Monday, November 29, 2010

Completely unnecessary condescending rubbish–how not to write a hotel business strategy

Those doyens who have evolved from yester years’ inn keepers to today's hotel managers have discovered that providing clean towels every day is probably unnecessary. Moreover the daily replacement costs time, labour and energy.

There is then, assuming guests can cope or choose to cope (since foregoing the daily towel is typically voluntary) money to be saved – and a material saving it would be too over a year and a few dozen floors of rooms.

So let’s save the money…..

But…. how is this tackled? The current fashion is to announce that “as a hotel” you are “green, responsible and saving the planet”. In one especially bad case, abstaining from fresh towels is said to be planting trees at the rate of 1 tree per five forgone towels.

This approach has to be nonsense – and unnecessary. Even from a governance point of view. Investors invest in hotels to make a return on capital invested in hotels and their management. If they wanted to invest in planting trees they would do just that – invest in forestry companies.

The dumbest thing is that given a competitive capital and goods and services market – money saved has to end up in savings for consumers through lower room rates or room rates not going up as fast as they otherwise might. Even hotel managers can’t stave off competition and its effects.

So this is god’s work. What is not is (vainly) trying to fool consumers that one is “greener than thou” and that they are “guests” on planet earth…

Why not simply say – “Join with us in keeping room rates down and, as a bonus, save some energy – a win win”…. its a fairly easy slogan.

Business gives itself a bad name doing dumb things – especially when its arrogance allows management and boards to pretend customers and shareholders are as dumb as they can be.

Saturday, November 27, 2010

Rent seeking and crowding out are real phenomena

Drawing from a study (Henderson, D. George Mason) reported in the Economist I note that…..

Examining 232 appointments of Chairs to Congressional Committees, the average state received a 30% – 40% boost in earmarks in the year following the appointment. Private firms reacted by reducing R&D spend by some 7% – 12% and capex by some  8% – 15%.

A long run study  (Furceri – OECD and Sousa Univ Minho) finds that over the long run a 1% rise in government consumption reduces private sector consumption by 1.9%.

The real action around all the complaints about “troughing” then turn out to be serious concerns – not about fairness (a pointless concept) but efficiency and therefore social well-being.

Canada’s Budget Triumph”, by David R Henderson, Mercatus Center, George Mason University
Do Powerful Politicians Cause Corporate Downsizing?” by Lauren Cohen, Joshua Coval and Christopher Malloy, Harvard Business School
The Impact of Government Spending on the Private Sector: Crowding-out versus Crowding-in Effects”, by Davide Furceri and Ricardo Sousa

Thursday, November 25, 2010

The problem is clear and it’s not corporate tax rates

Is there any reason to think Ireland’s competitive corporate tax regime is responsible for the nation’s economic crisis? The answer, not surprisingly, is no. Here’s a chart from one of Ireland’s top economists, looking at taxes and spending for past 27 years. You can see that revenues grew rapidly, especially beginning in the 1990s as the lower tax rates were implemented. The problem is that politicians spent every penny of this revenue windfall.


When the financial crisis hit a couple of years ago, tax revenues suddenly plummeted. Unfortunately, politicians continued to spend like drunken sailors. It’s only in the last year that they finally stepped on the brakes and began to rein in the burden of government spending. But that may be a case of too little, too late.

ex Cato Institute

Thursday, November 11, 2010

Round in circles

Some fancy terms designed to elevate the apparent status of the speaker or writer simply act as confirmation that the simple – and often useful term  “dork” applies. A good example is referring to “myself” when you mean “me”.

The term “revert” – a favourite in some business circles is another classic example. The toffs who use this term have recently started providing the confirmation referred to above by saying “revert back”.

Revert back? Right. Does this mean “go forward”? Or is it simply a business stutter?

The most recent example I have come across was the Customer Services Manager of Telstra Clear explaining in his two day late apology for that company’s gigantic email crash that customers would need to “revert back” to their old password.

Perhaps the email servers simply got sick of their master’s language and gave up.