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C-805-E
November 2021

Le Grand Hôtel de Leysin (GHL)

Edi Soler
Gaizka Ormazabal

Le Grand Hôtel de Leysin (GHL) was one of the oldest hotels in Leysin, a small Swiss village in the
canton of Vaud, 30 kilometers from Montreux and very close to Lake Geneva. At 1,260 meters
above sea level, Leysin was one of the hot spots for alpine skiing enthusiasts and an oasis of
tranquility for companies looking to get away from the large urban centers to hold work sessions,
conferences or workshops.
GHL, a four-star hotel, was founded in 1970 by Luca Frey, the grandfather of Sofie Keller, the
current general manager. The property remained in the hands of the family, which also owned
the building. In 2020, GHL had 250 rooms spread over five floors. In the late 1990s, a major
renovation of the facilities had been carried out. The first floor had been converted into spaces
for events and conferences and meeting rooms. Since then, no other significant investment had
been made. The hotel also had two restaurants, a heated swimming pool, a gym and a wellness
center that offered a wide range of treatments.
Throughout its 50-year history, GHL had experienced periods of strong growth as well as more
challenging times. While most of its revenue came from holiday guests, they had also managed
to attract business clients, mainly thanks to the facilities available for holding conferences and
corporate events of all kinds.
Keller, 34, was the youngest of three siblings and had been a professional competitive skier for
years. Though she no longer competed, she still spent almost all of her time off practicing the
sport, including summers, when she would try to travel to Argentina to enjoy the winter season
there. Her two older brothers, aged 39 and 41, were married (both with young children) and
worked in banking. The older brother was also a member of GHL’s board of directors. The other
board members were Keller’s cousin, two independent professionals, and Keller’s mother, Sarah
Frey, who served as chairperson.

This case was prepared by Professors Edi Soler and Gaizka Ormazabal. November 2021.
IESE cases are designed to promote class discussion rather than to illustrate effective or ineffective management of a given
situation.

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C-805-E Le Grand Hôtel de Leysin (GHL)

Following her retirement from competitive skiing, Keller had studied at the École Hôtelière de
Lausanne. After graduating, she worked in the hotel industry in other parts of the country,
mainly for the Mövenpick and Accor chains, though never as a manager. In early 2019, the board
of directors had approved the decision to hire Keller as general manager of the hotel following
the retirement of her mother, who had held the position for the last 20 years. In the words of
the younger brother, “The gamble that mom’s taken by putting Sofie at the helm of GHL isn’t a
bad one. I imagine she must have learned a thing or two over the years, but with that temper…”.
Indeed, the decision to hire Keller had caused some unease among GHL employees. However,
she had the support of her mother, who was often involved in some decisions, both formally
(through the board of directors) and informally. In fact, some employees still went to her when
they felt that she needed to be informed about something specific that was going on in the hotel.
In January 2020, on the occasion of the first board meeting of the year, the accountant had sent
Keller a preview of the 2019 results, together with those for the previous two years (see Exhibit 1).
2019 had been a record year in Switzerland, with almost 40 million overnight stays, up 2% on the
previous year.1 Eighteen million of those stays were attributable to local demand, which was up
3% on the previous year. The average occupancy in 2019 was 55% in Switzerland as a whole, which
was similar to the average for the canton of Vaud. For GHL, in contrast, 2019 had been one of the
worst years in the last decade.
In addition to being an attractive location for a wide range of mountain sports, in the past Leysin
had managed to attract a good number of corporate events, conferences and congresses,
offering an alternative to nearby cities such as Montreux, Lausanne and Geneva. However, the
small hotel market in and around Leysin was saturated with supply. The seven hotels that made
up GHL’s CompSet (competitive set),2 all four-star establishments, offered similar services and,
given the transparency that characterizes the sector, almost identical rates. The largest
competitor in terms of turnover was a hotel that belonged to the French chain Accor, which was
located just 500 meters from GHL. Keller analyzed the rates of her CompSet almost daily,
especially those offered by the Accor hotel, which were generally the benchmark for the rest of
the competitors. With 73 hotels in Switzerland and more than 9,200 rooms,3 Accor was the
largest hotel chain in Switzerland in 2020.
At the board meeting held in January 2020, the need to achieve efficiencies in GHL’s business
had been put on the table. In this regard, Keller had suggested that they stop offering the
conference service. To perform the analysis, she had asked the accountant to provide her with a
more detailed breakdown of the 2019 results by business line (see Exhibit 2), a brief explanation
of each revenue and cost item included in the analysis, and other details of the hotel’s operations
(see Exhibit 3). In Keller’s view, the loss incurred by the conference business was definitive proof
that it wasn’t viable, and she had communicated this to the board. However, the board had
denied her request to close that line of business.
Six months later, Keller was preparing for another board meeting. During the intervening
months, the unimaginable had happened: in March 2020, the Covid-19 pandemic had broken
out. One of the sectors hardest hit by the health situation had been tourism. The authorities had
forced the closure of hotels, restaurants and other businesses, and millions of workers around
1 Swiss Tourism Federation. Swiss tourism in figures. Structure and industry data, 2019 (2019), https://www.stv-
fst.ch/sites/default/files/2020-07/STV_STIZ_2019_en_web_0.pdf.
2 A competitive set, known in the hotel industry as a CompSet, is the group of accommodations that have similar
characteristics to a particular hotel and compete with it directly.
3 Horwath HTL. Switzerland Hotels & Chains, 2020 (2020), https://horwathhtl.ch/en/publication/swiss-hotels-chains-2020/.

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Le Grand Hôtel de Leysin (GHL) C-805-E

the world had been furloughed. Despite having weathered the crisis somewhat better than most
neighboring countries, Switzerland had been no exception. However, unlike authorities
elsewhere, the Swiss government hadn’t mandated a strict lockdown of the population. Even
so, lockdown orders in many other countries and travel restrictions caused hotel occupancy to
fall to record lows in March and April of 2020.
Keller’s mother had advised her to keep the hotel open despite low occupancy. “GHL can’t close.
We have local customers who’ve been coming here all their lives and will keep coming. Life goes
on despite Covid.” Keller kept the hotel open and followed the instructions issued by health
authorities, but she was forced to cut some costs and furlough some of her staff, who were
eligible for compensation payments under a program introduced by the Swiss government. She
had also had to implement health measures to ensure that GHL was safe for the few guests
staying at the hotel.
The July board meeting was to be held the next day. To prepare, Keller had requested a preview
of the results for the first half of 2020 (see Exhibit 4), which she found worrying even though
there were no surprises. GHL had never had occupancy below 40% or such low revenue per
available room (RevPAR4), not even during the 2008 financial crisis.
The big challenge for Keller now was to get back to positive figures in the second half of the year.
A large majority of neighboring countries were starting to lift lockdowns and ease restrictions.
Still, foreign tourism could take time to recover as many countries, including Switzerland, were
imposing quarantines and other restrictions on travelers wishing to cross their borders. Despite
the high level of uncertainty, Keller was confident that occupancy would increase slightly in the
summer thanks to local tourism, and even more in the last quarter of the year when the ski
season got underway. Some pharmaceutical laboratories were also predicting that a vaccine
against Covid might be available by the fall of 2020. Financial markets also showed important
signs of recovery.
With this in mind, and taking into account the usual seasonal demand for GHL’s services, Keller
had produced a brief report for the board with the estimated average occupancy for the second
half of 2020 and expected average net rates per room (see Exhibit 5), which continued to be
low, in line with its compset. As for costs, she did not anticipate any substantial changes from
the first half of 2020, with the exception of cleaning, where costs were likely to increase by 5%
due to Covid-related measures. Likewise, she did not foresee any changes in the rates of the
other services.
The day before the meeting, Keller found out that the Accor hotel, her main competitor, had
launched a campaign on its website with significant discounts for all overnight stays, with no
exceptions. The discounts would apply until December 2020. According to her estimates, this
meant an average net rate of around 120 Swiss francs per room per night, well below the
standard official rates. Keller could not understand the reason for this action by the Accor hotel,
which had also reduced its prices during the first half of 2020. Her mother had mentioned that,
in the past, other price drops had had little impact on the demand. In addition, the demand was
expected to grow in the second half of 2020 due to the expected lower impact of the pandemic.
“Why such discount now and for so long”? Keller wondered. With the occupancy rate expected,
such a low net rate would cause RevPAR to fall significantly. Keller believed that could lead to
serious problems for some hotels in the area, given their weak financial health, which had been

4 Revenue per available room, one of the most widely used indicators in the sector, is calculated by multiplying a hotel’s
average daily room rate by its occupancy rate.

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C-805-E Le Grand Hôtel de Leysin (GHL)

exacerbated by Covid. The alternative, Keller thought, was to maintain the planned rates. In that
case, Keller estimated that the volume of rooms sold in the second half of 2020 could be 30%
less than the volume she had originally expected, favoring the Accor hotel or any others that
decided to apply similar rates.
To relax, Keller decided to go for a swim in the heated pool in the semibasement of the building.
Despite some deterioration of the facilities, the wellness center’s results in 2019 had been
satisfactory. (Due to the impact of the pandemic, the results for the first half of 2020 weren’t
representative.) “I remember that we were the pioneers in these services in Leysin,” thought
Keller. Indeed, both the two restaurants and the wellness center were famous in the area and
attracted clients, even if they weren’t staying at the hotel5. But going for a swim did nothing to
relax Keller, who was going through one of the most difficult periods in her life. Although she
was a strong person, the enormous pressure she’d been under over the past few months had
even given her a health scare. Also on her mind was a recently published study on climate
change,6 which claimed that the ski season in Switzerland had been reduced by more than a
month since 1970 due to a shortage of snow, especially at lower altitudes, where the ski resorts
closest to Leysin were located. Some experts estimated that climate change could eventually
lead to the closure of ski resorts at altitudes below 2,000 meters. “Of course—what a bunch of
doomsayers! But that’s not what I need to think about now, though I wouldn’t mind moving to
run a hotel in Bariloche.”

5 Approximately, 70% of the F&B revenues and 80% of the Wellness revenues came from customers staying at the hotel.

6 Willibald, F., S. Kotlarski, P. P. Ebner, M. Bavay, C. Marty,

F. V. Trentini, R. Ludwig and A. Grêt-Regamey. “Vulnerability of ski
tourism towards internal climate variability and climate change in the Swiss Alps”. Science of The Total Environment, 784
(2021): 147054. https://doi.org/10.1016/j.scitotenv.2021.147054.

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Le Grand Hôtel de Leysin (GHL) C-805-E

Exhibit 1
GHL’s Income Statement and Main Business Indicators as of December 31,
2019 (in Thousands of Swiss Francs)

2017 2018 2019

Gross sales 15,465 14,776 13,385
Commissions and discounts 1,375 1,338 758
Net sales 14,090 13,439 12,627

Materials 3,565 3,399 3,177

Personnel expenses 2,062 1,956 1,832
Maintenance 496 486 452
Cleaning 719 686 644
Supplies 899 869 838
Management salaries 246 238 215
Security 461 467 467
Insurance 296 290 270
Sales and administration expenses 562 592 549
Depreciation 3,760 3,834 3,680
Operating profit 1,025 622 503

Financial expenses 196 175 166

Profit before tax 829 447 337

Occupied rooms 54,464 51,417 48,341

Occupancy rate7 59.7% 56.3% 53.0%
Net daily room rate 161.36 158.54 152.96
RevPAR 96.31 89.33 81.03
Number of meals served 110,017 107,571 108,713
Number of wellness services 6,181 6,323 5,912
Number of conferences 236 221 201

Source: Prepared by the authors.

7 The total number of occupied rooms as a percentage of those available. The number of persons per room remained practically

unchanged.

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C-805-E Le Grand Hôtel de Leysin (GHL)

Exhibit 2
Results by Business Line and Main Indicators as of December 31, 2019
(in Thousands of Swiss Francs)

Accom. F&B8 Wellness Conf. Total

Gross sales 8,153 2,935 739 1,558 13,385
Commissions and discounts 758 0 0 0 758
Net sales 7,394 2,935 739 1,558 12,627

Materials 951 1,412 48 766 3,177

Personnel expenses 526 654 307 346 1,832
Maintenance 380 17 26 30 452
Cleaning 483 81 40 40 644
Supplies 492 213 50 82 838
Management salaries 129 54 11 21 215
Security 374 47 23 23 467
Insurance 229 13 13 13 270
Sales and administration expenses 357 110 27 55 549
Depreciation 3,173 169 97 241 3,680
Operating profit 301 166 97 -61 503

Financial expenses 97 39 10 20 166

Profit before tax 203 128 87 -81 337

Occupied rooms 48,341

Number of meals served 108,713
Number of wellness services 5,912
Number of conferences 201

Source: Prepared by the authors.

8 Food and beverage (food service: breakfasts, lunches, dinners and others).

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Le Grand Hôtel de Leysin (GHL) C-805-E

Exhibit 3
Details of the Main Items in GHL’s Income Statement

 Commissions and discounts. Commissions paid to intermediaries such as agencies,

Booking.com, etc., calculated as a percentage of the gross rate.
 Materials. Costs for each line of business that vary in line with the volume of activity
(occupied rooms, number of meals, wellness and conference services).
 Personnel expenses. Expenses for full-time and hourly employees. Full-time staff received a
fixed annual salary and performed tasks in all four lines of business. Hourly employees
performed tasks in a single line of business, and their cost varied in line with the volume of
activity. Accommodation and F&B activities didn’t require hourly workers. In 2019, the costs
for permanent employees working in wellness and conference services were 141,000 Swiss
francs and 186,000 Swiss francs, respectively.
 Maintenance. This service was outsourced to an external company. The cost practically did
not vary with the volume of activity.
 Cleaning. This service was outsourced to an external company. The cost varied according to
the volume of activity.
 Supplies. Thirty percent of these expenses were considered fixed. The remaining 70% varied
depending on the volume of activity in each line of business.
 Though the remaining expenses could vary slightly at Keller’s discretion, they didn’t change
according to the volume of activity at the hotel.

Source: Prepared by the authors.

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C-805-E Le Grand Hôtel de Leysin (GHL)

Exhibit 4
Results by Business Line and Main Indicators as of June 30, 2020
(in Thousands of Swiss Francs)

Accom. F&B Wellness Conf. Total

Gross sales 2,753 944 140 303 4,140
Commissions and discounts 256 0 0 0 256
Net sales 2,497 944 140 303 3,884

Materials 326 439 10 159 933

Personnel expenses9 212 244 78 78 612
Maintenance 217 10 15 17 258
Cleaning 180 27 8 9 225
Supplies 166 62 9 18 255
Management salaries 64 27 5 11 107
Security 152 19 9 9 189
Insurance 117 7 7 7 137
Sales and administration expenses 146 45 11 22 224
Depreciation 1,570 84 48 119 1,821
Operating profit -652 -19 -61 -147 -879

Financial expenses 51 19 3 6 79
Profit before tax -703 -38 -64 -154 -958

Occupied rooms* 17,117

Number of meals served 33,379
Number of wellness services 1,116
Number of conferences 42

* The occupancy rate (rooms occupied as a percentage of those available) was 37.8%, and RevPAR was 55.19 Swiss francs.

Source: Prepared by the authors.

Exhibit 5
Overnight Stays Forecast for the Second Half of 2020

July-20 Aug-20 Sept-20 Oct-20 Nov-20 Dec-20 Total

Average occupancy 40% 50% 50% 50% 60% 65% 52.5%
Occupied rooms 3,100 3,875 3,750 3,875 4,500 5,038 24,138
Net daily room rate 131.5 145.1 140.6 140.6 140.6 145.1 141.1
RevPAR 52.61 72.56 70.29 70.29 84.35 94.33 74.04

Source: Prepared by the authors.

9 The cost of fixed salaries in wellness and conference services was 47,000 Swiss francs and 46,500 Swiss francs, respectively.

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