Switzerland targets rich tourists but at what cost?

The current world situation is turbulent, with conflicts, climate change, and concerns about economic recession dominating the news headlines. However, for a segment of the population, things are quite good: the wealthy. Despite global instability, the number of billionaires worldwide is increasing, and their personal wealth continues to grow.

So, how is this enormous wealth being handled? The growing trend of top-tier luxury experiences suggests the consumption patterns of the wealthy. For the tourism industry, this undoubtedly represents a huge opportunity. Switzerland has long been known for its understated luxury, and the number of five-star hotels in the country is growing faster than any other category.

Many five-star hotels were built in the early 20th century as magnificent "Belle Époque" palaces, catering to the then-emerging privileged class, primarily British tourists. Today, renovated to the highest standards, these hotels cater to guests' every desire. They feature luxurious spas, gourmet restaurants, and designer suites with panoramic views of the Alps. Some hotels even offer "ski butlers" who shuttle guests to and from the slopes, carry their skis, and even help them put on their ski boots.

The United States, the Gulf countries, China, and Southeast Asia are the primary markets. Swiss hoteliers report that American guests, in particular, expect comprehensive five-star treatment, including 24-hour room service so they can order food in the middle of the night. Meanwhile, China and India are emerging markets, and the first tourists from these countries tend to be the wealthiest. Switzerland is eager to capitalize on this emerging trend.

However, five-star service comes with a hefty price tag, so what about those who aren't billionaires? Markus Berger of Switzerland Tourism says the strategy isn't solely focused on high-end guests, but rather on taking a sober look at the data. Stays at Swiss five-star hotels account for approximately 8% of all overnight stays, but these hotels' guests contribute at least 25% of Switzerland's total tourism revenue. "The numbers speak for themselves," says Mr. Berger, "the huge economic significance justifies the investment in luxury guests."

Furthermore, he adds that Switzerland, as a high-wage, high-price economy, cannot compete with its lower-priced neighbors, especially with such a strong Swiss franc. "Switzerland has never tried to compete on price; there are always cheaper places," Mr. Berger explains. Instead, the focus is on quality, service, and added value, such as those ski butlers. In return, guests staying in five-star hotels also contribute significantly to other economic sectors, splurging in Michelin-starred restaurants and boutiques, which are also becoming a feature of some of Switzerland's high-mountain resorts.

But it's not entirely a win-win situation. In some of Switzerland's most famous luxury resorts, such as St. Moritz or Zermatt, there has long been concern that the focus on luxury is pricing locals out of the market. A common challenge is finding accommodation for the hundreds of hotel and restaurant staff needed to provide five-star service.

They sometimes find themselves commuting late at night, needing to travel long distances to other villages, where accommodation is within a waitress's budget, when the cocktail bars and restaurants finally close. Monika Bandi, head of tourism research at the Center for Regional Development at the University of Bern, believes that Switzerland's marketing itself to high-end guests is a delicate balance. She says it's about "quantity versus quality." She believes that more tourists are not necessarily better; instead, higher spending by existing tourists could be beneficial.

She adds that Switzerland needs to be wary of "the tipping point, where a destination really loses its character." Currently, in the resort of Wengen, people are asking questions about that tipping point. Wengen is known for its Lauberhorn ski race and its decades-long connection with British skiers – the much-loved Down Hill Only ski club is celebrating its 100th anniversary this year. This year, Wengen also opened its first five-star hotel, and there are also plans to build a five-star serviced "hotel-apartment" complex. These apartments will be sold to wealthy tourists who want a luxury holiday home in the Alps and can also be rented out when the owners are not there.

By calling the project a hotel, it exploits a loophole in Switzerland's strict laws against "cold beds" in holiday homes. In theory, the law limits the number of holiday homes to no more than 20% of the accommodation in a resort. The Swiss Heritage Society has formally objected to the plans for Wengen, with spokesman Simon Weiss claiming that the project is not actually a hotel. "It looks like a typical holiday home complex... it doesn't integrate into the community."

The public spaces that a hotel should have – restaurants and spas – are all planned, but they will be underground. Weiss is concerned that the design prioritizes private luxury apartments, which may only be occupied for a few weeks a year. "This design is unacceptable," he adds. Some Wengen locals also have their doubts. One local told Swiss media: "This is not St. Moritz; Wengen is not luxurious."

Rolf Wegmüller, director of Wengen Tourism, agrees with this assessment, but says that the trend towards luxury accommodation will not change the resort's character. "We won't suddenly see guests walking around in fur coats," he says. He points out that Wengen can only be reached by train, so, unlike St. Moritz, there won't be Bentleys or Rolls-Royces taking up parking spaces. Wegmüller believes that even if they could flaunt their wealth, "our guests don't want to show off what they have."

The resort also has visitors who return year after year, which helps with the integration that Weiss is concerned about. "Some families have been coming for generations, and the locals know them, which is good," says Wegmüller. This includes Brian Bollen, a keen member of the Down Hill Only Club, who has been coming to Wengen for over 50 years. He loves it here, but does worry that "some of the charm of the place has gone... it's been overdeveloped."

But, like Switzerland Tourism, most people in Wengen see investment in the high-mountain resort as positive. These villages were very poor just over a century ago. A British Alpine guide from the 19th century wrote: "Most of the children are beggars." In recent years, global trade rules limiting agricultural subsidies have forced many small Alpine dairy farms to close. Tourism, both winter and summer, is very important to the Swiss economy, especially for mountain communities.

As Mr. Berger of Switzerland Tourism points out, while the number of five-star hotels is growing, three-star hotels remain the largest category. Wegmüller adds: "We have one- to five-star hotels in Wengen, which is a good thing for a resort." While those with unlimited funds for luxury travel may still be a small minority, their numbers and wealth are growing. Switzerland's strategy – not cheaper, but better; not more people, but wealthier people – seems to be working.