Hotel Industry & More

Good morning, folks! At a time when most hotels are choosing not to be picky about guests, a hotel in Australia took the bold step of banning entry to two Emus and CNN Travel went ahead to make a full-fledged report out of it. On that loony note, remember that it is Friyay already!

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Hotel industry rings out the alarm bell

Hotel Association of India or HAI has expressed concern that the hotel industry could collapse if not given adequate support from government or RBI.

Some numbers to crunch: As per a recent Mckinsey report, there are quite a few numbers coming out which point out the extent of the problem. Projected demand destruction for travel and hospitality – over 90%. People employed: 4.5 Crore. Livelihood provided including self employed and contractual staff – 16 Crore. Contribution to GDP – 9%. Expected revenue loss in 2020 – Rs. 90,000 Crore. Current debt serviced by organised sector (10% of the industry): Rs. 45,000 Crores.

So what’s the plan? HAI has chalked out a 3-step process of survival-revival-thrival. Yes, their grammar goof-up has been noted by yours truly. The objective of the proposal which goes all the way till 2025, takes into account the fact that the hotel industry will take a longer time to get back to it’s feet. Hence, HAI proposes moratorium to be extended till Mar 2021 in survival, lower interest rate loan (repo rate + 2%) for the next 18-24 months in a bid to revival and then thrival (the word grows on you) for the next 30 months at MCLR or home loan rates. The trade off here will be margins for the lender.

The big daddy of Q1 results

Today, there’s very little about Reliance Industries that does not create headlines. Q1 results were no different with the giant mostly beating street expectations. Net profit rose by 31% YoY to Rs. 13,233 Crore, riding on a one-time gain of almost Rs. 5,000 Crore from it’s transfer of petrol marketing business to the RIL BP Plc joint venture. However, as always topline numbers don’t always tell the real story. Even with a better operating margin of 19.1%, up from 13.6% last year, operating profit fell 21% and revenue fell by 44%.

The star player: This was a no-brainer that Jio’s performance pulled the entire group up. The telecom player registered approximately 183% profit growth over last year, on the back of a 34% revenue growth. Within this Covid-hit quarter itself, Jio added 9.9 million users with each user on an average generating Rs. 140.3 revenue for the company. No wonder it hogged much of the limelight when it comes to future plans in the Reliance AGM.

The other team members? Not too good as the pandemic showed it’s impact. The core business of refining and petrochemicals suffered from crippled demand. Revenue from refining business dropped 54% while petrochemical business registered a 33% drop in revenue. Reliance Retail registered a 17.2% YoY decline in revenue while operating margin more than halved to 2.3%, down from 4.7% last year. However, the firm did open 69 new stores and even at 50% stores fully shut managed to generate a profit of Rs. 431 Crore.

US economy shrinks many sizes

In the worst ever quarterly GDP numbers coming out of US, it has been revealed that the economy shrunk a record 32.9% over same quarter last year. Yes, this is far higher than the previous worst of about 10% in 1958 from 1947 onwards, the time that this data has been collated. One look at the graph here makes the visually striking point of how dire things are.

What is happening? One word. Coronavirus. With most states and districts experiencing an open-shut dance, a multitude of businesses are barely able to function. Two numbers in this scenario are pretty glaring. One, consumer spending which accounts for about 70% of the GDP fell by a staggering rate of 34.6% over last year.  Two, for the 19th consecutive week, over a million people filed for new unemployment benefits with the latest figure being 1.434 million adding in to a total of 54 million Americans who have by now sought unemployment benefits since the start of the pandemic.

You got company: US was not the only country laying claim to the worst contraction ever. Neighbour Mexico announced a 17.9% GDP contraction as compared to last year. Germany was a few notches higher at 34.7% GDP shrinkage from last year which is the largest decline since 1970s when the data started being collected. One thing is for certain – the world is NOT looking at a V-shaped recovery unless we have the holy grail of a vaccine or a certain cure.

IN SNIPPETS

Something smells… uh, fragrant? When you think smuggling, you generally think either of old Hindi movies or of valuables like gold or diamonds. But, it is truly a different age when Customs department has to foil attempts of smuggling in 162 tonnes of agarbatti or incense sticks from Vietnam into India, through the Chennai port! In 2019, India had placed the item on the restricted list as a push to local producers in the industry.

National Education Policy rolled out: The government replaced a 34-year old National Policy on Education whereby the school term starts earlier, there are no specialised streams in school, colleges will gradually become autonomous and you can get a certificate even after a single year in a specialised degree. Phew!

Aiming for TV atmanirbharta: The government has imposed a restriction on import of color TVs and LCDs upto 63 cm in size. Any importer will now have to procure a licence from the commerce ministrys’ Directorate General of Foreign Trade (DGFT). Although it’s really a hint from the government for Make or Assemble in India.

Hong kong restaurant dine-in ban reversal: After a big public outcry against the government’s dine-in ban for restaurants, it was partially rolled back within a day. Now, restaurants can operate in the day time at 50% capacity and not more than two people at a table with evening restricted to takeaway.

Influencers in demand: Not just consumers, now influencers also seem to have a hold on the social media networks itself. In the rapidly intensifying battle between Tik Tok and Instagram, the former has now announced a spend of $2 Billion over 3 years for top content creators. With this promise of direct monetisation, Tik Tok hopes to keep reeling the popular ones to keep posting. 

MARKET PULSE

Markets remained pretty flat with news of US economy contraction and not much good coming out of India either. Even with the news of RIL Q1 results, the stock inched pretty slowly.

Gold on the other hand climbed down a notch from it’s high pedestal of 53,000 / 10 gram. However, these new heights are matched with a 74% plunge in gold jewellery demand in April to June quarter. While the price may have been one factor, the fact that weddings have also been pushed means retail demand will take time to come back.

WILD CARD

NASA’s new Mars rover Perseverance atop an Atlas 5 rocket was launched from Florida on Thursday. This $2.4 billion mission is with the objective of searching for potential past life on the red planet. Let’s see if this pans out to be an exciting new frontier for human race.

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