"Because of the Corona crisis, all investment projects will probably be put on hold"
Thomas Allemann is Head of Account Manager and a member of the Executive Board of the HotellerieSuisse Association. For him, the hotel industry is very investment-intensive. Depending on how trend-oriented or traditionally timeless a hotel is architecturally positioned in the market with its furnishings, the renewal cycles may be shorter or longer.
Mr. Allemann, there has been a structural change in the Swiss hotel industry for a long time, with a trend towards larger hotels. Nevertheless, almost 90 percent of the hotels have fewer than 55 beds. How are these companies responding to this change?
The biggest problem are businesses with ten to twenty rooms and 15 to 30 beds. These houses are struggling to be profitable. Many small businesses, however, have a very large share of the catering industry, some of which generate over eighty percent of sales. The hotel industry is not part of the main business there.
Hotel guests are becoming more and more demanding. How can the aging hotels keep up with this trend?
This is actually a problem. We have many plants in Switzerland that were built at the end of the 19th century and the beginning of the 20th century. These often have fewer than thirty rooms and are very entertaining. If you are in destinations that are no longer as attractive today, such as transit routes, this is an aggravating circumstance. Missing frequencies then automatically lead to profitability problems and pent-up maintenance.
Does the operation of a hotel require high investments?
Yes, because the hotel industry is very investment-intensive. A hotel should be completely renovated after thirty to forty years. Depending on how trend-oriented or traditionally timeless a hotel is architecturally positioned with its furnishings in the market, shorter renewal cycles are necessary, especially for the rooms.
Do the hotels generally have the necessary financial resources to carry out the necessary renovations and refurbishments?
In principle, investments should be financed from cash flow. In recent decades this has become increasingly difficult for many companies, also because of the various crises. At the moment, of course, especially because of the Corona crisis. In the luxury sector, there are often patrons who have either fallen in love with the house or with the region and are ready to invest in hotel properties. They see the motivation of their investments not only in economic terms, but as an «A-fonds-perdu-contribution. In this way, their hotel operations achieve their extraordinary positioning in the market. I see the critical segment in the middle-class hotels, which because of insufficient occupancy or insufficient positioning are unable to make the necessary investments or can only generate them through borrowing.
Does your association financially support the renovation of hotels?
No, this is not the association's task; we would not have the resources to do so either. The association has the competence to offer and supports its members to be competitive. We have built up a network of specialized consulting firms that can support our members in a wide variety of subject areas. We also work very closely with the Swiss Hotel Association (SGH), which has the specific financing expertise.
This means?
The SGH is a federal instrument to promote the accommodation industry. Subordinate to the banks and subsidiary to private donors, it can grant loans for investment projects to hotels in tourist areas and health resorts.
What other challenges need to be tackled?
Succession arrangements are particularly difficult for companies with an investment backlog and / or over-indebtedness. This is practically impossible within the family or cannot be expected of the children. Since the second home initiative was adopted, it is practically no longer possible to convert hotel properties. Demolition is not an option, especially for listed properties. Complete renovations or partial re-use are also very costly due to the requirements of monument protection. So there is still hope of finding a patron. Unfortunately, these are not just in front of the door. If the substance of the house is still intact and there is potential for demand in the destination, I see the merger of several companies as an alternative to cross-company cooperation as an opportunity out of this dilemma. For example, by bundling purchasing, costs can be saved and more sales can be achieved with joint marketing activities.
What advice would you give a hotelier: renovate, demolish or try to get a loan?
Look, one criterion is the existing building fabric, especially for hotels from the turn of the century. However, if only the shell is historical, this hotel hardly offers guests any incentives to stay here. Keeping a house steeped in history alive takes a lot of personal commitment. First of all, it is important to deal with the era of hotel construction. This requires a certain affinity with the history of the hotel. This also has to be told. So you need someone who is willing to renovate the establishment of the company gently and with great sensitivity and to bring it up to the state of today's guest needs. ■