Facing equipment blues

The growth of the hospitality equipment sector is such that if it moves two steps forward, there is an invariable backward step taken in the bargain. To set that record straight, equipment traders need all the help they can garner from their users to face modern day challenges. By Sanjeev Bhar

The equipment sector is on a high, a fact that nobody associated with the hospitality sector can deny. Nonetheless, numerous issues that prevent the equipment sector from achieving its full potential in the current economic scenario are prevalent. What is the cause of such a situation?

According to Surinder Mehta, partner of Saimex International, "The answer lies in the unsystematic, uncontrolled approach that still exists in this sector and the many unprofessional ways by which companies operate and find their footing here." This negative punch comes from one who is currently a part of this fraternity.

Lately, there has been a two-fold growth in this sector which has attracted attention, i.e. demand for superior equipment for hospitality and the opening up of the market. This has also led to two-pronged challenges: selection of right products for an organisation, and selection of original white market products- both issues being intertwined. Addressing them could therefore lead to a positive solution for the growth of the sector. Hospitality equipment is witnessing an unprecedented growth, but there is still scope to refine the equipment sector's prospects.

Growth in equipment trade

The rise in equipment trade is particularly due to two significant factors. One is the growth of the hospitality sector in the country and the second is the increase in scope for new players to participate and compete for the trade pie. Pramod Gupta, vice-president (materials), Jaypee group of hotels elucidates, "The country’s economic boom has given the hospitality and other sectors a reason to smile and this has led to a change in the way equipment has been used. Today, however, technologically superior products are potential drivers of an organisation's purchasing policy." Strictly speaking, hospitality is currently on a springboard of success where equipment trading within its sphere is finding strong favour. There has been a fair concern about the quality standard as a result of the upkeep and services offered by hotels and restaurants. To achieve the desired level of competence, the reliance on quality equipment has risen considerably. At the same time, this phenomenal rise has provided the international equipment market to come to India and directly cater to its consumers, viz. institutional segment, and gain acceptance. "The quality standard is a key issue for hospitality companies turning to international brands to provide an assurance of good products over a period of time. Where earlier companies would have to import, now the products have reached their doorsteps. Therefore what would prevent them from picking up foreign brands over domestic ones that does not even offer a track record to boast of," argues Mehta.

This is a common problem facing this industry today, but there is still scope for Indian manufacturers. Talking about the domestic market, Gupta openly acknowledges the positive scenario that is noticeable in the domestic market. He says, "The Indian market is slowly growing. The success of the Indian equipment manufacturers depends on the tax regime that has the power to promote manufacturing, as a number of brands are now producing products comparable with international standards."

In this regard, it is easy to gauge that the rise is taking place due to the increasing demand by the hospitality industry. It is understandable that with new hotels opening up, there is bound to be a rise in equipment demand. But the interesting fact is the equipment orders coming from established hotels in the last couple of years or so.

The changing phase

Keeping up with the changing times, hotels have been slowly increasing their budget for equipment purchase to phase out the old and bring in the new. The decision to go in for newer technology is undertaken after taking into account the feasibility of undertaking such a make over. "Equipment changes cannot take place overnight. Care has to be taken to do it in a phased manner so that existing equipment is used optimally and overall capital cost is maintained at the lowest," remarks Gupta. There have been talks about the growing share in investment for buying newer equipment each year by the hospitality units. But what is the actual cost to be kept in mind while going in for the purchase? Khanna replies, "We ensure that the total operating cost does not exceed 0.08 per cent of the total sale while going in for newer versions of equipment as per the hotel's need. It is also important to keep a check on capital and operating expenses, but that can be changed by keeping track of existing market trends at any given point of time."

Apart from the situational need, monetary back up, and change in market trends that facilitate the decision for purchasing new equipment, getting the right supplier is another key issue that hoteliers consider before taking a final decision. Chef Sudhir M Pai corporate executive chef, Sarovar Hotels, elaborates, "Every year there is a percentage of revenue set aside for purchasing equipment to enhance the productivity in the kitchen, with the help of better quality finished products. With so many suppliers in the market, the end user is equipped with more options to choose from and this therefore enables him to select the best one that fits both his budget and purpose." There has been a jump of around 10 per cent in the last ten years as far as budget for equipment is concerned. Gupta says, "The budget allocated for purchase of equipment is presently being maintained at 25-30 per cent of the total capital expenditure. From health club equipment to kitchen equipment as well as equipment for housekeeping, all departments have shown a fair demand."

As the demand from the industry increases, the equipment companies find a place in the sector well. This has raised the issue of how one is to go about selecting the right companies. Here, the selection would depend on who is selling the product. Whether the products being sold are well-known and after sales services is provided on-site or off-site and so on. "Professionalism has been crept into the food service equipment sector, mainly due to the entry of international brands. This has ensured that the right kind of products reach their users and operational standards are maintained without any justification. This has created a competition in the market and a wide array of good products to pick from for the hospitality sector," remarks Mehta.

Assessing the right selection

The choices of equipment available at one's disposal, coupled with the rise of this allied sector has also led to a new challenge, i e to choose between the known and the new. A decade or two ago, various equipment which were mostly imported are now available through various distributors/ importers. Also, equipment selection depends a lot on individual parameters of assessing the need. Pai feels that the most critical features that are given importance these days for selecting equipment are the country of origin, price tag attached to it, fuel or energy efficiency, space requirements, after-sales service, versatility of the equipment, and how the equipment fares under local conditions. "If we keep these factors in mind, the selection of equipment cannot go wrong," he adds.

On the other hand Rajesh Khanna, Operations Head F&B, The Metropolitan Hotel New Delhi pinpoints three key factors, namely, presentation, price and durability over a period of time. It is also understood that the rise in equipment demand is a genuine one. To achieve the best of standards, one has to have the key ingredients, and equipment has become a vital element especially with technologically superior products being available to cut down on operating costs. Mehta observes, "India is a fairly open market. People here adopt varied tastes, food and lifestyle culture fast. To keep up with their demands, it has become vital for the service providers to latch on to new technologies and serve according to the market demand. Indian companies will take time to reach that level and offer equipment of that kind." Keeping a list of parameters also leads to selection of genuine equipment, which is in turn based on standardised performance.

Looking ahead

Though the current scenario in the equipment sector has been fairly good especially for the hotel sector, there still remain certain issues which need to be resolved at the earliest to enable this sector to reach its full potential. As the trade is going through a churn of growth, proving that equipment is among one of the vital needs for hospitality's all-round development, there are certain issues that are not only hurting the equipment traders but also the hospitality sector at large. Gupta elaborates, "There are issues like suitability of equipment, the clientele and assessing the number of years the equipment could be of value to the organisation, these are not very easy to identify. Moreover, what the cost is and whether that cost is in keeping with the services it renders needs to be verified with a comparative study of the market for assessing equipment or the company's true value." These concerns might sound simple before one actually ventures forth to purchase equipment. However these issues crop up from certain drawbacks that haunt this sector. For example, the gray market is very much active and duplicate branding is available through other parallel routes. Mehta informs, "There are many fly-by-night operators in this sector who come and do business for a short period and vanish. The imprints they leave create suspicion amongst the distinguished buyers about the concerned products, which hampers the equipment community who are putting in a lot of hard work to bring about a marked change."

Gupta opines, "It is pertinent to promote Indian manufacturers as they are now offering good quality equipment. The government should promote them with lesser taxation and related fees to encourage them and to promote white market goods. At the same time, it is the responsibility of the hospitality sector too, to identify the right set of companies and people who promote the trade."

Promoting domestic traders would also ensure that the products sold in the market in customised format retain the standardised requirement users seek. Irrespective of the darker side of this sector and the hospitality industry's fight to offer the best of standards to customers , the future has some good news in store. Emerging mid to budget segment in hospitality - hotels, restaurants, etc as well as domestic manufactures are expected to see a quantum growth. This sector has not been sufficiently tapped yet but the international market has foreseen the potential it offers, which the domestic manufacturer can tap with diligent business planning to tackle some key issues that are drawing it away from the route to success.