One of the key challenges facing the hospitality sector is the high rate of taxes. In Delhi, for instance, there is a 12.5 per cent luxury tax as well as a 12 per cent VAT on food and beverages.
The high import duty is another challenge. On liquor, it is about 182 per cent and 35 per cent (including surcharge) on kitchen equipment.
There is high cost of debt as the gestation period can be up to 15 years and banks are tightening their purses.
There is a serious shortage of manpower of nearly 90,000 workers within the industry.
The economic slowdown has reduced the number of tourists, brought down the room rates, while the cost of land has not reduced so much as to make it viable for setting up new hotels.
NUGGETS
Selections from management journals
Because no two recessions are exactly alike, marketers find themselves in poorly charted waters every time one occurs. But guidance is available, say John A Quelch and Katherine E Jocz, who have studied marketing successes as well as failures throughout past recessions and identified patterns in consumer and company behaviour that strongly affect performance. Understanding consumers’ changing psychology and habits, the authors argue, will enable firms to hone their strategies so they can both survive the current downturn and prosper afterward.
Consumers in a recession can be divided into four groups: The slam-on-the-brakes segment, which feels the hardest hit, reduces all types of spending. Pained-but-patient consumers, who constitute the largest segment, also economise in each area, though less aggressively. Comfortably well-off individuals consume at near-prerecession levels but become a little more selective (and less conspicuous) about their purchases. Live-for-today consumers pretty much carry on as usual, responding to the recession mainly by extending their timetables for making major purchases. People may switch segments if their economic situations change for the worse.
As firms manage their marketing investments, they must simultaneously assess their brands’ opportunities, allocate resources for the long term, and balance their budgets. Many make the mistake of cutting costs indiscriminately, which can jeopardise long-term performance. Instead, firms should streamline their product portfolios, improve the affordability of their offerings, and bolster customers’ trust.
How to market in a downturn
By John A Quelch and Katherine E Jocz
Harvard Business Review, April 2009
Read this article at http://hbr.harvardbusiness.org
In tough times, many retailers focus on their most loyal customers. That seems sensible enough. But, paradoxically, your most loyal customers are not your best source of revenue growth in a recession. You’re already collecting most of the money they’re spending. If they suddenly spend 25 per cent less, most of that will come out of what they spend in your stores.
It’s not likely that you’ll pry away customers who are fiercely loyal to other retailers either. Your best opportunity lies with “switchers”— the people who spend money both in your shops and elsewhere. If you collect, say, only 20 per cent of what they’re spending today but can increase that to 30 per cent, you’ll still realise a net gain even if their total spending drops by 25 per cent.
Five rules for retailing in a recession
By Ken Favaro, Tim Romberger and David Meer
Harvard Business Review, April 2009
Read this article at http://hbr.harvardbusiness.org
Imagine two advertisements for a personal digital assistant brand. The first highlights “self-focused” or individualist product benefits, such as enhanced productivity and organisation. The second focuses instead on “collectivist” or group benefits, such as connecting with friends and family. Under which circumstances would each of these advertisements be more persuasive? The researchers addressed this question by investigating the role of culture and brand commitment in advertising effectiveness.
When should advertisers focus on you versus your entire family?
Based on the research of Nidhi Agrawal And Durairaj Maheswaran
Kellogg Insight, March2009
Read this article at http://insight.kellogg.northwestern.edu/
