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Macy’s has been facing a major downfall and its stock price has been tanking for a while now. This problem has been persisting for several reasons, and departmental stores in general have been facing problems making profits. Macy’s stock price fell by 15% in May after its 2016 Q1 financial results were released. Even more recently, in August, Macys announced that it is planning on closing about 100 of their stores. The company executives mentioned that these stores would be performing their final sales in the next year. They have also already had a few recent store closures.
There are several reasons that have been costing Macy’s major decline in sales and market share. It’s stock price and overall financial valuation has also been plummeting due to this.
Firstly, fast fashion upstarts and established fast fashion companies like Zara, H&M and Forever 21 are rapidly eating away market share because they are able to bring in new styles and designs within short intervals, which is attributable their low costs of production. Also, off price retailers like TJ Maxx and Nordstrom Rack have been providing high quality merchandise at lower prices, which have been attracting a lot of departmental store retailers.
However the real game changer in the fashion retail industry has been e-commerce. E-commerce has made a strong dominant presence in the retail world. This is more than evident as Amazon is about to have the label of the largest seller of clothing in the US. Not just Macy’s but multiple traditional retail companies have been struggling to keep up with the e-commerce industry performing at its ultimate peak. Though the profound growth of the online shopping realm is not a firsthand phenomenon, it is now establishing complete control over the apparel retail industry. Macy’s CEO Terry Lundgren is extremely concerned and recently made a statement that “Macy’s has been seeing continued weakness in consumer spending levels for apparel and related categories”. On the other hand, Amazon’s stock has been flying. According to research done by a recognized financial services firm, the Cowen group, its primary growth has been driven by its apparel and accessories businesses, which makes it a key competitor to Macy’s. This is not only apparent from numbers from financial statements and financial valuation represented in stock market prices, but also from increase in the number of shoppers of the companies over time. Cowen and Company, an investment-banking firm performed a detailed survey of 2,500 shoppers in the United States on a monthly basis for the past three years, and their results, which are reflected in the following graph, show that Amazon’s shoppers are continually increasing on an average where as Macy’s number of shoppers has remained the same.
Also, there is a current trend of millennial consumers being more willing to spend on services and experiences rather than on material or tangible products. Millennials are defined as Americans who are in the age group of 18-34. They form the U.S.’s largest generation by population and account for about $1.3 trillion of the country’s total annual consumer spending. According to research done by The Boston Consulting Group, the generation values personal experiences much more as opposed to material possessions, weather it is clothes and bags or cars and homes. This generation differs from previous generations in that happiness is a result of sharing personal experiences like a music festival or a vacation rather than of owning a car and a home. This trend has also been slightly contributory to decline in sales of high-end clothing brands, which sell in departmental stores like Macy’s and Nordstrom. The preference shift trend has also obliged many other clothing retail brands to try and adapt and provide experiences along with their products.
The stock price of Macy’s for the past year, which is summarized in the subsequent graph, has been quite volatile.
The key issues that are worrying and need to be carefully addressed by Macy’s can be gathered from data from the company’s recent financial statements. On May 11 2016, Macy’s stock price fell by 15% to $31.38, which was both a highlight of its stock price history and also an alarming wake up call for Macy’s. Macy’s released its first quarter financial results a few weeks before this and they showed that its sales fell from more than 7% from more than a year ago and its performance didn’t meet forecasts. Also, same store sales which indicate the change in sales generated from the existing stores of a retailer, are an important performance metric for retailers, have also been significantly declining for Macy’s.
The combination of fierce competition from e-commerce, off price retailers and stores that cater to fast fashion, along with shifts in consumer preferences that are moving away from traditional clothing retail stores have caused problems for not just Macy’s, but even its major competitors that have similar business models, like JC Penney’s, Sears, and Nordstrom.
It is crucial for Macy’s to craft an optimal strategy that has features that can address each of the causes for its decline in sales. Addressing each cause of the big problem specifically helps create a detailed approach. Capitalizing on the company’s existing strengths and opportunity is an integral part of implementing any plan to solve business problems. Consequently, Macy’s has announced that they have been taking some initiatives to combat their problems. They have been receiving constructive feedback and response towards these initiatives.
Firstly, the company has tried to achieve off price retailing, which is being adapted by many retail departmental stores. Off price retailers sell high quality products for much cheaper prices. The catch is that products are usually second hand goods, last season items, cancelled orders or goods returned by other retailers. They usually have an inconsistent mix of brands. An important characteristic that attracts consumers to departmental stores even today is sales and discounts. Even though departmental stores attempt to restrict discounts, it’s difficult them to do so while retaining their loyal customers. This is because some economically prudent customers get too used to this pricing and it is difficult to get them to pay full price. This is exactly where off price retailing comes into the picture. It caters to these customers by providing a discounted products option all year around. For example Nordstrom, one of Macy’s biggest competitors has introduced Nordstrom Rack, which has a strong presence in the off price retailing industry. Macy’s is also planning to start its own off-price retail store, Macy’s backstage, and aims at opening 15 stores by the end of 2016.
While the addition of this segment will definitely give Macy’s a stronger foundation to combat its competitors, off price retailing comes with its own set of troubles. It is important to look from a consumer’s perspective when trying to increase same store sales. Off price retail stores sometimes have defective products, because they are usually returned or rejected products bought out from other retailers. The décor of the store is not at all attractive and welcoming; the manner in which clothes are displayed in these stores are very unorganized and inconvenient for customers as they are all a mix of different kinds of clothes from different brands. Off price retailers project a different aura and feel altogether, and though Macy’s can start an off price retailing division, it would still need to focus on enhancing its primary departmental stores that define its brand image.
Another step that Macy’s has made towards progressing is focusing on developing and revamping their cosmetics and accessories department. While the retail industry as a whole has been struggling to perform in the United states, cosmetics and accessories sales have been soaring, and this has proven to be very beneficial to departmental stores. Not just Macy’s revenue mix, every general department store’s sources of revenue has a good proportion of income from the accessories and shoes departments. The revenue of Macy’s specifically is 38% accounted for by this department, which is the largest portion of all the categories.
Amidst of the struggle to perform, increase same store sales and expand customer base, Macys made an acquisition of Bluemerucry, which is a luxury cosmetics and spa with 100 stores all over the country. After acquisition, Macy’s is planning on opening 24 Bluemercury stores within the biggest Macy;s stores by the end of next year.
Macy’s is indeed making a clever attempt to reinforce their cosmetics department.
Sales of cosmetic products have been progressing remarkably and departmental retail stores like Macy’s should intend to take full advantage of this. Sales have been rising due to a combination of several factors. Firstly cosmetics cater to the contemporary trend of willingness to spend money on experiences. Buying make up is an experience, because most cosmetics stores like Blumercury provide in store make up salons and spas, which have in store makeovers. This is essentially the experiential service that Bluemercury stores could add to Macy’s. Exploiting the cosmetics department by selling experiences can play a substantial role in helping achieve higher sales for the company as millennials become more and more inclined towards such services. Another aspect about the cosmetics industry that makes its products so attractive is that it provides luxury at a much a smaller price and level. For example products from luxury cosmetics brands like LeMar, Clinique and Chanel provide millennials with the contentment of owning a luxury product, though it is at a much smaller level.
A noteworthy innovation that Macy’s is set to bring to its departmental stores is a virtual store assistant that guides you through the entire collection in the store. Macy’s initiated a partnership with IBM to create an app called Macy’s on call that is driven by artificial intelligence and provides customer with efficient in-store help.
A common apprehension that customers have towards large departmental stores is that that they do not get as much help and consideration from store associates as they would get in a smaller standalone store of any brand. Though a lot of times store assistants are helpful to customers, many customers, especially millennials would rather get this help from a smartphone in their hand rather than have to look for a store assistant and have them answer their questions. This app not only caters to such consumer preferences, but would also enhance the efficiency of the shopping process for customers. Such an app would be apt for shoppers with time constraints. Such customers know exactly what they want to buy, and in which size; they would take a few seconds to locate their items on the app and then checkout and get going. However, technology does come with its disadvantages. The risk of issues like network errors, app breakdowns and other technical glitches will subsist. Also, there is still an older group of shoppers who would prefer talking to a human store associate, not only because it might be harder for them to use the app but also because they actually like having the human touch in their shopping experience. Overall, however a user-friendly app like this one would be a considerable addition to improve the shoppers’ use experience and would also help attract more customers to drive sales revenues.
Ultimately, Macy’s will need to constantly keep innovating to add creative and unique components to their business to recover from its sales problems. It is not that blunders have been made by the company that have led them into difficulties, it is just that consumer preferences and trends have been rapidly changing, and intense competition from e-commerce and fast fashion retailers has been grasping customers and market share from departmental store retailers. Nordstrom, which is one of Macy’s major competitor, has also been facing a similar crisis, due to almost identical reasons. Departmental retail stores will therefore need to continually add new elements to their businesses, or remodel existing features to accommodate new trends and revolutionize the value of departmental store shopping.
On the 8th of November 2016, along with the US, even India, one of the fastest economies in the world, was also going through a turning point in the history of its country. India’s recently elected prime minister demonetized a large proportion of its currency by ceasing the usage of all 500 and 100 rupee notes as legal tender and replacing with them with new currency notes. Also, limitations have been placed on cash transactions, and laws have been passed for large and unusual bank deposits to be under extensive tax scrutiny.
This major step is aimed at combating several serious issues that the country is facing, like black money, corruption, the inflow of fake currency from neighboring countries like to fund terrorism and even the problem of smuggling.
Through the implementation of this revolutionary policy, any drastic increases in income of people that do not seem consistent with their past earning patterns are much easier to question and examine under tax assessment, because all the cash will now be discernible by banks and the government. To escape these tax assessments and pay fines for tax evasion and having huge sums of money accounted for, many businesses have completely wiped out their cash. There have been numerous reports of people burning down or throwing away their black money because it now has no monetary value. An expected number of one trillion rupees are to be not exchanged.
Also, to strengthen this step taken towards tax evasion is the imposing of more than a 200% penalty for those making deposits of cash worth more than 250,000 rupees that cannot be accounted for.
However, in addition to the affects on taxation and corruption, this de monetization has also had an interesting macroeconomic effect. In India, there are major industries that entirely thrive on a parallel economy run by black money. Demonetization will bar these industries and businesses and that significantly lower India’s GDP for the last quarter of 2016. However, this would only be a short-term impact that would be a small price to pay for the increasing the GDP and the overall health of the economy of the country. Additionally, as banks will experience a major influx of deposits, interest rates are likely to fall, and lower lending rates might help boost the economy. Also, the value of the rupee might enhance in the foreign exchange market because of the major decrease in circulation of currency notes in the economy.
As of the business forefront of the situation, investing in the real estate, luxury and jewelry industries might not be prudent as of now. This is because housing finance companies will not be willing to give real estate companies loans to companies and individuals that might be currently facing a liquidity crisis. Also owning luxury goods, especially luxury cars or jewelry is often a representation of high earnings and extra wealth, and hence the luxury industry might be adversely impacted because people might refrain from displaying their income levels by involving in such forms of indulgence. Hence investments and stock markets will definitely see volatility.
Comprehensively, the Modi administration has made a very forward-looking, unique and distinctive step towards counterfeiting this parallel black money economy, corruption and the circulation of fake currency. As of now, the demonetization has been having a three-fold effect on interest rates, taxation and the stock market. Nevertheless, the increasing magnitude of these impacts, volatility and destabilization to be caused by it is yet to be seen.
Anti dumping refers to the process by which governments levy extra costs and taxes to imports to protect domestic manufacturers. Dumping is the process by which foreign exporters enter into an international market by providing goods at significantly lower prices. Foreign exporters are both willing to do so can do it because of several reasons.
Firstly, foreign competitors might have comparative advantage over local manufacturers. Comparative advantage gives foreign importers the chance to produce the same goods more effectively because of better natural resource availability, better climate, productive skills, cheaper labor and other conditions that might provide a better environment for the same product to be made faster. Secondly, exporting to other countries is both accessible and profitable for many companies. Also, many companies are often able to find a huge demand for their product outside of their home country.
However, when these countries enter foreign markets, they have a huge impact on the foreign country and provide competition for domestic producers. Governments hence create anti dumping laws, trade barriers, and other legal restrictions towards foreign imports to improve their trade deficit, to safeguard niche and newly developing industries, and to give these companies a chance to grow and be ready to become competitive.
International trade dumping is often occurred at the cost of domestic workers and domestic companies loosing market share. However, trade barriers can also be detrimental to the overall efficiency of the economy. Trade barriers can also affect developing nations differently, because if developed nations have trade barriers, this would lead to them over producing and then dumping their products in developing nations for cheaper prices. Also, because the more richer and developed nations set the fundamental trade policies, developing nations face high barriers from these countries and cannot export from these countries to improve their own trade deficit.
Anti dumping laws and trade barriers and weather they should be implemented have always been a subject of controversy. Anti-dumping laws can sometimes be a barrier to innovation and progress, because if new advanced products are not allowed to enter the market, then domestic producers might not have the incentive to research and develop their products because of lack of competition. Also, providing more choice and higher quality to consumers is also crucial for the economy. Trade restrictions also however improve the current account balance of a country, by improving trade deficit and net exports.
The debate on weather anti-dumping laws and trade barriers should be encouraged or dumped is not one that can be resolved easily, and this debate falls under the umbrella of the debate of Keynesian versus classical economics. However a balanced argument that considers arguments of both sides would convey that government intervention and trade barriers are required to an extent, because free markets would only work in an ideal world of perfect competition, where demand and supply would purely control the market. However, in the real world, some degree of government involvement and laws are required to ensure fair competition and balance of trade across nations.
Anti dumping refers to the process by which governments levy extra costs and taxes to imports to protect domestic manufacturers. Dumping is the process by which foreign exporters make into an international market by providing goods for significantly lower prices. Foreign exporters are both willing to do so can do it because of several reasons.
Firstly, foreign competitors might have comparative advantage over local manufacturers. Comparative advantage gives foreign importers the chance to produce the same goods more effectively because of better natural resource availability, better climate, productive skills, cheaper labor and other conditions that might provide a better environment for the same product to be made faster. Secondly, exporting to other countries is both accessible and profitable for many companies. Also, many companies are often able to find a huge demand for their product outside of their home country.
However, when these countries enter foreign markets, they have a huge impact on the foreign country and provide competition for domestic producers. Governments hence create anti dumping laws, trade barriers, and other legal restrictions towards foreign imports to improve their trade deficit, to safeguard niche and newly developing industries, and to give these companies a chance to grow and be ready to become competitive.
It is argued that international trade dumping is often occurred at the cost of domestic workers and domestic companies loosing market share. However trade barriers can also be detrimental to the overall efficiency of the economy. Trade barriers can also affect developing nations differently, because if developed nations have trade barriers, this would lead to them over producing and then dumping their products in developing nations for cheaper prices. Also, because the more richer and developed nations set the fundamental trade policies, developing nations face high barriers from these countries and cannot export from these countries to improve their own trade deficit.
Anti dumping laws and trade barriers and weather they should be implemented have always been a subject of controversy. Anti-dumping laws can sometimes be a barrier to innovation and progress, because if new advanced products are not allowed to enter the market, then domestic producers might not have the incentive to research and develop their products because of lack of competition. Also, providing more choice and higher quality to consumers is also crucial for the economy. Trade restrictions also however improve the current account balance of a country, by improving trade deficit and net exports.
The debate on weather anti-dumping laws and trade barriers should be encouraged or dumped is not one that can be resolved easily, and this debate falls under the umbrella of the debate of Keynesian versus classical economics. However a balanced argument that considers arguments of both sides would convey that government intervention and trade barriers are required to an extent, because free markets would only work in an ideal world of perfect competition, where demand and supply would purely control the market. However, in the real world, some degree of government involvement and laws are required to ensure fair competition and balance of trade across nations.
From the second quarter of 2014, there has been a sharp decline in global fuel prices, which not only meant a lot of extra money being saved for vehicle owners, but also meant major changes in the sales and profits of automobile manufacturers. Vehicles and fuel are dependent on each other, and the price and demand for one affects the price and demand for the other. The fuel industry is driven by car sales, and changes in fuel prices also greatly impact consumer spending on vehicles, which in turn affects the revenues and profits of automakers. There are different ways in which automakers can be affected by volatility of oil prices. Changes in oil prices affect overall consumer spending and behavior. Also the sales of fuel-efficient, high fuel consuming cars and alternative fuel cars are affected differently when hit by a substantial increase or decrease in oil price.
The trend in oil prices for the past three years is shown in the following graph published by the NASDAQ stock exchange.
The last three quarters of 2014 is the crucial period that is to be focused on when exploring the correlation between declining fuel prices and vehicles sales and profits made by manufacturers. A more comprehensive view of these quarters as compared with its previous years can be seen in the following graph.
The average oil price decrease through 2014 has greatly impacted consumer spending and saving. When oil prices go down, consumers think they are inevitably saving a lot of money. In a paper published by NACS, Jeff Lenard elaborated that fuel is a commodity that is intertwined into an average citizen’s everyday life and changes in fuel prices fundamentally impact consumer spending and behavior in different ways.
Firstly, some consumers might change their driving habits. When asked through a NACS survey why people were driving more when compared to the previous year, the answers by people from different genders and age groups were very close to the results summarized in the table below.
It is evident from this table that lower gas prices were 40% of the reason why people chose to drive less and these people were almost equally distributed throughout all the age groups. Hence this indicates that fuel prices have an affect on consumer spending and consumer behavior, which is critical to the sales of the automobile industry.
Secondly, consumers are sometimes able to make decisions on weather they will reduce their driving if gas prices increase. A different survey, also conducted by NACS explored this issue and asked people how much would oil prices have to increase for them to lower the number of miles they drive, and the results were summarized in the graph below. The graph below illustrates the average gas price for each month and the increase in the oil price that would have to occur for consumers to start reducing their driving. Most results show that if oil prices were even $1.00 more per gallon, there would be a direct effect on the number of miles driven by vehicle owners.
During changes in fuel prices, not only is consumer behavior changing accordingly, but people also feel differently overall about the economy which affects every industry, and the automobile industry is especially hugely affected by this. The overall feel of an economy is a subjective term that can be defined by varying characteristics. For example, it could be defined by many characteristics, like economic recessions, decline in the stock markets, or political instability. However, it could also be measured by more specific factors like decline in oil prices. For example a survey that asked target customers during 4 different years (with distinctive oil prices) about how they essentially felt about the economy, their response reflected that the there was more optimism in the economy within people and their consumer behavior during the periods of sharpest decline in oil prices. The outcomes of the survey are presented in the diagram below.
When people have a positive attitude towards the economy because of decline in fuel prices, they tend to be more liberal about spending money, because as mentioned previously, they think they are certainly saving money on gas (vehicle owners). As a result, this benefits the retail industry, and the sales and profits of automobile manufacturers are impacted in an interesting manner.
The data pertaining to light weight vehicle sales and oil prices throughout the years is displayed in the graph below.
It is evident from the graph the fluctuation in oil prices is not directly consistent with the sales of light weight vehicles. However, it would be useful to breakdown the broad category of these vehicle sales into categories to analyze the trend in detail, firstly, small light weight cars, secondly big SUVs and trucks and lastly hybrid or electric vehicles that do not run on fuel.
Small vehicles that have a high mileage, which means they drive for a high number of miles for the amount of gallons of fuel, and these vehicles are usually the more fuel-efficient vehicles. Fuel-efficient vehicles usually have higher sales during of periods of rising or high oil prices.
As can be seen in the graph below that is comparing fuel prices and sales small fuel-efficient car sales, the trends of both have been very similar. There is a direct correlation for the trends of oil prices and sales of small cars from 2010-2014.
The second category of cars that can be explored is large cars that include SUVs and trucks. These large cars are usually gas-guzzlers, which means they give a lower number of miles for a certain amount of gallons of fuel and hence consume a lot of gas. The trend between large car sales and oil prices from 2010-2014 can be seen in the following graph.
There is not a consistent relationship or trend between changes in oil prices and sales of large cars. For example, there is a major decrease in sales of large cars in the second and third quarter of 2010, but there is a decrease in oil price in the second quarter and increase in the second quarter. Also during the last two quarters of 2013, when the US was progressing towards recovering from the financial crisis of 2008, there was an increase in fuel prices but large car sales were slowly diminishing: which could have been because of their low mileage and fuel efficiency. During the period of decline in oil prices, the sales of large cars did not increase. It continued to decrease, but at a much lower rate. This shows that oil prices are not the sole factor that determine or influence car sales, especially in the large cars/SUVs segment.
The third and final category of automobiles that can be explored is the alternative fuel (electric or hybrid) vehicles. Within alternative fuel vehicles, there are electric cars and hybrid cars. Only about a little less than 1% of households in America drive an EV, so though they do not have a very significant contribution towards the automobile industry, it is extremely important to consider EVs, especially when comparing its trend with fuel prices, because EVs are the primary potential solution to the energy and fuel crisis. Analyzing the trends of sales of EVs is important because they are a key alternative to fuel run cars that will face a major crisis in the future.
The following graph shows the trends of oil prices as compared with electric vehicles, and there is almost no correlation between the two. However as mentioned before, electric vehicles only make up less than 1% of total car sales, and how oil prices affect EV sales would not drastically matter for the automobile industry as a whole.
Hybrid cars are cars which combine the systems of both a conventional fuel run engine and an electric vehicle. Hybrid cars make up a larger percentage of the automobile industry than electric vehicles. The graph below quantitatively compares the trends of changes in oil prices and sales of hybrid cars.
It can be inferred from this graph that the sales of Hybrid cars have been quite coherent with changes in oil prices, except for in the last few quarters of 2011. Similar to the trend in small cars, hybrid cars are also considered very fuel-efficient. Hence their sales go up as fuel prices go up because they do not require as much fuel to run for the same number of miles as other cars, and when fuel prices decrease, consumers inevitably think they are saving money and opt for bigger gas guzzler cars, reducing the sales of hybrid and small fuel efficient cars.
In conclusion, to answer the research question posed at the very beginning of this composition: fluctuations of fuel prices do affect car sales, but very distinctively for different categories of cars. Changes in oil prices both directly and indirectly affect car sales. Fuel prices directly affect car sales when trends in sales of a certain type of car changes correspond to trends in oil prices (for example small cars and hybrid cars). Changes in fuel prices indirectly affect sales of cars by influencing consumer spending and behavior, which is in turn reflected in every retail industry, including sales in the automobile industry. Fuel and cars are almost like complimentary goods from an economic perspective and hence the connection between oil prices and car sales is significant. Consumers’ decisions to purchase certain types of cars is however not solely dependent on fuel prices. A vehicle buyer takes a lot of different factors into account before buying a certain type of car. Also, with the swiftly progressing nature of technology, hybrid cars and electric vehicles have been revolutionizing the nature of the automobile industry. Though EVs do not make up a large percentage of car sales, hybrid cars, especially the Toyota Prius have been becoming increasing popular. Another interesting element to consider could be that many of the self driving cars being built by Uber have been focusing on increasing fuel economy, reduce oil use and curb carbon emissions, according to an article in the wall street journal, written by a former energy advisor for the government. This could also make car sales and decisions made by consumers less dependent on fuel prices. However, driving habits itself have been affected since the initiation of Uber, and car sales have been affected since, so it would be intriguing to see how much further effect the introduction of self-driving cars by Uber have on car sales. Nevertheless, fuel prices continue to affect sales of automobile manufacturers in a substantial manner.
It might be possible that the hospitality industry might be on it’s way to completely revolutionizing itself, as can be seen by the new things that have been trending in hotels in the past year. There has been a shift from focus on factors like luxury, comfort and indulgence to factors like social spaces, high-tech facilitated services, and modern renewable energy driven buildings.
What young corporate travellers today while on business trips or work-related trips look for in a hotel is two things: firstly a smooth and easy stay process and secondly to use the hotel as a platform to socialize, meet people and start building a network. Consequently, hotels have been choosing to capitalize on possible social settings. For example, there has been a concept of ‘living room like lobbies’, which are basically huge lobbies with a lot of communal furniture to promote mingling and socializing. This was started by the Citizen M chain of hotels in Amsterdam, which offers not so luxurious and small rooms but these ‘living room like lobbies’. Shared spaces are not only limited to lobbies. Even restaurants and bars can be made to have communal tables and settings rather than the traditional way. Lounges can provide a kind of shared entertainment experience and even waiting areas like hallways and elevators could be somehow utilized as collective spaces. A hotel in Frankfurt that opened in March by the Lindenberg brand of hotels has shared leisure places like a communal kitchen that hosts cooking classes, and a jogging club in the garden. There are many innovative ideas being circulated within the industry, which could all culminate into a growing trend.
Also, with evolving and fast-changing technology, the younger corporate travellers are used to being associated with user friendly and tech savvy services. For example, many airlines are not just switching to online check in but also e boarding, which lets you proceed directly to security check: which is a part of making the travel experience smooth and error free. Lesser human involvement in this process implies a more systematic method. The same concept has been extending to the hotel industry: some hotels are now coming up with ideas of e-check in, by which they get their room key cards through an auto-mated system after scanning their identification. This process is both faster and ensures that customers are served in a timely manner or is been informed of an accurate wait time through a computer rather than an estimate by a customer service associate.
Lastly, there has been a growing concern for the depletion of resources on our planet and towards issues like global warming and melting of glaciers. This concern will be more and more reinforced every year, and renewable energy is starting to be seen as the future. Young corporate travellers who are usually recent college graduates are very informed about environmental issues and since they will be the ones to actually live through an energy crisis if it were ever to happen, they are very attracted to businesses that are renewable energy driven. Though not many hotels have had a goal to achieve this, it might be something they might consider in the future.
These trends could be a potential growing and strong threat to traditional hotels, and on important example of this is Airbnb. Airbnb is a new online platform for people who want to rent their property and people who are looking for properties to lease for a short period of time. Essentially, it acts as an online marketplace for people looking to rent a house and those looking to sublet their place for a few days and it lets people email each other through the website. Also, if these renters and sub letter end up finalizing a deal, they might even meet at the apartment or the house. So Airbnb reinforces two main things: an opportunity to meet people by staying in their homes, and it eliminates a mediating third party to connect the owner and renter of the property by using technology. Hence, Airbnb is could also be considered a potential threat to traditional hotels.
The use and influence of technology in the hospitality industry is evident, because as of now, about 57 million people made hotel bookings online last year, which is a 27% increase in bookings from last year and out of these 57 million bookings, 36 million bookings were made through websites like Expedia and hotels.com. Airbnb too has ben making a remarkable presence in many cities in the US. For example, in an interview with Vijay Dandapani, the president of Apple Core Hotels in New York, he mentioned that “I see a direct correlation between our revenues going down and [Airbnb’s] going up,” Also, financially, Airbnb has been valued more than most hotel groups except the top 4 largest international hotel groups, which shows that investors are also attracted.
It would be intriguing to see if all these changes in the hospitality industry have a large scale revolutionizing impact.
It might be possible that the hospitality industry might be on it’s way to completely revolutionizing itself, as can be seen by the new things that have been trending in hotels in the past year. There has been a shift from focus on factors like luxury, comfort and indulgence to factors like social spaces, high-tech facilitated services, and modern renewable energy driven buildings.
What young corporate travelers today while on business trips or work-related trips look for in a hotel is two things: firstly a smooth and easy stay process and secondly to use the hotel as a platform to socialize, meet people and start building a network. Consequently, hotels have been choosing to capitalize on possible social settings. For example, there has been a concept of ‘living room like lobbies’, which are basically huge lobbies with a lot of communal furniture to promote mingling and socializing. This was started by the Citizen M chain of hotels in Amsterdam, which offers not so luxurious and small rooms but these ‘living room like lobbies’. Shared spaces are not only limited to lobbies: even restaurants and bars can be made to have communal tables and settings rather than the traditional way, lounges, that can usually be accessed by frequent customers can provide a kind of shared entertainment experience and even waiting areas like hallways and elevator could be somehow utilized as collective spaces. A hotel in Frankfurt that opened in March by the Lindenberg brand of hotels has shared leisure places like a communal kitchen that hosts cooking classes, and a jogging club in the garden.
Also, with evolving and fast-changing technology, the younger corporate travelers are used to being associated with user friendly and tech savvy services. For example, many airlines are not just switching to online check in but also e-boarding, which lets you proceed directly to security check: which is a part of making the travel experience smooth and error free. Lesser human involvement in this process implies a more systematic method. The same concept has been extending to the hotel industry: some hotels are now coming up with ideas of e-check in, by which they get their room key cards through an automated system after scanning their identification. This process is both faster and ensures that customers are served in a timely manner or is been informed of an accurate wait time through a computer rather than an estimate by a customer service associate.
Lastly, there has been a growing concern for the depletion of resources on our planet and towards issues like global warming and melting of glaciers. This concern will be more and more reinforced every year, and renewable energy is starting to be seen as the future. Young corporate travelers who are usually recent college graduates are very informed about environmental issues and since they will be the ones to actually live through an energy crisis if it were ever to happen, they are very attracted to businesses that are renewable energy driven. Though not many hotels have had a goal to achieve this, it might be something they might consider in the future.
These concepts could soon make a lot of existing luxury hotel chains obsolete, or force them to go through very expensive refurbishments that might take a while and cause the hotel to be out of business for a while, which might not be something they could afford. However, it would be intriguing to see if these small but still significant changes could have a great impact and actually revolutionize the hospitality industry.
Could it be true that the taller the skyscraper the harder the fall? The correlation between completions of tall skyscraper buildings and economic is a fairly familiar concept. The Skyscraper Index was created by Andrew Lawrence in 1999 and explained that constructions of tall skyscrapers were representative of beginning of economic downturns. This trend of correlation between the construction of tall skyscrapers and economic business cycles that ended in recession was first studied in the 1930s, which was around the time of the Great Depression in the United States.
Historical examples of this phenomenon from the past century include the completion of the Empire State Building in the 1931 when the Great Depression had just started, the completion of the Petronas Twin Towers in Malaysia in 1996, which was when the Asian financial crisis began, and of course, the completion of the Burj Khalifa in Dubai in 2010 which was right after the 2008 worldwide financial crisis. Another key example would be the construction of the Sears Towers and the World Trade Center Towers that were built in 1973, during both the 1973 stock market crash and the 1973 oil crisis. Andrew Lawrence hence argued that almost all major skyscraper construction initiatives were pre-cursors to financial busts. The theory suggested that the building of skyscrapers generally started during the later phase or the peak of the economic boom when employment is usually high and the economy is growing, which is followed by economic downturns and low unemployment rates. So even though all economies go through business cycles, skyscrapers especially tend to be constructed in the last or peak phase of an economic boom and finish in a recession.
The skyscraper index might not seem legitimate and it could be possible that the aforementioned examples could be coincidences, because correlation does not always mean causation: and one may think why would impactful structures like skyscrapers that could be highly profitable be destructive to the economy? However, the Barclays Skyscraper Index Report shows that not only is there correlation between the construction of tall buildings and recession, the report also proposes that the rate of increase in the height of the skyscraper could indicate the extent of the financial crisis. The report tracks the building of new skyscrapers and their increase in height in comparison to the following recession that occurred from 1873-1878 until 2007-2010. There seems to be a trend in the study that the rate of increase in record-breaking skyscrapers is directly related to the magnitude of the economic downturn that occurred after.
Nevertheless, there have been some recessions that occurred in the past century that were not preceded by the construction of a tall skyscraper. For example the skyscraper index failed to predict economic downturn in Japan, which had a recession in 1990, and it also did not provide any indication of the economic recessions of 1920-1921, 1937-1938, and 1980-1981. An economist Mark Thorton commented, “both the causes of skyscrapers reaching new heights and severe business cycles are related to instability in debt financing”. Of course, economic indicator can predict perfectly, but the skyscraper index could be a basis to predicting some form of crisis rather than specifically speculating the severity of economic business cycles. It would be interesting to see what this could mean for the world’s fastest growing economies, India and China, which have multiple large scale skyscraper projects lined up for construction within the next few years.
Real estate development has always and still does account for a fairly large proportion of GDP of every sizeable economy. The development of tall skyscrapers has historically been offset during times of economic expansion and booms when funds and monetary resources are more easily accessible, and there is assurance of profitability, naturally. Also, skyscrapers are fairly lucrative by nature because they create more space horizontally in the same plot of land. However, skyscrapers are often just conjectural development projects that are built without any concrete plans relating to usage of the space being created. However, the completions of tall skyscraper buildings seem to have formed a recurring pattern, in the past century or so, of often being pre-cursors to economic recession or financial crises. This correlation between the construction of tall skyscrapers and economic business cycles that ended in recession was first studied in the 1930s, around the time of the Great Depression in the United States. Historical examples of this from the past century include the completion of the Empire State Building in the 1931 when the Great Depression had just started, the completion of the Petrnoas Twin Towers in Malaysia in 1996, which was when the Asian financial crisis began, and of course, the completion of the Burj Khalifa in Dubai in 2010 which was right after the 2008 worldwide financial crisis. Another key example would be the construction of the Sears Towers and the World Trade Center Towers that were built in 1973, during both the 1973 stock market crash and the 1973 oil crisis. According to substantial research done by economists, and there are conflicting opinions about weather there seems to be a correlation between skyscrapers and economic business cycles. While there are some rational explanations as to why the constructions of skyscrapers began during economic booms and ended during major financial crises, opposing research has also shown that there is almost no correlation between construction of skyscrapers and economic conditions, and that past events have been, to an extent, coincidence. Economists who concur with the fact that there is an important association between constructions of skyscrapers reinforce the Skyscraper Index, which was created by Andrew Lawrence in 1999. It states that tall skyscrapers have escalated right before or after serious economic downturns. It is self-evident that large projects like building one of the tallest skyscrapers in the world would get investment during an economic boom, due to lower interest rates, higher demands and easier access to monetary resources. However what’s interesting is that all of these components reach a peak during the growth or construction period of the building of a skyscraper, and this right when the economy has already reached its peak and is about to go into a recession. On the other hand, there are also exceptions to this and there are many economists who would agree that the skyscraper index is not a good enough economic indicator. But it is still an intriguing concept. There are numerous skyscraper projects coming up in the world’s fastest growing and high potential economies, India and China and it would be gripping to see how the completion of the new structures could be correlated to economic conditions in the future.
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