The first cracks are appearing in a project to rescue the Swiss resort of Andermatt, with the financial crisis and bad planning dealing it a double blow.
The former army town is being turned into a mega resort courtesy of its knight in shining armour, Egyptian billionaire Samih Sawiris.
His approach of creating new resorts out of thin air has worked well abroad, but in embarking on this first European venture he hadn’t anticipated major economic and political upheavals.
On the one hand, Sawiris’ own company Orascom Development is struggling financially. The Arab Spring dented 2011’s tourism and house sales in Egypt, its main market, and the group has had to scale back its business plans for the coming years. This month it announced Sawiris would personally be loaning the group SFr125 million in 2012.
This may not hurt Andermatt Swiss Alps which, as Orascom’s flagship project, will receive 72 per cent of the group’s total investment funds this year.
But on the ground the news is not great either. Sales of the million-franc apartments and villas under construction – the backbone of the resort – have been sluggish, as the project attempts to attract foreign buyers despite the eurozone crisis and strong franc.
Sales figures will be announced next month but Sawiris recently admitted that 2011 targets had not quite been reached. And meanwhile questions are being asked about the sales themselves. Last week a newspaper reported on a “pay-to-build” system with contractors being forced to buy properties. Andermatt Swiss Alps denies obliging anyone to buy apartments.
On the back foot
To make matters worse, talks with stakeholders on how to develop the old-fashioned ski lift system in the mountains are making slow progress.
Sawiris, the cantonal government, rail companies, the Swedish developer and sister resorts are all looking at where and when to expand and how to finance it. (See sidebar)
With public funds at stake a study was commissioned on the plans, which had been developed by a former prominent skier from Andermatt, Bernhard Russi. In details leaked to the Tages-Anzeiger newspaper, the study suggested going with a more modest version costing SFr130 million instead of the original SFr213 million plan. Answers on the ski area front are expected in March.
So, while the project is partly due for completion by winter 2013/14, it is now on the back foot when it comes to the ski areas. This, because it was first developed from a summer perspective. The winter aspect was only added later.
Progress in the ski areas should have been happening hand in hand with the development of the resort, says Lucerne University tourism and economics professor, Urs Wagenseil.
“The modern winter guest booking a four or five star hotel wants similar quality when it comes to skiing,” he told swissinfo.ch.
“That’s why the resort is one thing but what is happening in the mountains is another. The discussions have not been very intensive yet about what will happen in the mountains. We need solutions there as well.”
He added that the project was crucial for the region and its economy. “Switzerland itself could live without the project of course but the closer you come to Andermatt the more important the project is,” Wagenseil said.
Elephant in the room
In Andermatt, the locals are putting on a brave face. It’s been a poor start to the winter season, with heavy snowfalls blocking off trains for days and the strong franc impacting on bookings.
The skeleton of the new five star Chedi Hotel looms above the small train station. With winter in full swing, the various building projects are now ghostly quiet and buried under metres of snow.
Mention the recent bad press about the project and people roll their eyes but remain tight-lipped. More admit to being concerned about the euro than the elephant in the room.
“There’s nothing to worry about,” said one hotel owner, shaking her head.
A shopkeeper who also won’t give her name says: “We are lucky to have someone investing in our town. He [Sawiris] is bringing a lot of people here. But you have to rely on yourself to make your own business a success.”
But some locals are getting antsy. A group has launched an online information portal called bergstimme.ch (mountain voice), to share news on the latest developments of the project's ski areas.
“People have a lack of information about the ski area developments. We can’t just sit and do nothing. This part of the project is not on track like they say it is,” said Kevin Obschlager, co-owner of the River House Boutique Hotel and one of the website organisers.
“One of the reasons people are not buying flats is the ski areas have not been approved. The whole debate on the ski area has been going on for one to two years. The ski area is the main key to success.”
Obschlager says he wasn’t at all worried “in the beginning”, but the ongoing wait for progress could become a negative factor. If everything goes well “the impact will be huge”. But in a worst case scenario – for instance if Sawiris was forced to put the project on hold for ten years because of the economic crisis – “the losers will be people who live and work here”.
The next big date in Andermatt’s diary will be February 14, when the project’s latest sales figures and next steps will be announced.
“This is a test for Switzerland to see if such a resort development is possible in the first place and if this type of business model is possible,” Christian Lässer, director of the Research Center for Tourism and Transport at St Gallen University, told swissinfo.ch.
“At the end of the day this is basically a real estate project and at times when you have upward pressure in real estate development such projects run well.”
“In times when you have a decline or a downturn such projects run sour. And basically this is what is happening. This is a cyclical business.”
(Andermatt Swiss Alps later contacted swissinfo.ch to say that everything was “well on track in Andermatt” and they were “confident” about the ski resort development.)
Andermatt Swiss Alps project plans
1.4 million square metres of land
6 hotels with 4 and 5 stars and 844 rooms
490 apartments, 20-30 private villas
35,000 square metres of commercial space
Sports and leisure centre
Congress and concert facilities for up to 600 people
Nearly 2,000 parking spaces
18-hole golf course
Update Andermatt, Oberalp and Sedrun ski area
Chedi Andermatt hotel due to open winter 2013/2014
First apartments ready in 2014end of infobox
Cantons Uri and Graubünden gave the green light to expand the ski area linked to the Andermatt Swiss Alps development in 2011. Swedish company SkiStar was brought in to develop the resorts and together with Andermatt Swiss Alps, planned to invest SFr140.8 million in the project.
The new ski area would offer 100 kilometres of runs and connect Uri’s Andermatt with Sedrun across the Oberalp pass in Graubünden. The plans include 18 ski lifts and cable cars.
The authorities of Uri said the project was economically and environmentally justifiable and had the necessary acceptance within the local communities.
But Franz Steinegger, the president of the Andermatt Gotthard ski lift company, has said investment should happen in stages “in keeping with demand”. He fears investment in ski facilities could create a deficit that the public coffers would have to absorb and add to resorts’ common problem of second home “cold beds”.
The Swiss Alpine Club is also sceptical, saying the impact on the landscape would be too big.end of infobox