Tarandeep Singh’s Blog

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HOSPINOMICS

Yes that’s the word I derived for understanding and addressing Hospitality Economics.
The world economy is seeing a downtrend and it’s just the beginning considering that we in India are yet to see the summers of 2009. But as I have maintained and I being the optimist, I am hopeful that the recession is going to be here but not more than 12 to 18 months.
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If you look into the past you will indeed realize that as hoteliers, we are the first one to enter recession and the last to come out of it. This means that our Hospinomics is kind of an indicator of the overall economy. The downturn starts and the first thing that companies look at are their travel and hotel budgets. So with the above trend and looking at 12-18 month scenario, 2010 is by far the time when we can start looking at recovery and I just hope it happens beginning Sept 2010 when we start preparing for the much awaited Commonwealth Games.
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But that’s about recovery, I am also certain that this is going to be the most severe of the recession and we are yet to gauge the coordinates of the losses – that could be in terms of unemployment levels, net worth loss or commercial losses. Let’s not discount the fact that Terror Attacks also had a role to play in this.
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I had a chance to chat up with Mr Vimal Singh, (he has spent a good part of his years in the US and India and was the one who brought Holiday Inn in India) Managing Director for Golden Tulip Hotels in India and he had an interesting observation. All economic cycles have a recession, followed by a recovery that is followed by a rebound. And when these cycles rebound they are in fact bound to cross the capital point that they marked in their last cycle. Second, such cycles are accompanied by a period of unreasonable consumer, investor and manager pessimism. This is followed by a period of relative confidence, that is followed by a period of reasonable (hopefully not, unreasonable) joyously unrestrained & enthusiastic (exuberant) confidence.
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We are in the first phase of those cycles. How long we will be in them depends on Obama’s and Manmohan’s (O&M Factor) success of their governments’ monetary and fiscal policies plus credit market restructuring (And yes the entire world economies will definitely have their roles to play as well). However, inevitably, the other phases of both cycles will occur.
In the background are several secular inevitable economic trends. First, BRIC (Brazil, Russia, China and India) economies must eventually grow. They are driven by population dynamics (generally more youthful and larger populations than the rest of the world) and rapidly expanding or burgeoning capitalist economies. Second, Western Europe and North America are just entering the 60+ club (the salt and pepper club referring to their grey hair) demographic whose net worth will eventually recover and whose free time will spur leisure travel and hospitality demand. These secular trends serve as a backdrop to the positive cyclical phases not yet entered. This gives some reason to be optimistic about the economic future when it comes. And, it will come!
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Having said that, there will be a few challenges that will remain – Global Warming, Depleting Non Renewable Energy Sources, Terrorism & Politics. All will continue to co-exist and we will have to plot them our charts of cyclical trends.
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To ensure a positive Hospinomics, hotels will have to seek ways to maintain margins, improving productivity and most importantly MOTIVATING STAFF and remember to keep the pressure on themselves rather than putting on consumers. And this is required as the customers are well informed and well read and notice everything. When you have new kids on the block in sales (and unfortunately that’s the scenario you can’t change or do not want to change), they will feel the pressure and eventually go all out in desperation to get the business. And all this means is erosion of your bottom lines and to some extent competition between may be your own two hotels in the same location.
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The luxury travel is also going through a change of phase. It will soon be replaced by up market eco tours and adventure vacations. Luxury need not be confined to a business traveler looking at 1000 USD a night suite in an up market branded hotel.
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The luxury consumer is going through three issues on his whiteboard:
1. Liquidity – People are losing money and loosing by the hour. But the fact is that it’s only on paper
2. Frozen Capital – Much of the investment was less liquid than stocks and bonds; instead it was in private equity (subject to capital calls) hedge funds (being locked down) and lenders (now tightening credit).
3. Asset Value Declines – in art, real estate and collectibles. And we all know what Real Estate has gone through and as I read in an article, even Hussain’s paintings have seen correction in their price points.
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For a positive Hospinomics, the key mantra will be T3 (Trust, Transparency & Trust) and this will be both internal and external.
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I remember the advt of MasterCard. You can buy Travel and the works by MasterCard (read money) and then there are precious moments that cannot be bought. I am looking at a different picture now. Travel is increasingly becoming about the things money cannot buy – experiences and emotions are treasured and these are the ones that are dictating the new rules.
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Discounting (I love this word!!) is NECESSARY. Let’s face it and not count on the numbers of adhoc rates that we have issued (If you would have been wise enough to offer decent price points earlier, you would not have been reading this blog anyways). But yes Discounting has to be specific and should target markets which give you good yields.
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A recent study indicated that Eco Tourism will continue to grow @ 30% and is expected to make around 25% of world travel by 2012. What are we doing about it?
A new trend in hotels is coming soon. Hyatt’s new Andaz brand as the new kind of business hotel that features a warmer welcome and local culture. It was referred as “Bleisure”.
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Embracing and facilitating consumers’ new behaviors is the key to survival. Counting on the power of new technology to enhance customer relationships, Sheraton introduced a social networking facility on its site, on which travelers are invited to share travel stories, recommendations and photos. It says that “Tying together the advantages of a known, global brand and the capabilities of the Internet, a personalized travel experience could be created to surprise and delight.” And I completely agree and pop goes the question – What are we doing about it?
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I recently came across ASSOCHAM study on Commonwealth Games. According to the Associated Chambers of Commerce and Industry of India (ASSOCHAM), Commonwealth Games 2010 are likely to push India’s Foreign Exchange Earnings (FEE) through tourism alone in 2010 to an estimated level of over USD 16915 million, as these are expected to grow at cumulative rate of 20 per cent in next two years.
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Through tourism last year, FEE’s were measured at USD 11747 million. The optimism as to why tourism will register a cumulative growth of 20 per cent in next two years is based on the fact that, by then global meltdown will have subsided to make India a leading tourist destination, especially due to the fact the focus its policy makers (I talked about the O&M factor) are attaching on hospitality sector. The ASSOCHAM estimates that if India’s tourist arrival in October 2008 was 4.53 lakh, during 2010 Commonwealth Games which will conclude in October, the foreign tourist arrival is likely to double.
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In October 2008, tourism alone fetched India USD 900million with tourist arrivals of over 4.50 lakh, especially from countries like UK, Japan, South Africa, Australia, Singapore, Mauritius, Middle East and Far East etc. The Recession and Terror Attacks were yet to happen by then.
In the last couple of years, FEE’s earnings on an average have been growing at robust average of over ten per cent and there is no reason that their average rate of growth will accelerate during Commonwealth Games for which India is creating lot of facilities by renovating its majority of tourist sites. Also, advertising strengths and intellectual superiority and skills of India’s Ayurvedic, Medical and Clinical Tourism including Religious Tourism are expected to draw a large crowd during the forthcoming Games for multi purposes.
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All in all, Savvy strategies are needed to combat recession and hopefully Hospinomics will be back on track soon!!

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April 12, 2009 - Posted by | Uncategorized | , , , , ,

2 Comments »

  1. Good and comprehensive read. Truly Tarandeep style analysis….

    Comment by Kiran Challoju | June 9, 2010 | Reply

  2. Hi colleagues, its fantastic piece of writing on the topic of tutoringand entirely defined, keep it up all the time.

    Comment by Anne | March 12, 2013 | Reply


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