Saturday, July 12, 2008

Malaysia: Hotel industry will lose millions or may be billions....

Friday July 11, 2008

Don’t let the tap run dry


Cutting costs has always been the magic cure resorted to every time there is a threat of recession but cutting the flow of money completely may not be a good idea.

MY late father was a civil servant for over 30 years and continued to work for a quasi-government organisation even after he retired.

One of my most deep-seated memories of him was how he never wasted any paper, pins, paperclips or anything that was from the office.

I can remember how he used to write on every available space on a piece of paper, made sure used pins were reused and limited himself to only a box of paperclips for months.

He was a superintendent of a welfare home at the height of the recession in the 1970s. He even made handwritten posters and put them everywhere to remind everyone to switch off lights and fans when not in the office.

Even at home, my family followed suit and tightened our belts. We started growing vegetables in the huge compound of our government quarters and my dad never changed his old Ford Cortina until he retired.

Other civil servants repeated what my father did during the past few recessions. More than 30 years later, we are doing it again.

The rising fuel and energy prices have forced Federal and State Governments to carry out similar cost cutting exercises.

There are more things to cut now compared to the days when my father was a civil servant what with the size of the government right now and the usage of computers and air-conditioners.

As for myself, the son has become the first victim of the cost cutting measures at home. He recently got his driving licence and I kind of promised him a car next year if he gets into college.

The half-hearted promise (it was meant to be a bribe) was to spur him to do better in his SPM exams.

After hearing about the massive increase in fuel prices, I broke the bad news to him - “Remember the car I promised? Forget it!”

He was, of course, not pleased – that was until he had to fill diesel into my monster truck. He came back complaining about the cost and stopped grumbling about the loss of the car he was never going to get.

On weekends, like most middle class families, we used to go to a nearby mall to enjoy the “free air-cond” but all that has stopped as well because somehow or another we would end up buying something unnecessary during such visits.

In order not to be tempted we do not go to the malls. Even the launch of last week’s Malaysia Mega Sale did not tempt us into buying anything.

The boy and I ended up playing two hours of pool and spending less than RM15.

Over the past few days I caught up with my friends in the retail business and they are suffering from low sales.

One of them complained that if people like me, with a decent income, were not spending then this year’s sales would be a flop and her bosses would not meet their targets.

“We are already expecting the worse. If we do not get good sales for the end of the year then we are looking at not only cost cutting but also job cuts,” this friend explained.

I also told her about my decision not to buy the car for my son and she just rolled her eyes and said:

“That means one less sale for a car salesman somewhere. If you are anything to go by, the car sales will drop again. People from the car industry will also have less money to spend and this means less sales for our store. It is a vicious cycle!” she exclaimed.

This friend is not the only one saying this. The Tourism Minister, Datuk Seri Azalina Othman Said seems to agree when she said her ministry would propose to the Cabinet to review a ruling to reduce government events at hotels.

According to her, the Malaysian Association of Hotels reported losses of some RM100mil after 85% of bookings by government departments and government-linked agencies were cancelled over the past two months.

“Although the move by the government was necessary to reduce expenses, we hope a compromise can be reached as the hotel industry has been badly hit.

“Even the suppliers and those involved in up and down stream industries have been hit by the move,” she said.

A Treasury circular had earlier directed departments and agencies to reduce the number of events at hotels but the ruling resulted in immediate cancellations of bookings.

It seems that the hotel industry will lose up to RM100mil this year because of the cancellations and the industry employs about 500,000 people. I suspect quite a number of these people may lose their jobs if this trend continues.

All these had me thinking. Cutting off spending is not a solution to our present crisis. I am not advocating pump priming by any measure but the government (federal and state) should actually make target spending instead.

They should find which sectors in the country that will create the most spin off in terms of spending by those who get the money.

This multiplier effect will ensure that the money keeps flowing in the system.

Strangulating the economy of money will only bring everything to a halt and this will only cause more hardship.

Cost cutting measures does work and improve productivity but this must also go hand in hand with rewarding staff to enable the increased of savings.

So why not spend a bit more money and keep the cogwheels moving?

However, this does not mean the son is going to get his car but instead of an outright no, my answer has now become maybe.

Full here : Don’t let the tap run dry Malaysia Star,