Strong Swiss Franc To Hit Winter Hotel Visits

October 31, 2011

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Occupancy rates in Swiss hotels are expected to fall this winter as the strong Swiss franc and a darkening economic picture take the shine off the country's ski slopes, and economic researchers forecast a gloomy jobs outlook for the sector.

Adding another blow to the struggling tourism sector after a poor summer, the BAKBASEL economic research institute said on Monday it expected hotel stays to fall 2.6 percent this winter, with foreign skiers put off by the strength of the franc.

The Swiss National Bank set a cap of 1.20 francs to the euro in September to try and shield the country's economy from the impact of a soaring local currency, but the tourism sector is still seeing fewer visitors.

"The current strength of the franc in combination with a slowdown in the pace of (growth in) the worldwide economy is putting a strain on the tourism market," it said in a statement prepared for the Swiss government.

Stays by overseas visitors are expected to drop 4.2 percent, with fewer tourists expected from Western Europe and the United States in particular, while demand from local residents is seen slipping 0.4 percent.

Switzerland has been grappling with the effects of the strong franc, which repeatedly hit records against the dollar and the euro earlier this year and flirted with parity against the European single currency in August.

This combined with poor weather led to a 2.5 percent fall in hotel stays over the summer, with Alpine regions the hardest hit, BAKBASEL said.

JOB CUTS

Despite growing signs of an economic slowdown, unemployment stayed relatively low and was unchanged at 2.8 percent in September.

But the KOF employment indicator for October, also published on Monday, turned negative for the first time since the start of 2010, suggesting job cuts are on the horizon.

"In view of the deteriorating and uncertain profit situation many firms may wait to hire staff in the coming months or be forced to cut jobs," the KOF Swiss Economic Research Institute said in a statement.

The outlook was especially bleak for the banking, construction, retail, and hotel and restaurant industries, the KOF institute said.

To help ease some of the effects of the strong currency, the Swiss government has proposed a package to boost unemployment insurance and other steps, including support for the hotel sector.

But hotel stays for the whole of 2012 are expected to fall 1.9 percent, with a recovery not forecast until 2013.

"In 2013 the trough is likely to have been crossed and the Swiss tourism sector will return to a sustainable growth path," BAKBASEL said.

In 2014 it forecast hotel stays to rise 3.4 percent, benefiting from a rebound and investment in the hotel industry.

(Reuters)