Goodbye hospitality industry?

The recent government decision to make residential areas residential makes sense. However, authorities seem to have gone gung ho in implementation. While it makes total sense to remove purely commercial ventures like corporate offices from a residential area, why go after the restaurants and food joints en masse? If it has to be done then do it in an orderly manner, not bulldozing structures and using strong-arm tactics to cower investors into submission; one should be realistic that substantial investments have been made in this sector and wrapping up has to be a phase by phase effort.

A report in this newspaper on July 31 painted a bleak picture of the restaurant scene in Dhaka. Some upscale places have beefed up security with security men toting shotguns and metal detectors. But that is not the case with the so many other smaller but cosy eateries which have simply closed shop. The evenings have become dull beyond comprehension as people order in. That people do not feel as safe as they used to after the bloody carnage at Holey Artisan bakery is normal. Yes, the hospitality industry has taken a major hit. Foreigners who used to throng the restaurants can't be seen and the local clientele have thinned to a bare minimum. 

While security has been tightened around the Gulshan / Banani / Baridhara areas and with people eventually feeling less insecure, the restaurants and hotels were hoping to recoup their losses in the coming months. The bad news is that all restaurants, hotels and rest houses are to be wrapped up as per government decision. These establishments are an expensive affair and we simply cannot ignore the fact that thousands of crores of taka have been invested in the restaurant and hotel scene in the Gulshan/Banani/Baridhara areas. A rough estimate of the investments involved would provide a clearer picture of the situation. There are at least 350 medium sized restaurants (1,500- 2,000 square feet) in the Gulshan/Banani areas. The average cost of setting up such establishments is around Tk. 1.5 to 2 crores (Tk. 15–20 million). That's a net investment of Tk. 525 crore (Tk. 5.25 billion calculated on Tk. 1.5 crore as investment per establishment). At least 60 percent is bank financed, which means respective banks will be writing off a large portion of the Tk. 315 crore (Tk. 3.15 billion) as bad debt when these establishments go down under.

This is terrible news for building and property owners because the going rate per square feet (commercial) is anywhere between Tk. 200 - 270, and all business houses pay six months in advance to get space in the first place (for the sake of argument we can take Tk. 240 as average commercial rate of rental per square feet). Hence, a property owner renting out space for a medium sized eatery in these areas is looking at a net loss for paid up rental (at today's rate) to the tune of Tk. 2,160,000 (Tk. 240 x 1500 x 6) as half year's advance rent and monthly rent on an average of Tk. 360,000 (calculated on a property of 1,500 sft). The fear is that if the government stands firm in its decision to oust all such ventures, the rental value will plummet as there will be no more commercial rate for property that are not "officially" designated as "commercial" property. And according to The Federation of Hotel, Guesthouse and Restaurant Owners' Association of Bangladesh (FHGROAB) that held a press conference on May 14, these business houses pay about Tk. 4 billion as VAT to the national exchequer, which the government will now be deprived of.

Most restaurant/hotel owners are going to go for litigation through writ petitions and the legal procedures will take anywhere between three to six months to come to a conclusion. The government will have its day. But what message are we giving out to prospective entrepreneurs and investors here? That this is not a country to invest in? That is precisely what we are saying. Where was RAJUK all this time? Did it not give permission to property owners to build structures for commercial purposes? Did it not turn a blind eye when businesses were opened/ operated in residential housing? The billions invested are now to be thrown down the drain because it is now suddenly expeditious to zone the city into residential and non-residential areas! Why are authorities not holding stakeholder meetings that involve the property owners/ business houses/ banking institutions – all of whom who have invested time and energy into building a vibrant and growing hospitality industry? These are valid questions, and sooner or later, authorities will have to answer them.

The second piece of bad news is this. People's involvement in the hospitality industry in the Gulshan/Banani area is estimated to be anywhere between 100,000 – 200,000 people (according to newspaper articles); people ranging from cooks, guards to waiters and managers. These are just the people directly involved in the day-to-day operations of restaurants, hotels/ motels/ rest houses. If we calculate that there is a family against each of these individuals (say five members including parents, spouse and two children), that's between 0.6 to 1.2 million people who will bear the brunt of a jobless family member, who may well be the sole breadwinner. We talk about employment generation and here we are putting at risk more than 100,000 people out of work for no fault of their own. Rather, it is the whimsical manner in which our policymakers take decisions that could spell doom for a budding sector and put so many jobs and dependents at risk.

At a press conference held in the city on May 14, the  FHGROAB stated, "The decision to remove the hotels, guesthouses and restaurants in particular seems to be in sharp contrast with the Government's policy to promote tourism in the country. The Government has declared 2016 as the "Tourism Year". The Ministry of Civil Aviation and Tourism is reportedly working to attract 1.0 million foreign tourists in the year 2016-17. But can just a few 5-star hotels accommodate all these targeted tourists or can all of them be expected to afford the luxury of staying in those expensive 5-star hotels? The obvious answer is 'NO'. Will the other hotels located outside those residential areas with much inferior quality of service and literally no measure for safety or security be acceptable to the foreign tourists as an alternative place to stay? The answer will also be 'NO'".

Lastly, the hospitality industry in a growing industry is driven largely by young entrepreneurs and if this plan for wholesale removal goes ahead, we would be making a huge mistake. As per newspaper reports, the education system produced 1.3 million graduates last year and the "system" produced only 300,000 jobs. The support staff consisting of more than a hundred thousand who will probably not find meaningful employment elsewhere and may turn to criminal and/or terrorist activities because they have mouths to feed. This would hardly be conducive to law and order. But let us not go there. Let us sit down with stakeholders and chalk out a workable timeframe for relocation.

The writer is Assistant Editor, The Daily Star.