ITC’s Fortune has great competition

The 26/11 hit Taj Hotels have two brands competing with ITC’s Fortune and others in the mid-market segments like the Quality Inn. However Only Fortune and Taj’s Gateway have plans to be in the Tier II towns dotting the country’s landscape like the pilgrim towns and those with significant merchant trade. The Taj Gateway for example wants to add 30 new hotels by 2015 in locations like Jalandhar, Mysore, Raipur and Gondia ( Mint – November 18 ) 

The answer is nto that simple however. The available accommodation would definitely make a profitable niche but wll not reduce the shortage of boarding and lodging nor will it address viability concerns of the Taj and ITC Hotels, not to mention home grown players like East India Hotels and the Club Mahindras.

Indian consumer spending in B towns is definitely slated to pick up and double in every 2-3 years for some time to come, but this country hs been in the midst of such boom and not seen enough clientele in this industry yet. Business Travellers and the 5% of GDP that is accumulated by Tourism remain formidable targets to maintain each year even during the good time, Costs of Real Estate, F&B related inflation, wage inflation and the seasonality of tourist arrangements coupled with India’s non voice in international leisure and lifestyle forums , lack of negotiated tarriffs in travel and hospitality all count towards a tremendous dearth of new traffic for any such tourism business. A lot remains to be done and while more and more deluxe 5 star facilities are slowly becoming available because of rush hour and the consequent unavailability that plagues travellers scheduling a trip, too many ventures like the recent Indian Maharaja ( TC/Cox & Kings IPO now open) trins and the 15 year old plans of Gateway and ITC fortune have been non starters. Costs for 5 stars have easily climbed to an average of Rs 5 Crore per room, while the Marriott has managed the same in Mumbai for less tan 3 crore and the Fortune and the Gateway chains have to manage with Room Rents of not more than Rs 800000 to 1000000 per room and 20-30% contribution from F&B implying a 100 room hotel cannot earn a topline of more than $2.7 million a year, a measly Rs 12 crores, a pretty small cake for the employee family. A cosmopolitan venture like Ginger on the other hand would not be acepted easily outside the metros of DElhi, Mumbai, Chennai and Bangalore.  

Also a significant competitor to these brands would be Oakwood and Marriott Suites that provide furnished flats for unlimited duration as they would segment that population of expats that need such spacious living and confine their target market to backpack tourists and pilgrimage bound couples/families

 

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IPL’s new revenue streams | Hotshots at Advantage zyaada

If you follow the brand valuations for the IPL here, you would note the vertical cliff between revenues after season 1 and season 2. Also, the same is likely to repeat again in season 3. However, most of us would find the pricing for outdoor/theatrical rights for IPL coverage which in fact may not cover public radio and is unclear about use of team logos etc, seems to have been a cheap affair for ESD. OR, if Lalit Modi has done his job right, then there is as of now a very minimal revenue share for the TV network, the teams and the On ground sponsors are also getting away scotfree..it probably would be a very tightly monitored roll out as all the stakeholders would want to be visible and / or paid for the game in action and the real brand value would probably factor in this roll out of IPL at even 10 times the bid of INR 3300 crores at the very least.

Apart from this, team revenues would also need to rise vertically again for season 3 as time for rebidding is close at hand and some voices will already be contemplating new team mates in the pits. If not, trading is likely to get very ham handed despite the adding teams in during seasons 3 and 4

Here are the few tweets about the rights being granted and what has been happening:

What are the revenue share arrangements for ESD? and ESD with Mall/Theatre operators? MSM pays 80% to IPL till season 5, 60% till season 10

As per GoI broadcast Ministry rules all DTH providers have to get the channels from MSM, now if ESD uses at theater?

Big TV had earlier pulled out of a on ground sponsorship whn Airtel earned on-air DTH rights from MSM, Coke has on-air rights, Pepsi on grnd

MSM had earlier paid $1.79 billion to IPL for telecast rights for 10 years and the 160 cr settlement later for season 2

ESD would thus control IPl coverage in cinema, stadia and other public places for 10 years..they should pay the TV ntwrk used for broadcast?

Entertainment Sports Direct wins IPL ‘theatrical’ rights for $71.7mln till 2019 from Season 3 on, That means TV networks would now bid again

Lakers shining the Suns! At least NBA fans in India are happier with the new ESPN India imports

The Sales numbers from Apple $AAPL though their self congratulatory notes don’t sound too polished http://ping.fm/DESi9

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BofA – A business blueprint for 2010

When May 2009 began, the stress test results more or less indicted Bank of America asking it to raise $34 billion in fresh equity to cover its gap. This came on the heels of its questionable act ( Kenneth Lewis is still responding to the resulting enquiries) in first accepting and then trying to finagle out of the Merrill Lynch takeover using the MAC clause. But all that is past as BofA successfully raised the required capital and closed the second quarter with exceptional trading profits of $6.7 billion and a top line of $33.9 billion showing its old magic and leaving the markets with a lot of positive expectations. The market reaction has not been that positive in terms of actual stock performance as people wait for the next few steps to show and prove that this is indeed the best investment american investor should make. 
Wells Fargo had a far worse business performance but they were only $17 b short in the stress test, as BofA was one of the biggest mortgage and trading players, not good old WFC. Probably that image gap is the first thing BofA must prioritize for 2010. Where it was the strongest retail brand in the US after its 2001 takeover of Fidelity in the east, today it looks like it may be playing second fiddle to others. Not only because it had to cough up more capital, but also because it is one of the very few who sold their crown jewels outright in China and other Emerging Markets and whose global presence is now severely in question.
While the US Economy suffered a 6.1% deceleration in Q1 of 2009 and passed a shaky $3.9 trillion Budget for 2009 after much soul searching, Non Performing assets continued to grow at the bank rising to $31 billion at June 2009. The bank is currently on its way to sell Columbia Asset Management for an expected $2 b in pre tax gains and will likely report $12-13 b in pre tax profits in each of the remaining two quarters thus maintaining profitability after paying preferred dividends to the Government and even paying off some of the $45 b it had to borrow from the government. It is also selling the Asian real estate investing business of erstwhile Merrill Lynch. (Merrill’s Asian Business Drawing Strong Interest)
Will BofA therefore be able to act as the Market Leader American Investors expect it to be from here? There is no other way. However, it cannot sell all the banking businesses it acquired albeit in the last 5 years like MBNA (2000-1) and hope to do so. The Merrill Lynch units in Asia and at home in North America also have to turn in a good performance as the investment banking business becomes the most profitable at current valuations. It’s higher fees on retail accounts by itself will not be able to absorb rising credit losses as retail customers implode on current accounts ( overdrafts) , cards and mortgages. 
To quote Ken Lewis at a recent Town Hall meeting in LA where he was addressing the Countrywide/Mortgage issues – “The bad news is that consumer confidence is at its lowest point since 1992. It’s easy to see why. Here in Los Angeles, distressed home sales are up from 3 percent of total sales in spring of 2007 to 30 percent in spring of 2008; 3.7 percent of all homes are in foreclosure; and across California, home sales prices are off almost 30 percent. And that is not to mention $4 gasoline and record food and commodity prices that are pinching household budgets.” In mortgages, the market will return to more traditional products also, along with Home buyer education and renegotiation of defaulting loans and that is no small exercise, but financial innovation has to continue as well. At this stage, while BofA consolidates it has to invest in more of market development efforts thru its extensive network and refocus on producing returns from the world’s nook and corners like in China and Brazil where there is more and more business as BRIc countries maintain their growth. BofA has to find robust business models and risk management while increasing its presence in Europe, LatAm and the developing world without decimating itself in the crisis and imploding on itself. Direct Banking models, Prudent Credit Card lending and tapping unbanked populations in responsible lending and banking programs are but obvious choices which cannot be swept aside for feigned problems in their operating structures. Business is successful in China, there are successful Credit Card companies and you are Bank of America, not an also ran. You owe it your investor and your customer. 
Bank of America is among the world’s leading wealth management companies and is a global leader in corporate and investment banking and trading across a broad range of asset classes serving corporations, governments, institutions and individuals around the world and serves clients in more than 150 countries
[Tags Obamanomics, Ken Lewis, BofA, BAC, Bank Stocks, Financial Markets, TARP, US, America, Banking, Investment Banking]

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Musical wealth from the Beatles

Michael Jackson, U2 and The Wealth Report – WSJ Blogs
zyakaira notes: WSJ blogs also have U2’s Larry Mullen speaking against the
Irish Bile and resentment against the rich..the US is cautioned not to treat
them poorly. In a related story, the death of Michael Jackson has caused
speculation about the sale of his rich music collection that’s jointly owned
with Sony and includes the vintage Beatles collection purchased by him for
$47.5 million. This collection along with his own is valued at $1 billion
and may go higher given the quality of the artiste’s recordings despite the
debts that pwned him and raised questions on his lifestyle. Sony has hard
work cut out for them to sort out these squabbles The world population of millionaires fell 15% last year, with the super-rich
taking an even bigger hit, according to a new survey.
The Capgemini and Merrill Lynch World Wealth Report, released this morning,
finds that the number of global millionaires fell to 8.6 million from 10.1
million in 2008. The declines were the largest since Capgemini/Merrill
started the survey 13 years ago. (The survey defines millionaires as those
with investible assets of $1 million or more).
There were 2.5 million millionaires in the U.S. at the end of 2008, down
from 3 million in 2007.
The wealth held by the world’s millionaires plunged nearly 20%, to $32.8
trillion from $40.7
trillion. The ultrawealthy, or those with $30 million in investible assets,
saw their ranks drop 25%, with their wealth dropping 24%.
According to the survey, the more rapid fall in wealth by the superrich had
an outsize impact on the overall numbers, since so much of global wealth is
concentrated at the top of the millionaire pyramid. At the end of 2008, the
ultrawealthy accounted for less than 1% of the millionaire population but
held 34.7% of the wealth.
The main reason for all the declines: the financial crisis, contracting
gross domestic product and the accompanying declines in stocks, real-estate
values, private equity, hedge funds and other things the wealthy invested
in.
Surprisingly, the U.S. wealthy fared better than many
via The Wealth Report – WSJ .

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ITC Welcome Heritage And Fortune Hotels

This is the third attempt in the last 15 years that the ITC Hotels Franchise is launching an expansion plan in either the superluxury or as in these five years, the Budget and the Mid-Tier hotels. Fortune properties previously purchased across pilgrimage towns and other Tier II towns did spark interest but the consolidation is still only half complete and the business model has many doubting thomases. Nevertheless ITC cannot afford to miss the bus and thence 14 new heritage hotels and a few Fortune properties will come up.
 
One quick word on operational and business model challenges :
 
ITC has found historically that moving towards mid tier and Budget properties actually does not bring costs down as much ( Investments in land are not that disparate as one might naively believe) while revenues on the heritage properties are seasonal and at the Fortune and heritage properties are much lower with the F&B component falling further in disproportion and discounts in that tier being much more in vogue because of local competition. However, a little bird did tell me once that properties named Fortune in Gurgaon command up to $400 per night for rooms.
 
Revenues at this tier are unlikely to exceed $65 per average night for boarding and less than 20% in F&B with Capacity utilization unlikely to cross 65% even at tourist growth rates exceeding 10% per annum

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ITC Welcome Heritage And Fortune Hotels

This is the third attempt in the last 15 years that the ITC Hotels Franchise is launching an expansion plan in either the superluxury or as in these five years, the Budget and the Mid-Tier hotels. Fortune properties previously purchased across pilgrimage towns and other Tier II towns did spark interest but the consolidation is still only half complete and the business model has many doubting thomases. Nevertheless ITC cannot afford to miss the bus and thence 14 new heritage hotels and a few Fortune properties will come up.
 
One quick word on operational and business model challenges :
 
ITC has found historically that moving towards mid tier and Budget properties actually does not bring costs down as much ( Investments in land are not that disparate as one might naively believe) while revenues on the heritage properties are seasonal and at the Fortune and heritage properties are much lower with the F&B component falling further in disproportion and discounts in that tier being much more in vogue because of local competition. However, a little bird did tell me once that properties named Fortune in Gurgaon command up to $400 per night for rooms.
 
Revenues at this tier are unlikely to exceed $65 per average night for boarding and less than 20% in F&B with Capacity utilization unlikely to cross 65% even at tourist growth rates exceeding 10% per annum

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Aviation blues, will UDF increase in a year? more fare increases?

Air traffic down seventh month in a row; airport developers hit

While domestic passenger numbers declined 15.3% y-o-y, international passenger traffic, which lately saw some growth, was virtually flat for the first time in January, adding to the airport developers’ woes

Click here to view full story

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$one: The Merrill Wealth Report bottomline

“One million gets you nothing nowadays” « Dr Hsu’s Forum

zyakaira notes: A whimsical connection to the one million ‘watermark’ on the Wealth report (Merrill Lynch) – my connection here is not the rural-urban divide or any other . Also ($FXE $FXC are both up..)

This is reported in the NST today:

She said since Todt, who was appointed last month, was serving and promoting the country on a voluntary basis, it was only fair that the government covered his expenses.

“Just because he is volunteering his services, you cannot expect him to pay out of his own pocket.“This budget is not for his personal use, it is for the expenses incurred when he meets top people from television and the media.“Besides, RM1 million in Europe gets you nothing nowadays,” she said at the Parliament lobby.

The ’she’ refered to is a minister in charge of Tourism.Before I go further, I would want to stress that Jean Todt, as a foreigner married who is a good freind of  a Malaysian Michelle Yeoh, must be commended for his good intention in volunteering his service to promote Malaysia, and I am sure being a super rich guy, he would never ask to be reimbursed for his expenses in promoting Malaysia.

It was also laudable for the Ministry to propose to reimburse him on his expenses, too.What I cannot understand is the need to utter this phrase: “Rm 1 million in Europe gets you nothing nowadays”.And because of that, and being the cynic I am, I wish to say that for most of us, 1 million is a big big sum, and certainly it can still buy a lot in Europe.

Even in Europe, not many people earn a million RM a year more than 200,000 euros

via hsudarren (WP blogs)

Filed under: China, Global, India, Retail Lifestyle , $one, Amitonomics, Banking,China, Global investing, India, Wealth, Wealth Management

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A retail comeback story | Mysore Road the new Whitefields « An investment Blog

A retail comeback story | Mysore Road the new Whitefields Mumbai: Consumers have started trickling back to malls and department stores as the economy is stabilizing, say many large retailers, who expect sales to further improve in the months ahead. This sentiment is spread across segments, from value retailers such as Vishal Retail to specialized chains such as The MobileStore, which sells cellphones and accessories and is part of the conglomerate Essar Group, to Reliance Retail, part of the Reliance-Anil Dhirubhai Ambani Group. Pantaloon Retail (India) Ltd, the country’s largest retailer by revenue, witnessed around 8% growth in same store sales for the month of May compared with the same period last year. In April, the company said it had an increase of 7% and 5% in March. Vishal Retail, which shut two apparel manufacturing units and two stores during the downturn, is now seeing sales picking up again. Chief executive officer (CEO) Ambeek Khemka said, “Sales are picking up gradually and the company has seen a surge of around 20% overall sales in the last three months.” A Reliance Retail official, who did not want to be identified because of company policy, said, “From April, definitely, the consumer sentiment is positive and we have witnessed an increase in sales by around 15% in the last two months and June is looking better than May.” Rajeev Agarwal, CEO of The MobileStore, said, “In the last three months the sales of the company have increased by around 20% which definitely indicates a positive sentiment.” The upturn comes at a time when economists around the world have been speaking of so-called “green shoots” of recovery after an unprecedented global slowdown sharply cut consumer spending. Falling stock indices, declining housing prices, rising inflation and the global economic crisis had led to Indian consumer confidence declining by 26.5 points between January 2008 and March 2009, according to a May report titled Winning Indian Consumers In The Downturn from the Boston Consulting Group. Analysts, too, feel the worst is over for retailers and the sector, whose market size has been estimated at about $25 billion (Rs1.2 trillion), is likely to witness slow and steady growth. During the period, most retailers, among them Spencer Retail Ltd, Aditya Birla Retail Ltd, Future Group, Reliance Retail Ltd and The MobileStore, went slow on expansion, closed stores that were no longer viable, and regularly pitched promotional offers and deep discounts to counter the decline in discretionary spending. In addition, some retailers laid off employees, renegotiated rental agreements signed in a healthier financial climate, and consolidated operations by merging teams, warehouses and back offices. The MobileStore, for example, shut down at least 70 stores, while opening an equal number of new ones after November. Reliance Retail added 100 stores and shut down at least 20. However, some retailers such as Subhiksha, Mumbai-based Foodland Fresh, and Indiabull’s Retail Service Ltd were the worst hit. While Foodland Fresh and Indiabulls Retail Services Ltd have only three and four stores operational, respectively. Subhiksha had to shut down operations due to lack of funding. However, things are looking better for the industry as a whole. Kishore Biyani, founder and CEO of Future Group, said, “We are seeing positive sentiments in consumer behaviour due to the sense of security in terms of job and stable government. With asset prices increasing people have started to feel more secured. Moreover consumption in the country is not going to come down and will continue to grow.” A New Delhi-based analyst with a domestic brokerage said in the last three months the consumer sentiment is gradually improving, and that almost all retailers are seeing a rise in sales across categories. “Retailers may once again see a double digit growth in the next few months if the consumer sentiment continues to grow at the present level,” he said. He declined to be identified because he is not allowed to speak to the media. via Retail glimmer of hope zyakaira notes: In other related news, in Bangalore – Mysore Bangalore Infra Corridor is being used effectively by the traffic, while the paid toll roads from and to the NICE road have picked up some traffic though they are not there yet. Whitefields projects coming up include a Prestige Seconds’ mall. Prestige forum in Koramanagala remains the stellar success and malls in Bangalore like Forum and even the new Oasis / Lifestyle Mall show continued traction throughout the week. We are backing the property at Innovative Film City which is available cheap at rents of $4 psft and less and retains 50000 footfalls in a week without the congestion and with a complete leisure and holidaying destination story around it The Mysore-Bangalore Corridor is likely to see a larger support esp. along the SH-17 which is a regular attraction for Bangaloreans. And personally, someone like Kishor Biyani should not be in this Industry at all and there should be more options for teams like Bharti and Walmart to provide choice to consumers rather than start a shackled business under Business to Business pretext because of FDI restrictions

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