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  The World Economic Forum (WEF) in turmoil, and restructuring of the ski area : is the local economy of Davos in difficulty ?

Bruno GERBER - Davos, Switzerland

 

 

For at least the past 20 years, the tourism policy in and relating to Davos has been marked by the desire to safeguard and develop the existing diversification and to favour a sustainable development that uses resources sparingly. It was well known that economic, social or societal changes could run counter to this development strategy. Moreover, insight and experience told people that trends and an increasingly revived actionism with regard to holidays and leisure time in the world of tourism would always influence the actions of local residents and visitors in terms of expectations. Nevertheless, the strategy of diversification and sustainability continued to be the general maxim. And this maxim, or guiding principle, has not lost any of its correctness or validity. But of course not !

The title of my short speech says, or implies, that currently in Davos, something is not as it should be or as people would like it to be. And indeed, there is cause for critical reflection and rapid but appropriate action. At an international conference, you are less interested in the "Davos Situation" than in the question of whether conditions in Davos are of a prototypical nature and ergo could be of general interest. I believe this to be the case in various ways.

The initial position. – Davos is one of the largest holiday destinations in the European Alps region. The resort has around 24,000 guest beds and registers around 2.5 million overnight stays per year. In this respect the resort enjoys a good balance as around 45 % of these stays are recorded in summer and around 55 % in winter. The fact that the winter season greatly exceeds the summer season in terms of the turnover and profit figures reflects - apart from some exceptional locations - the European reality in mountain holiday regions. As for diversification: Davos is above all a holiday, relaxation and sports resort, but it is also a significant medicinal place with domestic and foreign clinics devoted to the treatment of respiratory disorders, allergies (asthma) and skin diseases. Davos is also an internationally renowned congress location and home to scientific research in the fields of medicine, climatology and physics. – This diversification and the fact that Davos, with its 13,000 permanent residents, is viewed statistically as a city, means that the drastic seasonal fluctuations noted in other mountain regions are less significant.

If the mood today in Davos is somewhat gloomy however and the "blues" prevail, it is therefore interesting to analyse the reasons for this. Wherever possible, my analysis does not coincide with those of others, in particular, wherever possible, not with those by the responsible officials in Davos. I personally believe with regard to their accuracy, that part of.the problem is overrated (WEF), another part is broadly underestimated (mountain railways) and that yet another part should be introduced on the psychological level (Olympics application / tussle over responsibility between the political authorities and independent tourism organisations / indecisiveness in determining the development of the sports infrastructure). I do not intend to go into the psychological level any further here.

The "Annual Meeting" of the World Economic Forum has so far taken place 31 times in Davos. It is the most prestigious recurring event that Davos has ever held. For the past 20 years, the international media presence at this event has been so massive and prominent, that public awareness has assumed global proportions. Through reporting on this event, Davos has won worldwide renown as the hosting venue and has thus been able to create a profile for itself as a conference destination. The World Economic Forum, or "WEF" for short, as we in Davos refer to the "Annual Meeting", is without doubt the most significant, non-governmental event in the world. The "WEF" is one of the greatest success stories ever. It is in fact natural that outsiders wonder why an international event from the "champions league" should be allowed to take place in a mountain location at all. - To Davos, it was always clear. For as long as, and insofar as, this event did not affect happenings in the holiday destination as a result of its size and/or due to any related initiative of any kind, and providing the everyday structure of holidaymakers and patients was not disturbed for any great length of time, there was no reason not to willingly and proudly undertake the role of host to the WEF. On the other hand: Every time rumours broke out that the WEF was one day set to leave the location, Davos reacted vehemently and actually, with the use of significant financial resources, made every effort to create optimum conditions for the event's organisers with regard to the hosting of the mega-event.

Almost two years ago, in January 2000, the situation came to a head. - Despite repeated assurances by the organisers of the "Annual Meeting" that they would limit the number of participants in the event in the interests of quality assurance, a dynamic developed, which even the organisers were incapable of resisting. On the one hand, the pressure for admission to the meeting rose more and more for participants and media representatives, and on the other, the organisers concentrated increasingly on the introduction of subsequent, traditional politicians' weekends, at which, in recent years, over 100 heads of state, leaders of Federal German states and senior representatives from international organisations have met in Davos.

The WEF became larger and larger. In 1999, opponents of the unrestrained globalisation long since mobilised and began to give vent to their indignation at the lack of harmony in the global economic development with demonstrations worldwide. As for the demonstrations, which took place with brash words but without violence, they are always accompanied by a core of aggressive agitators, prepared to use violence. Even in Davos. In January 2000, despite a considerable police presence at an unauthorised demonstration, ugly scenes and considerable damage to property arose. This left an uninsured organiser, a humiliated police troop with its frustrated chiefs and representatives from local and regional authorities who quickly issued assurances that the necessary resources and means would be found to prevent such a presence of opponents to globalisation being possible in the future. This then in many places left anger but unfortunately, not the insight that the demonstrations in Davos and elsewhere found their origin and cause in a deep despair present among broad sectors of the critics showing global solidarity. In the same way as the media, who reported the riots effectively and unknowingly contributed thereby to the fact that demonstrators were a priori perceived as violent criminals, in Davos, the demonstrators were also seen as monsters.

It is perhaps this environment or this atmosphere which contributed to the fact that those responsible for security legitimately stated, one year later in January 2001, that they wished to.see proof that the small town of Davos could play host to a world event without problems.

The proof was provided. At what cost? – Just days before the opening of the event, the conference centre was hermetically cordoned off with tall wire fences and barbed wire, measures were taken to block of individual streets and various objects were searched through.

Prior to and during the event, heavily armed police and members of the army were positioned around the conference centre and other patrolled through the town. Both access roads from Davos were closed and passage was only granted to those who satisfied the most stringent examination. Naturally, all rail traffic to Davos was supervised. Police and/or army helicopters carried out low-level flights over the holiday destination. - Anyone who claimed that the town of Davos could have offered its holidaymakers or clinic patients the same service they were promised despite this action, namely to relish in activities and relaxation on or near the pistes or strolling around, had to be blind. Unlike previous years, where the conference participants, athletes, relaxing holidaymakers or patients stayed at the same hotels as one another and visited and strolled through the same restaurants, in January of this year, those not taking part in the conference avoided Davos during the WEF days. The result is obvious : winter sports operatives and a large proportion of the shops experienced a 10-day lull in the middle of the high season. Naturally, no weekend holiday traffic and short break tourism is recorded when the journey to the destination is virtually impossible. – The reaction to this phenomenon ? It was for the time being negligible. It is not proper in Davos to voice criticisms about the WEF. There, talk centres around the turnover and revenue generated and not around the loss of turnover. – For days and weeks after the event, clouds gathered over the WEF and the Davos sky. Not everyone subscribed to the rapidly offered theory according to which ensuring security for the event and its participants simply required measures that would lead to limitations of various types and which would have to be tolerated. Many individuals, institutions and groups thought of the events surrounding the WEF 2001 as unreasonable, others however affirmed the lack of democracy in the WEF and/or patronage of the unfettered worldwide globalisation, and many found the central need for security abstruse. As a result, a veritable political storm blew up in our country and the WEF became a controversial media topic for weeks. For good money, analysts were prepared to examine the events and suggest ways out of the crisis. The result: Pleas for greater transparency, and the inclusion of organisations against globalisation (NGO's) in the program organisation requires that admission to participants be more open and postulates that demonstrations should take place during the WEF. Whatever actually sounds good and makes sense is an illusion. In the same way that simultaneous braking and acceleration rarely leads to the target, one can not set down regulations for the organiser of the wholly private event regarding its program organisation, persuade it to change its participation criteria or oblige it to contribute significantly to the costs of something which falls within the area of responsibility of the State : namely, to ensure the safety of visitors to Switzerland. – In the event that the WEF 2002 takes place in New York instead of in Davos, it will be extremely effective against the argument that there is a desire to show solidarity in a sorely afflicted and fated town. So effective, that the fact that on account of the numerous unanswered questions in connection with the continued hosting of the event in Davos meant that the WEF organiser was forced to recommend the move to America as a release from an embrace. – Whether or not the WEF will ever return to Davos is uncertain. Uncertain because no agreement has yet been reached.

There is a lesson to be learned from all this. Perhaps it is that success can lead to a greatness which paradoxically results in asphyxia. Or the rather banal lesson that the end of a symbiosis seldom leaves behind survivors. – The fact that Davos laments the development surrounding the WEF 2002 is understandable. Who is able to compensate for the loss of mass trade in just a few weeks ? Who is supporting the town in its mourning for the loss or withdrawal of favour it has suffered ? Here, the view of Davos inhabitants that the WEF is just one of many Davos.conferences would certainly help here. Certainly : the most significant! Few show self confidence in that however, forgetting that with 300 days occupied in the conference centre and extremely significant international conferences taking place all year round in Davos places it at the top of European conference destinations that are not cities. The WEF is of paramount importance to Davos. Whether it will remain in Davos or not however is not a question of fate. Davos is and continues to be a jewel in the world of conferences with excellent prospects for the future.

Turning to the situation of the Davos mountain railways. – Corporate mergers are also a hot topic in tourism and in many ways a survival strategy. Even if local mergers make efficient sense or if they ensure that unstable company can be saved by integration into a larger association, mergers are always accompanied by less competition, on the one hand, and the attainment of more market power on the other. This phenomenon need not, but may form the substance of disputes.

Davos has five ski resorts, not connected in terms of transportation technology. For many decades, the Parsenn railway was queen in Davos. Popular, rich and powerful. So healthy that thirty years ago a new ski resort, which has not yet been developed, could be opened. Also so audacious however that some years ago it acquired the shareholders' majority in a declining mountain railway company. The queen became complacent, announced investments in renovations that had become necessary, had reports drafted by expensive consultants and considered opening up new ski resorts. Everything was then abandoned in its old age however. For an investor who, over 10 years ago, had obtained the shareholders' majority in the largest competitive railway in Davos (Jakobshorn), not much more is left for the queen than a pitying smile. And then, as was perceptible and obvious, the foreseeable happened, the so-called new investor revolutionised its railway company with an exemplary approach, creative energy and an almost stubborn persistence. The visitor reacted, penalised the complacent queen with an ever more obvious abdication of custom and turned to the new king of the mountains. With innovations, a slimmed-down management and rigorous cost management, the latter found the resources to develop a mountain empire with railways, lifts, trendy piste restaurants and a whole range of companies providing accommodation.

Other sequences in time-lapse. When the Parsenn railway wished to react and there was talk of perhaps now actually also implementing twelve investment projects, the unbelievable happened. The banks refused loyalty to the queen and the (subservient) shareholders protested. So strongly that there were threats to refuse re-election of the board of directors.

Ultimately, in order to be able to save what, given the significance of the enormous Parsenn ski resort, had to be saved, great lengths were done to and the strong king was invited into the bed of the suffering queen. The bride was poor but still attractive. Now there was no longer two but once again just one kingdom and one ruler. Since a small but extremely important, for Davos, independent railway company paid for years of mismanagement in the meantime with corporate infirmity and the prospects for rehabilitation were not and are not given, Davos gave rise to a monopolist.

Further in time-lapse. – Monopoly companies are neither bad nor good per se. In tourism, even in a place like Davos, they are good if they are suited to the needs of visitors and the needs of the town itself. If they are designed purely for their own recovery and thus, for their own purposes, they are of course not good. No one would claim that the corporate interests of a mountain railway company and those of a holiday destination coincide. The town courts the patronage of visitors staying over. The mountain railway wishes to use its sponsorship capacity to the full at any cost and with almost all resources. The fact that, from the point of.view of the mountain railway company, the day-tripper, the promotional visitor and the weekend break guest are no less interesting than holidaymakers staying several days or weeks, is understandable. What is not understandable is the fact that holidaymakers staying several days or weeks still pay the full price while short break holidaymakers, groups and promotional visitors are all generally granted special conditions. – Monopolies in the mountain railway sector are therefore problematic for the town and its visitors if the railway service is run on a strictly demand oriented basis. What does this mean ? Shorter hours of operation and therefore later start times and earlier closing ; temporary external operation of parts of the service, casual employment on an as and when basis and the definitive closure of parts of the railway in the interests of better capacity usage for the remaining companies.

The fact that renovations are always accompanied by painful and difficult processes is not new. If the renovations are carried out carefully, they will amount to a custom negating reaction to the mistakes of the past. Management of a holiday destination, but also that of a mountain railway company, can not be performed with a software package for industrial inventory management. If the "mountain railway" monopoly deviates from the holiday destination's solidarity agreement, in the long term both, the town and the mountain railway company, will pay a high price.

Regardless of whether the restructuring of the mountain railway, which has become necessary in Davos, is being carried out thoughtfully or carefully, it is, in my view, currently operating on the very fringes of that which the visitor is prepared to accept. And that is far from optimal - to say the least....... The fact that the Davos mountain railways are now the largest accommodation provider in the town and are increasing their accommodation offer in the long term through the acquisition of companies must also make us sit up and take notice. There are companies which tend to be more occupied at weekends and less so at other times, and there are companies who tend to be concentrated on the winter season. Such a development does not run concurrent to that which corresponds to the aims of the town.

"Such is the market" then. But: Where competition rules, it is not only the market, but also the competitors, that determine the individual conduct and business practices.

Thus, as the general title of this conference already states : "The dynamic in tourism and people's desires and expectations". So, wherever visitors are at the forefront, they should not suddenly be just another factor.