Dec. 29 (Bloomberg) -- Four years after Bruno Prior paid less than a dollar for an unprofitable ski resort in the Swiss Alps, the strength of the country’s currency has quashed the British entrepreneur’s dream of turning it around.
The Swiss franc has risen 70 percent against the pound since August 2007, when Erner Galen’s community backed Prior’s plan to resuscitate 12 miles (19 kilometers) of pistes over bids to build holiday chalets. After investing more than 500,000 francs ($533,000) in the resort east of Zermatt, he’s dropped a plan to raise another 100 million francs and is instead seeking a buyer.
“The funds we’d set aside for it were worthless,” said Prior, 45, a director of U.K.-based Summerleaze Ltd., a firm that specializes in renewable energy and waste disposal. “The strength of the franc is a problem for the country long term.”
The franc’s gain, coming after a season when snowfall was less than two-thirds of the long-term average, is putting pressure on a ski industry worth 1.5 billion francs a year to the Swiss economy. Resorts from St. Moritz to Verbier are cutting prices for hotels and ski passes to lure foreign visitors and deter locals from crossing the border into France or Austria.
A combination of the strong franc and Europe’s debt crisis is weighing on this season’s bookings with some hotels only half full, said Guy Chanel, marketing director for tourism in Villars, a ski resort 123 kilometers (76 miles) east of Geneva.
“In the past, chalets would be booked in August or September for Christmas,” said Chanel, adding that heavy snow this month boosted reservations. “Now it’s last-minute.”
Almost half the resort’s 45 restaurants are reducing prices and discounts of 30 percent are available for weekday ski passes, according to Chanel.
The franc’s strength prompted ski-wear suppliers to cut prices by as much as 20 percent, said Michel Daetwyler, who is passing on those reductions to customers at his family-owned store on the main street in Villars.
“If we didn’t own a chalet here, we probably would have gone to France to ski instead,” Loralie Barker, an American mother of three who lives in London, said in a Dec. 21 interview on the slopes of Villars. “The strong franc certainly would have been an issue if we had to pay for a hotel or other accommodation.”
About 60 percent of Swiss hotel guests are foreigners, and half of them hail from countries using the euro, which has weakened 20 percent against the franc in the past two years. The Swiss National Bank capped the exchange rate at 1.20 per euro on Sept. 6 after the currencies almost reached parity.
St. Moritz, which bills itself as the birthplace of the “white winter holiday,” is offering discounts on accommodation and ski lessons during some weeks of the season to limit an expected decline in overnight stays, said Sara Roloff, a spokeswoman at the tourism office. The Chesa Salis hotel in St. Moritz has started offering guests a free ride into the village in a horse-drawn sleigh, she said.
Davos-Klosters, whose ski-season regulars include Prince Charles, was handing out free lift passes to people booking overnight stays until Dec. 23, according to the Swiss Tourist Board.
That wasn’t enough to stop Graubuenden, home to both St. Moritz and Davos-Klosters, from being rated the most expensive ski area in Europe after Norway’s Hemsedal, according to a study of 488 destinations by German online travel agency Ab-in-den-urlaub.de. While an average ski pass in Graubuenden costs 47 euros ($61.23) a day, a veal, duck liver and truffle burger will set diners back 168 francs at La Marmite in St. Moritz.
Overnight stays by foreigners in Swiss resorts will drop 4.2 percent this winter season as tourists opt for cheaper destinations such as Austria, according to the BakBasel economic institute in Basel. That would accelerate the trend between 1993 and 2011, when the number of overnight stays fell 12 percent to less than 13 million while visits to Austrian rivals such as Ischgl and St. Anton rose 6 percent to 16.5 million.
Verbier, where 30 percent of visitors come from the U.K. and 15 percent from France, offers an exchange rate that’s as much as 20 percent better than the official rate on ski passes and lessons, said Yan Baczkowski, chief executive officer of the resort’s tourism office.
The franc, coupled with Europe’s debt crisis, is the biggest problem, according to Baczkowski, for a resort where 18 guests can rent Richard Branson’s The Lodge for 99,800 pounds ($156,500) during Christmas week.
Zermatt -- ranked by Credit Suisse Group AG as Switzerland’s most successful winter destination, along with St. Moritz -- won’t be offering any discounts, said Edith Zweifel, a spokeswoman for the tourist office.
Indeed, the resort near the iconic Matterhorn raised the price of a one-day international pass by 1 franc to 86 francs this year.
“Zermatt does not cut prices, because we are aware of our brand,” she said. “I cannot read the tea leaves, but we know from our hotels that they have very good bookings for Christmas and New Year’s Eve, though there are many openings still for January. People book at the last minute, so we are confident.”
Prior, the investor in Erner Galen, hasn’t made up his mind yet what to do with the ski resort he bought out of his passion for snow and skiing.
“There have been one or two expressions of interest, but I’ve been so tied up with my business that I haven’t had time to pursue them,” he said.
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