It was the site of Hitler's notorious Alpine retreat, so what can have possessed InterContinental to build a swish hotel at Berchtesgaden? And who would want to stay there? Jonathan Margolis reserves a room - but not his judgement

A funny thing - kind of - happened to me at Dachau concentration camp recently. There I was, in the extermination block, fighting back the tears, as was an American air-force officer, the only other person there. Then suddenly, there's a jarring, alien sound from my pocket. Diddle er-derr, diddle-er-derr - the Nokia tune. Damn, I forgot to turn the stupid thing off. I try to hit the ignore button, but, fumbling, answer it by accident. It's my son. "Can't speak, busy," I hiss. "Dad, it's really important," he says. "I can't talk here," I whisper. "Where are you?" he demands. "I'm in a gas chamber," I find myself saying.

A funny thing - kind of - happened to me at Dachau concentration camp recently. There I was, in the extermination block, fighting back the tears, as was an American air-force officer, the only other person there. Then suddenly, there's a jarring, alien sound from my pocket. Diddle er-derr, diddle-er-derr - the Nokia tune. Damn, I forgot to turn the stupid thing off. I try to hit the ignore button, but, fumbling, answer it by accident. It's my son. "Can't speak, busy," I hiss. "Dad, it's really important," he says. "I can't talk here," I whisper. "Where are you?" he demands. "I'm in a gas chamber," I find myself saying.

It was as convincing a way as any to cut short a call, besides being a probable first in the history of mobile phones. And I found myself smiling faintly. The air-force officer, unamused as any decent person would be, retreated into the neighbouring room. I spent the next few months trying to analyse whether there was any legitimate sense in which my embarrassing moment in Dachau's gas chamber was funny.

Before the offended put green ink to paper, please understand that I do not find Nazi extermination programmes amusing. Several family members died in the camps, and if it hadn't been for several strokes of luck, my parents would have ended up in Adolf's ovens, too. So I get it, right? But then something else happened last week where, again, I got the giggles courtesy of the Nazis.

I was, you see, checking in as the first, and possibly last, Jew to be a guest at a beautiful, newly built, £70m InterContinental Resort Hotel at, er, Berchtesgaden - Hitler's beloved holiday home in the German Alps, near the Austrian border.

Pristine and modern, a complete contrast to the standard cuckoo-clocks-and-Eva Braun's-knickers twee Alpine hotel style, the newest jewel in the crown of the British InterContinental Hotel Group, opened just last week. It looks, from the outside, like a software company's Colorado HQ. Inside, it is modernist, with a dozen shades of brown furnishings and fixtures, stylistically cool to the point of being a bit chilly. There's even a little style joke in the lobby - a display of the mandatory animal antlers, but these made of modishly twisted shiny metal, sort of Philippe Starck does glühwein.

The Berchtesgaden InterContinental is painfully trendy. There's no hint of Wiener schnitzel on the restaurant menu. In the spa, there are rooms for different massage techniques, plus one marked "Meditation", where you can think things over while staring at a large crystal that changes colour.

Perhaps the management of the ICH Group down in Windsor should spend an hour or two in the Meditation room, because they're suffering a bit of corporate stress right now as the world's press sniggers at their courageous/foolhardy decision to stick a huge and expensive hotel in a town with a near-unique PR problem.

Berchtesgaden was more than just somewhere that the Führer liked chucking on his lederhosen, taking the air, walking the Alsatians and watching old movies. A mountainous peninsula of Bavaria surrounded, with duly ponderous symbolism, by his native Austria, the Führer cast it as the embodiment of the whole Germanic Volk myth, and hence the spiritual home of the National Socialist German Workers' Party.

Berchtesgaden was where the Führer dictated half of Mein Kampf, received world leaders, and directed much of the course of world history, Holocaust included. It served as the Third Reich's second, and, for months at a time, principal seat of government. Even the mountains were tainted. Up on top of one, Martin Bormann, Hitler's disgusting little private secretary - a Nazi so rank and servile that even Hermann Goering referred to him as "the dirty pig" - built Hitler, as a 50th-birthday present, a summer house, The Eagle's Nest, unaware that Adolf was terrified of heights. Hitler hardly ever used the place, and it is now a restaurant serving a particularly fine Jäger schnitzel at just €12.70.

The whole of the Berchtesgaden area accordingly became sanctified ground. On fine days (" Hitler Wetter", as they were called), as many as 5,000 Führer fans used to spend hours gawping with binoculars in the hope of a glimpse of moustache. If they got lucky and the Leader passed by, they would scrabble around to gather the stones upon which his flat feet had fallen.

And it's worse for ICH than even that dodgy CV suggests. The new InterContinental isn't just in the vicinity of Berchtesgaden. It is carefully sited above the town, at a hamlet called Obersalzberg, which was the epicentre of Nazi Berchtesgaden. The new hotel is, in fact, in Hitler's back garden, on the precise spot where Bormann and Goering had their own villas. Whereas Berchtesgaden is a standard Alpine town, with its Gasthofs, cafés and souvenir shops, and little other than its name to creep out visitors, Obersalzberg is Nazi Central.

Neo-Nazis still like to leave the odd wreath hereabouts on Hitler's birthday. Everything you see has an agenda. See that pretty little Gasthaus and golf club? That was Bormann's farm. The building currently being turned into a restaurant? That was Albert Speer's office. If there is such a thing as land poisoned by its history, Obersalzberg has to be up there with Dachau, Auschwitz, the Gulag, Bhopal, Tiananmen Square, Culloden - none of which have, to date, attempted to build a luxury resort bang on the very spot where the action was.

Let's enjoy, for a moment, then, the discomfiture of the FTSE 30-rated InterContinental Hotel Group as it bravely weathers its corporate "Doh!" moment. Let us give thanks, too, that we had nothing to do with the decision to spend £70m on a not-un-stately pleasure dome at Obersalzberg - and that it's not our job to put a PR gloss on it.

In its defence, ICH points out that, for over a century before Hitler ruined it, Berchtesgaden was a respectable mountain resort as popular with Jews as anyone - the Sigmund Freuds and the Bechstein piano people were among those who had weekend places there. The scenery at Berchtesgaden is also exquisite - Salzburg, where the Von Trapp family lived, is only a short way across the Austrian border, and even though you know you're at Berchtesgaden, for goodness sake, it's quite hard not to start humming "Climb Ev'ry Mountain" as you grind up the 1:4 gradient to Obersalzberg.

ICH's attempts, in its big, clumsy, corporate size-12s, to wriggle its way out of the resultant PR mess have been wonderfully arch. The resort's proudly proclaimed slogan is as marvellous an example as you're likely to see of what a group of not very bright people can do when they put their minds to it: "It's not just a peak. It's a treat." (There's more - the hotel chain's magazine, Highstyle, describes the new resort as "a cozy spot for a display of thigh-slapping local dancing", and a nearby valley as "a particularly fine spot for yodelling".)

Until the moment I checked into the hotel, though, I, too, was in a Sound of Music frame of mind. It was only at the reception that the tunes in my head changed. Suddenly, I was whistling "Springtime for Hitler", the centrepiece number from Mel Brooks' The Producers. "Springtime for Hitler" is, of course, subtitled, "A Gay Romp with Adolf and Eva at Berchtesgaden"... Indeed, only once you're handing your credit card over in Hitler's back garden does InterContinental's attempt to rebrand Berchtesgaden - an enterprise not unlike Max Bialystock's brainwave in The Producers of staging a Hitler musical - seem on the stupid side of iconoclastic. The joke of "Springtime for Hitler" was that it was meant to be a tax loss; the InterContinental Berchtesgaden, by contrast, is a serious attempt to make money.

So, as I was going to my room, I started on the lyrics for the opening song to my successor to The Producers, "The Hoteliers". A chorus of brown-suited bellhops singing, "We're the Volk who burned the Reichstag / But be sure and have a nice Tag," was as far as I got before sitting on my bed and wondering what exactly I was doing here. Was it creepy to sleep in Hitler's garden, where Bormann and Goering literally strutted their stuff? Well, to be honest, you sort of forget about it. The rooms have more Lebensraum than the Sudetenland, the plumbing is of the gods, the duvets are, as in all German hotels, blissful, and, frankly, I had a magnificent dinner and slept like a top.

The few guests were all German and all a wee bit shy about being there. The consensus is that the Bavarian Alps desperately needed a quality hotel because now that people can fly to Majorca on budget airlines for a few pounds, and the economically vital US troops have mostly left the area - they formally handed Berchtesgaden back to the locals in 1995 - the tourist trade has plummeted and needs help.

The Germans themselves, bless them - and I am, quite un-ironically, modern Germany's biggest fan, loving the people, the language, even the food - have done everything that they can think of to facilitate ICH's rebranding enterprise a little more tastefully. Jewish groups have been brought in to advise on the project. Some have been guardedly pro-resort, others, notably the Simon Wiesenthal Centers in Los Angeles and Paris, have been vociferously anti, assessing the entire thing as a gross insult to the memory of the Holocaust.

But there is little of the Don't Mention the War syndrome in these parts; it's actually difficult to stop people referring to it. The Bavarian government has built a superb little museum a few hundred metres from the hotel, which even on weekdays, with five feet of snow, is rammed with people from all over Germany and Austria - and not all of them in school parties. The museum uses audio-guiding technology boldly stamped "Made in Israel". And Berchtesgaden people, even as supporters, almost to a man, of "moving on", tend to be doughty advocates of the Jewish state. The Israeli bobsleigh team, known as the Frozen Chosen, were in town for a competition a fortnight ago, and were reportedly cheered to the rafters by elderly locals.

The hotel, too, does its corporate best not to shy away from the bleedin' obvious. In every bedside cabinet is the usual Gideon's Bible, plus a 600-page volume on the history of Nazism and the region - Die tödliche Utopie (The Deadly Utopia). All the staff, even the cleaners, underwent police checks to root out Nazi and neo-Nazi connections. All have been on history courses and had to sign an addendum to their contract stating that they support the democratic ideals of the Federal German state. Even the InterContinental's business model has been designed, so the management says, to exclude the dread possibility of a neo-Nazi group managing to book it for a convention - the price mechanism has been used to see off this ugly scenario: rooms start at £160 and rise to £1,700 for a suite.

But last week was still a tough one for Jörg Böckeler, the InterContinental's general manager. The worst he's had since, as manager of Cliveden in Buckinghamshire, he tangled with Michael Winner. (Winner will doubtless be amused to hear of Böckeler's latest job at Berchtesgaden.) First came a possible intervention from the spectre of Adolf; on opening day, the Berchtesgaden region experienced the second-coldest temperature ever recorded in Germany, -43.6C. Then, with the Wiesenthal Center and other Jewish groups shouting "foul", a German journalist made the observation that the shower-heads in the hotel rooms are remarkably similar to the fake shower-heads used in the Dachau gas chambers. This remark was enough to send Böckeler into near-apoplexy. "These shower-heads were first used at The Savoy 104 years ago," he says. "It's a pathetic comparison. These German journalists have done everything they can to make silly parallels with the National Socialist regime. The ICH Group is aware that this hotel is built on sensitive ground, but we believe that the time is right to move on, touristically, and we do so with integrity and transparency."

"So, who is staying at the Berchtesgaden," I ask Herr Böckeler. "It's a lovely place but I can't quite imagine spending my holidays here." "At the moment," said the beleaguered manager, "bookings are extremely strong, but it's 98 per cent Germans, Austrians and Swiss. We aim to have 70 per cent Germanic guests and the rest UK, US and Arabs, who love this region. I've been to 12 travel fairs, and the interest, particularly from Great Britain, is terrific."

"There's no question, it's a really nice place," says the hotel's Austrian sommelier, Thomas Breitweiser, as, later, he shows me his fine cellar. "The only trouble is, yeah, Hitler was here. That could be a problem."