Egg’s failure to crack hotel market illustrates Davos accommodation imbalance

When the masters of the universe are not in town, there's little money to make for Davos hotels.

In a previous missive from Davos, I wrote: “The normal laws of supply and demand don’t seem to apply there.” Well, I’m pleased to tell you that I was wrong, and in one important respect: the iron laws of economics do indeed apply: if you don’t make money, you go bust.

That is what has happened to the previous operator of the hotel that was destined to set new standards in Davos. The InterContinental – known popularly as the Golden Egg, and if you check out the pictures you will see why – came under new management last year after just one season.

Apparently it was all booked up by the gilded Davos set last year, with Tony Blair, Goldie Hawn and Bono all in attendance.

But it failed to attract anybody after the WEF show left town. The result was that a Credit Suisse real estate fund, which funded US$175 million of construction costs, had to find a new operator.

The Egg must have thought it was on a winner. There are only about 400 five-star hotel rooms in Davos, for which 2,500 WEF guests have to fight every January. So the Egg’s 200-odd rooms looked certain be snapped up at a big cost.

Which they were, during the WEF’s annual meeting – but not the rest of the year. The hotel is too far out of town and too expensive for the ordinary ski or summer Alpine tourists who come here. The regular Davos set is not of St Moritz or Zermatt status, apparently.

I took a trip out there on Wednesday night to see what all the fuss was about, and to find out why the Egg had turned into a turkey. It certainly is a lengthy drive out of Davos itself, around 15 minutes along the Klosters road and through various security checks. It would have been a demanding walk, especially in sub-zero temperatures.

I must first report that Egg is a complete misnomer. It looks much more like a bird’s nest made out of reinforced concrete lattice. It certainly does not blend into the Alpine mountainside, and is the complete opposite of the charming traditional Swiss-style hotels – all carved woodwork and sloping roofs – that Davos boasts.

Even the reception area is concrete-dominated, although the large number of people milling around disguised its cavernous nature. At least in WEF week, it obviously has no trouble selling its rooms. Most of the hotel seemed to be temporary home to the Azerbaijan delegation at Davos, and publicity for the forthcoming European athletics championship in Baku was everywhere.

I had a meeting there in the cutesy lounge on the ground floor, doing its best to look like a timber-framed chalet, and then dinner. Two unexceptional courses came to just over 100 Swiss francs (Dh428) for one diner, which I thought was steep.

Anyway, I came to the conclusion that you would not come to Davos expressly to stay in the Golden Egg, and this illustrates a problem the WEF might encounter in future.

It has been whispered that the WEF might end its 44-year association with Davos if it cannot get more and better hotel accommodation. But, as the Egg has shown, this is more easily said than done.

Any new hotel operator opening up in Davos would have to put up with a situation where as much as 30 per cent of annual profits are made in the WEF week in January. If they don’t get it right then, it’s difficult to make it up during the rest of the year, when the masters of the universe are not in town.

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