Coupons: How They Can Help The Hospitality And Food And Beverages Sectors
With Covid-19 drying up the cash flow and hitting business hard, these sectors are now resorting to issuing coupons.
This not only helps retain customers, but also assures business in future.
Covid-19 is here to stay and we may have to live with it.This is precisely why several experts have been insisting on opening while mandating social distancing norms.The reason was purely based on the understanding that costs of a lockdown were far too high to justify continuing with the same.Yet, several state governments have been slow in terms of opening their respective economies.
The government has announced its stimulus response and several state governments have also tried to provide relief in some form or the other to various sections of the population.We need to recognise the constraints faced by our government in terms of their fiscal space — which is an issue that needs to be addressed in a separate article as India continues to struggle to raise adequate tax revenue.This means that at some point, businesses will have to be innovative to be able to make the most of the difficult situation we are in.
One of the worst affected sectors will be the hospitality industry.Hotel bookings, travel and even eating out are unlikely to become a part of our routine as before the pandemic, for at least a couple of months if not more.The same will be true for air travel even as flights are gradually allowed. The fear of the disease will force people to cut down on any non-essential travel, which makes the situation difficult for the industry.Several prominent restaurants across the world have already decided to shut shop, while airlines in the US are in the process of discussing the kind of relief that will be needed to get the sector back on track.
The question at hand is, therefore, about survival of the sector in India. Due to the lockdown, when flights were cancelled, most airlines provided credit for booking fresh flights whenever the lockdown was lifted.This was an excellent strategy to ensure that the customer is retained and that they do not have to refund the money in the form of physical cash at a time when the company itself faced severe cash-flow stress.
Similarly, restaurants have started issuing food coupons.The food coupons are essentially those that make the holders eligible for a meal at the restaurant up to a particular amount within a period of time.By issuing such coupons at huge discounts, restaurants are in a way able to generate cash flow even while being shut, knowing that it will have to be redeemed once they open.Of course, there is an uncertainty here of what happens if the restaurant does not open or does not honour the coupon, but that is more to do with the issue of violation of contract.
The idea of issuing coupons is indeed a feasible one that several companies have adopted at times of the crisis.It enables companies to sustain their fixed expenses and meet the cash flow problem.More importantly, it underlines how innovation could be a differentiating factor for the success and failure of firms in sectors that are going to be worst hit even after the unlocking process is complete.
As the process of unlocking continues, all eyes are now on the entrepreneurial spirit and innovation to make the most of the present opportunities which are available due to significant geopolitical shifts.The hospitality sector should be no exception.The government should encourage their resilience and their spirit by giving them tax concessions on coupons, while initiating broader reforms to improve ease of doing business in the sector.Removing red tape, regulatory bottlenecks and excessive license and inspection norms can be some of these reforms that can be instrumental in improving the spirit of those in these sectors.
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