Indirect taxation is one of the main sources of revenue for the government. A significant portion of it comes from the hospitality industry. Any slowdown in this sector has an impact on the overall growth of the GDP and unfortunately this year has not been kind to it. According to the Bangladesh Bureau of Statistics (BBS), business in hotels, motels, resorts and restaurants have contracted in the second half of the current fiscal year. This has had an adverse effect on national growth. Indeed, according to a report published in this newspaper recently, "The value addition from the 'accommodation and food services', which was earlier termed as hotels and restaurants services, dropped 7.92 per cent in January-March quarter (Q3) and nearly 6.0 per cent in April-June quarter (Q4) of the last FY."
This does not come as a surprise since the economy has been experiencing sustained inflation in prices of food items for the whole year. The problem is that the hospitality industry is now big business, employing hundreds of thousands of people and supporting millions of people in the greater context of things. The boom in this sector experienced over the last decade translates into 'accommodation and food services' as being a key sector in the economy and any downturn here has a visible impact on the economy.
Turnover has dropped because higher prices of food have become a dampener to business. Upper scale restaurant managements disclose that many businesses are bearing losses because customers are very price-sensitive. It becomes difficult to simply raise retail prices in the hospitality industry for fear of losing customers. Hence, at the upper echelons of the restaurant business, many a management is sustaining losses, but that is something they may be able to do for a specific period. The situation is quite the reverse for the majority of eateries and places of stay.
Of course, with people scrambling to make ends meet, lots of people are simply forgoing the extra luxuries of life like eating out and partaking in domestic tourism. The money is simply not there anymore. With squeezed wallets come little or no savings and the first few casualties of living on such terms are the little luxuries of life. Food prices in restaurants have shot up significantly and this comes from the fact that fresh and raw materials like flour, sugar, onion, and other such kitchen items have been on a seemingly unstoppable inflationary path for practically the whole of 2023.
On top of all this, one should understand that cooking oil is made with imported soybeans and imports in general have become so much more expensive due to both devaluation of national currency and rising prices in international markets. Multiple factors have colluded to push up prices and it is a situation that shows no signs of easing off unless there is meaningful intervention from the authorities. There has been much talk about such intervention but that market forces have a free reign to do what they please is obvious, and inflationary pressure remains unrelenting in people's lives. The belt-tightening measures by consumers will continue and as long as prices of food remain sky high and they are likely to shy away from dining out and going on holidays.
© 2024 - All Rights with The Financial Express
