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Hotel Vendors see a Glimmer in GST

Tuesday, January 24, 2017, 12:37 Hrs  [IST]

Demonetisation has stroked the entire nation and vendors are no exception. In fact, vendors are the ones who are most badly affected by the demonetisation of INR 500 & INR 1000, though it may be a good initiative in the long run, believes most of the vendors. Vendors are an integral part of the hospitality industry and when they are hit, the hospitality industry too is hit directly or indirectly in a major way.

The last quarter of 2016 did not do well for vendors and the first quarter of 2017 too seem to be the same as cash flow crisis is yet to stabilise in the country. This can be
one of the major reasons most of the vendors may dither to introduce new inventions early next year.

The entire industry is looking forward positively to the implementation of GST in the coming year. This can be one of the positive changes that will transpire in 2017 and which may bring in a ray of hope after a dark period in the industry.

Hospitality Biz spoke to some of the vendors in the hospitality industry who shares their views on demonetisation, expectation from GST and market opportunities going forward.
Pau Abello Pellicer,
MD, Roca Bathroom Products

For us hospitality domain covers hotels, malls, schools, cinemas and hospitals. In this industry the demand are not as affected as the residential market by the short term developments. In other words, I do not expect any significant impact of the two big gamechanges; demonetisation and GST implementation.

During the current scenario of demonetisation, we are only expecting that there will be an increase in purchases of bathroom products from the organised players in the institutional market of new projects, instead of buying from unorganised sector.

Innovation rules the market space and automated sensor enabled fittings are chosen over the traditional ones by the new tech-savvy customer. We have multiple bathroom products where innovation has combined with sustainability to reduce water consumption, increase hygiene, offer better comfort and convenience, with zero compromise on durability of the product.

GST is the much awaited and a positive move by the government, it is must for a country like India. With GST in place now, we are expecting a higher growth rate and a complete change in the supply chain of our raw materials, components and finish goods. We, finally, will buy, move and store the products based on market logics and note based in tax issues.

Hiroshi Akai,
MD, Rational India

A survey conducted by us in the market recently at 144 customer sites has shown that Indian cooking has evolved to combi-steamer technology and there is over 95% customer satisfaction ratio with our self-cooking centre. Although the market is still small compared to developed markets like Germany, Japan or China, we believe that there is unlimited potential in this market and would surpass those markets over the next five to ten years'time.

We have introduced the compact"XS" version recently and with this we will be able to penetrate into smaller casual dining restaurants, snack and bake cafés, and QSR segment. Moreover, the compact version would be ideal for live kitchens in larger hotels.

We will be now concentrating more on training and education. We understand that general training is not enough considering the attrition ratio in kitchens. We have to give customised training at customers'site so that they can use the units efficiently with higher RoI. While we have proved that even Dal Makhni can be prepared using our selfcooking centre, the units are still used for roasting or steaming jobs.

We are in the process of creating 'Apostle'chefs in different regions who can demonstrate the efficiencies and RoI which can be achieved using self-cooking centre to our potential customers.

Nirmal Khandelwal,
Chairman, FCML Distributors

If we look at the entire scenario of the next year, we could see a steady growth in the hospitality industry. We can project a leap of atleast 20-25 % in the demand of our product range. All the dormant and on hold projects have been started now and they would require our products in the coming year for the completion of the projects at the earliest.

I believe that the new projects will get materialised at a much faster pace vis-àvis what has been the scenario till date. With the demonetisation, the financial institutions and banks are getting flooded with funds which would lead to the easy and cheaper finance.

The improvisation is always required in the product line that we deal in. We along with our principals are always geared up for the improvisations, whenever required. The new technology, cost effectiveness and the contemporary look of the product is getting more and more in demand and we are bound to evolve ourselves to the need of the hours.

Sooner the GST is implemented, better it would be for the country and would definitely be good for the business aswell. It would lead to the free flow of the goods within the country from one end to the other and undoubtedly lower the prices of the products.

Karan Khanna,
Director, Eclipse International

We are one of the oldest manufacturers of mattresses in India. We tied up with Eclipse International four years ago and manufacturing international quality products with technical collaboration with the US partner in India. We have 3,000 dealers and about 100 exclusive stores in across India currently. Our intention is to open more franchisee stores next year..

Currently, only 10% of our total sales are institutional, but we are geared up to grow our institutional share in coming years. We are working closely with people and organisations in the hospitality industry to understand the product requirements develop products specific to India. We have enhanced our portfolio already with introduction of soft furnishings – bed sheets, bed linen, bath linen, etc. Our endeavour is to become a one-stop-shop for everything starting from bed bases to mattresses to bed linen, bath linen, etc..

We already have exclusive vendor tie up with lot of hotel chains in the country. We have a dedicated team for institutional market which takes care of project specific requirements.
Ravi Nindwani,
MD, Delta Faucet Company

We expect demand to grow strongly in the popular segment, steady growth for the premium segment after a few months and I wouldn't like to hazard a guess about the luxury segment, at least at this point in time. We service the hospitality segment very selectively and I would say that for the project segment as a whole, it does look like at least one tougher year ahead.

Today the market is demanding value very fiercely – hence, cost related innovations on existing products and technologies are likely to cut more ice than anything else. The GST, if and when it comes in, will lift the industry growth rates at least by 200-300 basis points, if not more.

Pawan Raj Kumar,
Director, Continental
Equipment India

There are many new projects announced this year and we hope that more of them will see light of the day in the coming year. Demonetisation drive is a positive move for the economy. While the next couple of quarters are expected to see a down trend in terms of growth but if the further measures ensure that there is not too much of job losses then in the near future economy should show a robust growth. However, it is expected to adversely affect already stressed real estate industry and that will have direct effect on our industry.

We are working on new products and technologies. I think the future is going to be about bringing efficiencies in the operations. Lesser usage of space, energy and manpower should be the talking points in all capex purchases. We also see IOT playing a very important role in the kitchens in order to save energy.

GST is a much awaited welcome move. Its execution is yet to be seen and we do expect a bit of confusion in the beginning. However, this move will allow local manufacturers to reduce logistics time and costs. We would also like to see a reform in EPCG scheme to attract foreign investments in our industry and help revive it.
Ajay Khanna,
Partner, Eagle Forgings

2017 should see marginal improvement over the last few years. Our products are tried and tested and find place in a majority of the good hotels across the country. Going forward I continue to see strong demand from new projects, renovations and also from existing properties. Our foreign partners are also actively involved with international groups and have approvals across most of the groups. Similarly in India, we have been actively discussing with most of the Indian groups for standardising and approving our products. Demand is quite strong, however, pricing and competition is fierce, especially from China. Our main advantage and 'USP'is supplying standardised good quality products, backed by long-term European service support.

The recent demonetisation drive could affect the growth. There is uncertainty and ambiguity on how money will be changed and foreign visitors are weary and may delay or cancel visits leading to lower occupancies. Demonetisation has also led to a temporary squeeze in liquidity with developers, which will definitely delay projects and will have an impact on vendors. However, hotel projects once started need to be completed and therefore there will be a delay but the eventual demand will remain.

Technology is the way forward and customers are demanding new technology and guest conveniences.
P.A. Prabhu,
Director, Revac Systems

A lot of builders have prime land used to use it for multiuse construction and this may see a decline as opening of malls will become unviable in present scenario. I expect the restaurant industry will see lesser restaurants opening as demonetisation will take toll on the business which was normally cash driven.

Portable cooking station for open kitchens is being launched by us to meet the demand of interactive cooking and hopefully it would fetch good opportunities for us.

GST will bring a level playing field for all the players and will lead to better rates for customer and growth for small scale as the customers will be able to take GST set off on all the purchases including capital purchases.
Anil Malhotra,
CEO, Hospitality Sales &
Marketing Company

I feel that the organised sector would prosper in the coming 2017 year as the domestic tourism shall get a boost from the previous year. Since, we shall be introducing new products in the market in 2017; we do foresee a good demand for the same. There would be new projects that would also come up in the New Year as the interest rates would be falling.

In the wake of demonetisation there is not much impact on the organised sector – we were anyways on net banking and cashless business norms. As a matter of fact in a broader perspective, this would be simpler for business across spectrums over a period of time in 2017.

Our focus has also shifted to the"Make in India" products over the years and this surely is the future. Import substitution is the name of the game, especially starting in 2017 and GST is the best thing to happen for years. We as vendors would gain immensely from this move. The taxation would be crystal clear and since we do send a lot of goods between states, GST would stream-line this sale across states for us. Further it would also reduce the paperwork and various forms that are required these days on interstate sales.

Sunil Khanna,
Principal Consultant & Partner,
Hotelconsult Orient

We'll have to depend more upon our existing projects to generate revenue as we do not expect announcement of many new projects in immediate future. We'll have to focus on the government sector which we have been ignoring hitherto and we'll need to convert more enquiries into orders. In short, we'll need to consolidate our market share and make inroads into market segments where we do not have much presence at present. We are expecting fewer projects in hotel, restaurant & banqueting sectors in the New Year. However, the demand is likely to be restored as soon as liquidity improves to previous levels.

We cannot immediately bring any significant changes to our services in the field of facilities planning & food service design consultancy. Once money availability is back to normal, businesses will go on as before. We'll need to change the nature of our services only if further

policy changes are introduced in future. Currently many of our customers are unable to get any credit in lieu of service tax charged by us, but in the case of GST, they will be able to claim input credit and this will be beneficial to all.

Rajat Pandhi,
MD, Dixy Chicken India

The demand for products and services in the next year are likely to remain at same levels but with a slowdown in ordering due to the demonetising and resultant less cash purchases. Only the organised big chains plans will go ahead as planned. It is a period of uncertainty and one needs to be cautious. Hence, it is better to stay with your tried and tested products. Also with the uncertainty of GST we don't know as yet how it will impact our input costs and labour costs, so we won't be able to give a correct selling price as yet.

Ranjan Jain,
MD, Elanpro

India is country with the hottest, longest and in some respects, the most trying summer season. So, I believe, thirst quenching healthy drinks will soon replace the carbonated beverages. This in turn will increase the demand for drink dispensers.

In the current situation we expect the economy to be buoyant post GST. The second half of 2017 should be good. It is expected that the monetary situation will stabilise by the latter half of New Year when new projects are likely to pick up. I think scrapping of INR 500 and INR 1000 notes by the government is a tremendous move in a bid to target counterfeiters.

Underscoring our commitment to introducing high tech, innovative products from across the globe, we have recently entered in a far reaching alliance with SPM. This association will combine the industry -leading beverage dispensers of SPM with the marketing and service capabilities of Elanpro. We will be launching an array of sophisticated products like GT Touch, I Pro etc., from this range.

The new indirect tax regime which is called as GST will have shades of both central and state levies. Since it is based on input tax credit method, taxable goods and services will not be distinguished from one another and will be taxed at a single rate in a supply chain till the goods or services reach the consumer.

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