A financial analyst quoted in the Wall Street Journal noted, “I’ve just come back from lunch at McDonald’s. Although the venture related to the company’s food business and relied on many of its core competencies, such as franchising and real estate management, the McDonald’s brand doesn’t square with the image of a four-star hotel. Even worse, as the owner of a hospitality consulting firm pointed out, was that the word “arch,” when pronounced by German speakers, sounds a lot like a vulgar word for a person’s posterior.īeyond all that, the strategy itself was questionable. Another issue was that the English phrase “golden arches” isn’t associated with McDonald’s in German-speaking countries. The showers, for one thing: Families and business travelers rooming together complained about the lack of privacy (the glass was later frosted as a result). The worldwide economic contraction-and the appreciation of the Swiss franc-that followed the attacks of September 11, 2001, contributed to their demise, but there were other factors, both minor and major. The hotels clearly didn’t deliver the expected results. A colleague of mine who stayed there in 2001 recalled frankly that “the entire feeling was one of oddity and discomfort.” The second hotel was similar. The decor was spare and brightly colored. The guest accommodations, for $120 to $160 a night, featured a patented curved wall and a cylindrical, see-through shower stall that protruded into the bedroom.

The McDonald’s restaurant just off the lobby was open 24 hours (a rarity in Switzerland). The Zurich Golden Arch hotel opened first, and it was unlike any other hotel around. They were the brainchild of Urs Hammer, chairman of McDonald’s Switzerland, who was responding to the parent company’s push for diversification and new ideas.

Relatively few travelers ever stayed in-or heard of-the hotels, which opened within a few weeks of each other in the spring of 2001, one near the Zurich airport, the other in Lully near the A-1 interstate. But as I tell my MBA students and executive-education participants, the foray can be thought of as an inexpensive “real option” that provided the innovation-hungry company with an opportunity to learn valuable lessons from a controlled failure.

The Golden Arch venture in Switzerland ended in 2003 after two and a half years, when the pair of McDonald’s hotels closed. In the end, the decision by McDonald’s to build a couple of four-star European hotels, with arch-shaped headboards for the beds and fast-food restaurants on-site, wasn’t as bizarre as it seemed.

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