Strong Swiss Franc Blamed for Shelving of Ernergalen Ski Resort in Canton Valais

Posted By: The Ski Channel on June 20, 2011 10:33 am

Investors from around the world have flocked to the safe haven of the Swiss franc following the financial crisis and the subsequent global economic downturn. The strengthening franc has invested Swiss companies and holidaymakers with greater purchasing power, but exporters and the domestic tourism industry are feeling the pinch as goods and services become more expensive for foreign markets.

The decision sounds the death knell for the small resort located near the Italian border. Its four lifts, already at a standstill last winter, are set to be closed for good in the summer.

It is a disappointing end for an ambitious development plan which began when a British investor responded to a newspaper article which offered the sale of Ernergalen – lifts, pistes and snow machines – for the bargain price of one franc to any developer game enough to take on the challenge.
 
British company director Bruno Prior told swissinfo.ch plans for upgrading ski lift infrastructure and building a new hotel were well advanced, and the necessary permits obtained, when his company decided not to continue with the project.
 
He said his company, Summerleaze, had invested more than SFr500,000 ($590,000) on preliminary planning, but financial circumstances had forced it to put the development on hold indefinitely.
 
“It’s not absolutely certain that it won’t go ahead but for now it’s hard to imagine circumstances in the next few years (in which it would),” said Prior.
 
“One thing is the exchange rate, when we started it was about 2.5 francs to the pound, now it’s about 1.4 which means the funds we’d made available to do it were worth less.”

 

Money matters

News of Ernergalen’s fate comes as Swiss tourism authorities attempt to offset the effects of the strong franc on the tourism sector having earlier this year announced extra spending on promotional efforts for 2011-12.
 
According to the Federal Statistics Office, the number of hotel stays registered over the winter season – November 2010 to April 2011 – declined by 114,000 visitors, or about one per cent.
 
Numbers of European winter visitors to Switzerland declined by 5.1 per cent, some 373,000 people, over the winter of 2010-11 compared with the previous winter season.
 
“The relatively low exchange rate of the single European currency against the Swiss franc may be a factor in explaining the decline in overnight stays of some countries of the continent,” the Statistics Office said in a statement earlier this month.

 

Big dreams

Ernergalen comprises some 20 kilometres of piste and partly belongs to the small commune of Ernen. For years it had been struggling to compete with attractions offered by its larger neighbors, with existing hotel beds often empty during the week in winter.
 
Christine Clausen, mayor of Ernen, told swissinfo.ch although the decision not to go ahead with the development of Ernergalen added to difficulties faced by the community of around 500, Prior had tried his best to make it work.
 
“It was a good project,” said Clausen. “He had invested a lot in the planning of the project so it’s a shame he was unable to continue.”
 
Prior’s pans for Ernergalen included a new 800-bed hotel, and linking Ernergalen to other resorts in the area such as Bellwald, Aletsch and Belalp with options for visitors to purchase ski passes valid across all resorts. 
 
“Put them together and you’ve got one of the largest ski resorts in Switzerland,” said Prior. “We spent quite a bit of extra money looking at options to try and connect them. It wasn’t obvious that you could make it function like one integrated resort.”
 
Prior said although locals were not resistant to the idea of linking resorts, there was no “impetus” for the idea to go ahead. He said the biggest problem was finding a way to physically link the resorts, and he had investigated “slinging a cable car across the lake at the end of the Arletch glacier” to link Arletch and Belalp resorts.
 
“To survive now, you need more than before,” said Prior, adding that the economic climate was pushing tourists towards the larger resorts.
 
“You need to get people in for a week and you can’t get people in for a week, fill the beds, buy lift passes, if you’ve got 20 or 30 kilometres piste.”

 

Moving on

Prior and Clausen insist that the failure of the project does not necessarily spell the end for Ernergalen, and both are open to new expressions of interest.
 
Clausen said the resort is particularly popular with tourists in the summer months.
 
“There was the project for a large hotel. In summer we have a lot of people coming and there are not enough beds, so we still want to continue with that project to find someone to take it on in some way,” Clausen said.
 
Prior suggested the project might be more attractive to a Swiss investor as a standalone family-orientated resort.  
 
“Everything else being equal, Switzerland still is a good place to invest but (it) does have a huge problem because of what has happened to the franc,” said Prior. “A Swiss investor would be the obvious thing because they are not exposed to the exchange rate.
 
“And the Swiss take a very different attitude to us. I’m looking at it as skiing as business but I know from talking to a lot of Swiss, they see these little resorts as attractive in their own right.” 

 

Find out more on www.swissinfo.ch

 

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