Chic chalet shuffle

The Alpine landscape is changing as top-end tour operators adopt a new business model. Felix Milns explains how property owners and skiers could benefit.

Chalet Lumiere enjoys a spectacular position in the Chamonix Valley, with the Mont Blanc Massif in the background, through World of Indulgence.
Chalet Lumiere enjoys a spectacular position in the Chamonix Valley, with the Mont Blanc Massif in the background, through World of Indulgence. | Image: Rob Lea/

Ski chalets are used to a quick turnaround; as one set of well-fed and well-skied guests depart, hopefully contentedly, another set eager to taste the mountain spoils are always quick to arrive. Yet in the recession-hit build-up to this season, it is not the guest part of the business that has been all-change, but the relationship between tour operator and chalet owner, and the financial model behind the rental contracts themselves. As the customary batch of new luxury properties hits the market this winter, behind the scenes it’s a very different environment.

Last of the big spenders was UK-based luxury tour operator Descent International, which in August went spectacularly bust, leaving a trail of creditors, including the Duke of York, in its wake. However, it was not just the guests for the forthcoming winter who were affected. With 19 of the Alps’ finest private residences on their books, it was also the chalet owners themselves who were faced with the prospect of a bleak winter ahead.

They were not alone. Indigo Lodges was another major luxury operator to go into administration this year and across the industry tour operators have slashed their top-end portfolios by around 30 per cent. “An awful lot has been taken out of the market,” according to Andrew Dunn, MD of new market leader Scott Dunn. “We cut our capacity by 30 per cent this winter and quite frankly that’s proved very wise.”

Panoramic view from Chalet Serena in Chamonix, through World of Indulgence.
Panoramic view from Chalet Serena in Chamonix, through World of Indulgence.

It’s quite a turnaround. Over the past decade, ski chalet ownership has proved a stellar investment. Most of the major resorts have seen property prices triple, with rental returns anywhere between two and five per cent, though these have become more stretched as capital values escalated. As the market for private chalets with five-star service continued to increase exponentially, it was all power to the owners as operators gazumped one another to add to their portfolio. It was, typically, Descent that would routinely outbid other operators to maintain its stranglehold on the top chalets in the Alps. And it was exactly this model of guaranteeing exorbitantly high, fixed-rental returns that was its ultimate undoing.

The traditional model is for the tour operator to pay the owner a fixed price to rent the property for the 16 weeks of the winter season, give or take a couple of weeks when the owner can have exclusive, fully serviced use of the chalet. These rental contracts were typically costing the tour operator anything up to £125,000 per winter, depending on the size, luxury and location of the chalet. These were salad days for owners, with the operators risking all to make their margins on the final few sales of the season. While it worked in the boom times, when operators could comfortably expect 80 per cent occupancy, things looked very different in the long shadows of the recession.

Whereas mid-market chalet companies are, for now, still largely operating on the fixed-rental model (they have compromised by cutting capacity by up to 60 per cent in some cases), the trend at the top end of the market is now very much for joint ventures, with owners sharing both the potential risks and rewards. In Dunn’s opinion, “The chalet model will change forever now. No one is ever going to enter into those ridiculously high fixed-price contracts again. All the new business we do from now on is going to be joint ventures.”


Some see it as a well-needed jolt. Mark Gibbins is sales director of The Oxford Ski Company, a highly respected agency that works with many different operators to find the ideal chalet for clients. “Owners had been far too greedy for far too long, fed by an insatiable desire from tour operators to feature the latest hot property in their portfolios. Hopefully, this will bring everyone involved back to a sensible and sustainable level. We are still seeing strong occupancy for this winter, albeit at a lower spend per head.”

As such, rather than paying owners a fixed price for the season, operators are now entering into partnerships with owners and paying them a percentage of net profits directly linked to actual sales. The concept itself is nothing new. Smaller, resort-specific operators such as CK Verbier, Verbier’s leading luxury chalet specialist, have built their business model on this basis. “We had no incentive to handicap our business model financially with large rental guarantees. Our owners get around a 20 per cent share of net revenue week by week, with an additional dividend at the end of the season if the company as a whole does well,” says director Liz Berman. It’s a similar story in Chamonix where luxury operator World of Indulgence has renegotiated all its old contracts and will only take on new properties on a joint-venture basis.

While this increases the risk to owners, the flipside is that it also increases the potential rewards. Most of the new agreements equate to a parity with the old system when the chalet is let for 10 weeks, with a large part of the profits generated in the key weeks of Christmas, New Year, February half term and Easter. Anything above the 10-week mark is a fillip for owners that they would not previously have seen.

Home comforts at Bella Coola, through CK Verbier.
Home comforts at Bella Coola, through CK Verbier. | Image: Yves Garneau/CK Verbier

It seems to be a policy that works. CK Verbier is one of the few operators increasing its capacity this winter with the launch of a spectacular new property, Sagittaire. Rented whole, the chalet sleeps 31 guests; it can also be divided into three self-contained apartments with a stunning communal pool, spa and gym. But is it really a good time for expansion? “The property is selling really well. The opportunity to buy the land and develop the site was too good to miss. We were already quite small, whereas other operators had dead wood from the boom times. It also makes sense, when you’re a high-end tour operator, to have a reasonable-sized portfolio to help share marketing costs over the different properties,” says Berman.

It was exactly this philosophy that led to the birth of Consensio. Rising like a phoenix from the ashes of Descent’s demise, Consensio (Latin for co-operative) is now operating seven of Descent’s former chalets, concentrated in the French strongholds of Méribel, Courchevel and Val d’Isère. Company founder Ceri Tinley worked as the financial director for Descent before setting up as an independent consultant in 2009. As a trickle of pleas for help turned into a stream when the news about Descent broke, setting up the new company was an easy decision to make. “It was a once-in-a-lifetime opportunity, really; a chance to work with the best chalets in the world and set up a new model, which will hopefully work as well for the owners as it does for the operator.”

Each property will run on its own profit-and-loss basis, with the income from the key four weeks covering all the running costs of the chalet. Any income after that is shared between operator and owner. Again, anything above 10 weeks’ occupancy will see owners in a better financial position than with the old system. Because these chalets have a proven track record, all the owners are confident that their properties will reach at least 80 per cent occupancy.

Chalet Saphir in Chamonix, through World of Indulgence.
Chalet Saphir in Chamonix, through World of Indulgence.

Joanna Yellowlees-Bound, CEO of Erna Low and an investor in Consensio, agrees: “The way the company is set up will ultimately benefit owners. Consensio represents some of the most stunning chalets in the Alps and there’s no reason for them not to be full. It’s also a much fairer and more flexible system, with owners having far more freedom to use their chalets when they want to.”

And it’s not just happening with chalets – the rental structure of top-end self-catering apartments is also changing. Erna Low has just taken over the marketing of a new 12-apartment development in Morzine called L’Aiglon de Morzine after the original management company ran into difficulties. “Conventional apartments are normally managed by an external management company, which takes a large percentage of the profits. Here the owners themselves are the management committee. We are expecting two-to-three per cent returns in the first year but quickly rising.”

However, at this level, it’s not just about the properties themselves. In catered chalets, service is equally important and the trend towards smaller companies focusing on fewer resorts can only help. “If you are operating in one or two resorts then you have control. Service is key and if you have properties spread across all of the Alps it’s very difficult to manage,” continues Tinley.

The club-style ski room of Asian-inspired chalet Hidden Dragon.
The club-style ski room of Asian-inspired chalet Hidden Dragon. | Image: Mark Sanders

And in luxury chalet terms, small is beautiful when it comes to your portfolio. Julia Summers was head of sales and marketing for Descent until setting up her own consultancy, Summers & Winters, a year ago. “Realistically you can operate a maximum of 12 to 13 chalets at an exceptional level, but finding over 20 superb chefs to work the winter season every year, for example, is extremely difficult. As companies get bigger they can be forced to take on staff and properties that are perhaps not quite up to the standard they would like.”

Agents, too, are welcoming the move, “Skiers going with a smaller resort specialist invariably get better value for money. The staff are much more likely to have inside knowledge of the mountains, bars and restaurants, and the management infrastructure is in place locally to deal with any problems,” says Gibbins.

So it seems that clients looking to rent their dream chalet will also benefit from the changed landscape – good news, as there are suddenly a lot more smaller operators on the market, many of which are owner-operated. Yellowstone Ski Lodge in Sainte Foy, France used to be with Descent but owner Rupert Clevely is now operating the property himself and, unusually, relaunching it as a boutique hotel. “Most properties at this level can only be booked on an exclusive basis but we felt there was a gap in the market for a property let on a room-by-room basis,” says Clevely.

The dining room at Yellowstone Ski Lodge in Sainte Foy, France.
The dining room at Yellowstone Ski Lodge in Sainte Foy, France.

However, setting up alone has been a daunting process. “It’s been a massive challenge, far more complicated than I anticipated. There are so many hoops to jump through. The chalet manager has to go on a three-day course just to be able to serve alcohol to the guests, and woe betide anyone falling foul of the French authorities.”

Owners in Switzerland face an even sterner test, with a five-week, bureaucracy-rich hospitality course in either French or German essential before you open for business. CK Verbier started life as an owner-operator, after a couple of seasons of letting Chalet Kernow to a different operator. “In a much more buoyant market we made the decision to run the business ourselves. We felt there was a demand for things we could do better or wanted to do differently,” says Berman.

Owners today face a slightly different scenario. Ashlee Benis is the owner of Hidden Dragon, a new, Asian-inspired lodge retreat hidden in a remote corner of the Four Valleys, far away from the glitz and glamour of Verbier, which she runs with her brother André. “We always wanted to run it ourselves but had in mind that the easy back-up option would be to let it through somebody like Descent. But then all of our options started drying up one by one and we were left with no other choice but to go it alone. However, it’s been far more fulfilling than simply being another anonymous chalet in another company’s portfolio.”

A huge picture window brightens the drawing room of Yellowstone Ski Lodge in Sainte Foy, France.
A huge picture window brightens the drawing room of Yellowstone Ski Lodge in Sainte Foy, France.

With a background in advertising, the Benis’ tactic is about creating not just another owner-operated chalet, but a brand they can expand. Belinda Archer, editor of, rates it as one of the most spectacular properties in the Alps. “It is fabulously different from the traditional cowbells-and-gingham Alpine chalet, but it’s possibly not for everyone because of its Asian-inspired interior design and remote location.” On the other hand, while not being in the thick of the Verbier action may rule some clients out, for others its private setting and great access to the ski area is a very attractive USP.

Not only that, opening up your chalet to paying guests is a sage move from a tax perspective. In France you can reclaim all of your TVA (the equivalent of VAT) if you run the chalet on a commercial basis, which is another reason why former Descent and Indigo owners had to work fast, otherwise they could have faced tax repayment bills of up to €500,000. Property experts also recommend keeping debt on the property. Alistair Street runs Alpine Property Consultants and says, “It is very beneficial to have debt on your chalet – for instance a loan – as this helps avoid French wealth tax and income tax, and all of your interest can be set against your income.”

But is now a good time to enter into the market? After a stagnant year, things seem to be moving again. Prices of top-end properties in the A-list resorts have plateaued over the last year rather than dropped, with very few forced sales and most owners content to sit tight, though mid-market properties and chalets in less well known resorts have dropped by around 10 per cent. Erna Low, for example, has a charming farmhouse with eight en-suite bedrooms on the market in Les Gets for €850,000 – two years ago an offer of €1.4m was rejected by the owners.

Chalet Les Brames in Méribel, France, sleeps 15 guests. Through Consensio Holidays.
Chalet Les Brames in Méribel, France, sleeps 15 guests. Through Consensio Holidays.

And, despite the exchange rate issues, money is cheap to borrow. The aptly named James Price, director of Equity Release Finance, works with a number of financial institutions and retail banks, plus private banks in Geneva, Monaco and Luxembourg. “If a client is a high-net-worth individual then we can establish them as a private banking client, where your options are much more flexible. We can move clients’ current mortgages to interest-only and release as much equity as possible. New buyers, meanwhile, can place a sterling bond of around 20 per cent with a private bank, with the returns coming back to you through your choice of investment vehicle. And on paper your loan-to-value ratio will be 100 per cent, highly efficient for tax purposes while totally skirting the exchange rate issue.”

While many buyers are drawn to the stellar resorts, high property prices mean that rental returns are not as rewarding as they once were, with Street recommending Davos, Klosters, St Anton and Chamonix as the best resorts for a return on your investment. Off-plan apartments are a little out of vogue this season, with Erna Low instead suggesting clients take advantage of the resale market in places like Arc 1950, where prices have dropped 20 per cent since their original sales. “Our focus is on re-selling now. We are advising sellers to hold on to their properties in Arc 1950 if they possibly can, but there are still some great bargains to be had,” says Yellowlees-Bound.

And owners, potential investors and chalet guests alike will be hoping that the landscape changes once again come Christmas, with more of the bountiful snow the Alps have seen over the past two winters. That should cheer up even the most challenged owner-turned-operator.


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