The biggest challenge is, however, being faced by the companies in the services sector. The hardest hit have been the airlines, especially those operating at the budget end of the market. It is a question of time when the hospitality sector (hotels and restaurants) begins to face the challenge of preserving margins. Ironically, in this sector, it is my belief that the hardest hit will be those hotels and restaurants that are operating at the premium end of the market. This particular set of businesses have had exceptionally good times in the last few years with the increase of global interest in India leading to legions of international business travellers making their way into India. With scant regard for any long-term impact, almost all the premium hotel chains in India merrily resorted to unrestrained price gouging with extraordinary increases not only in the room tariffs but also in just about every service being offered to their hapless guests. Standalone restaurants took the cue from the exorbitant price lists of the five-star hotel restaurants and ended up increasing their prices in tandem. With rising inflation and declining consumer confidence, organised retailers are next in the firing line. Many will see stagnant and even declining same-store sales figures, the situation further exacerbated with increasing competition from new, more aggressive, and in many cases, better-funded entrants. In the healthcare sector, almost all the new entrants are struggling to achieve even operational profitability and the prospects for improvement in margins do not look very good.
It is, therefore, no surprise that the tendency of the strugglers in the services sector is to start cutting on service