrasse between luxury-brand stores from Chanel to Prada and Hermes, Vaff and Rossi plan to limit their purchases.

“We would shop but then you take a closer look and say, wait, I can get that cheaper at home,” said Rossi, 56, while resting on a bench on Lindenhof hill, the historic site of a Roman Castle five minutes from Bahnhofstrasse. “You’d be better off going to another European country.”

To contact the reporters on this story: Klaus Wille in Zurich at kwille@bloomberg.net; Antonio Ligi in Zurich at aligi@bloomberg.net

To contact the editors responsible for this story: John Fraher at jfraher@bloomberg.net; Benedikt Kammel at bkammel@bloomberg.net

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