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Terror vs Business in Mumbai, 2008
Dec 2008
The recent terror attack on India's financial capital has proven that India is perhaps the most vulnerable country in terms of terror attacks. And Mumbai is no doubt the terror capital of India. The wounds of the city are left to fester amidst lack of strong political will to contain recurring terror strikes.
So far the terror strategy had been different. Terrorists had been bombing crowded public places, to inflict maximum casualties. But this time around, their motive seems to be different. They have now targeted the elite class. And the modus operandi was different. Not public places but hotels of international repute, housing international clients were made the targets of the strikes. Thus the desirable outcome of this operation for the terrorists was international media coverage and attention, which they have successfully clinched.
In the aftermath several pertinent questions are waiting to be answered. In times of economic crisis, the terrorists have chosen to attack the financial capital of India. Why? The Taj, Mumbai's pride and the preferred destination for foreign delegates was the prime target. Why? Amidst these questions the business class and the industry captains wonder if they would be able to sustain India Inc.'s business friendly image in the world.
This year will be the worst year in the glorious history of the Tatas. Earlier they were compelled to shift their 1500 crore nano plant from Singur to Gujarat. Now the Taj will be closed for another six months before it is completely sanitized and restored. It was all so easily that the terrorists have converted a century old heritage hotel doing brisk business into a haunted site.
However, the repercussions on industry and business are likely to be short term. It seems our system has begun to develop resilience to such attacks. The markets were quick to bounce back in a couple of days following the attacks. Investor sentiments are very low at present; however inflow and outflow of funds over the long term is likely to be driven by valuations which are not likely to see much deviation.
Experts say the terrorist attacks will affect the flow of foreign funds and FDI in the country, but only in the short term. Long term investment decisions will not be affected because such events do not impact the fundamentals. But the fundamentals of some industries like hotels, tours and travels and aviation will be impacted.
The impact on the real estate market will not be pronounced, since it has a long lead time. This incident has a transient glitch for a city that has absorbed tremendous body blows in the past. Indian Hotels Limited, the company which owns the Taj Mahal Palace and Towers property in Mumbai may not collapse due to the damage caused by the terror attacks but it may have to bear losses in revenues and profits over the next four quarters. Analysts see that the country as a whole may feel the pangs of terrorist attacks over the next couple of quarters at least.
The attack that ravaged at least three of the six floors of the Taj, which overlooked the Arabian Sea, was inflicted when the industry is mid way through its peak season. The peak season which began in September is when luxury hotels make the most of their business in a year. Being a leisure hotel Taj Mahal hotel may take more time to become a favourite destination than a business hotel like Trident-Oberoi.
The Taj Mahal customer comes to experience the unique heritage experience. Last year, (2007-08) was the best year for Taj in terms of revenue and profit. Leisure hotel customers have numerous choices. They can postpone their visit to a specific place or country. Leisure travellers come to the Taj to have the specific experience, the ambience and service of a heritage hotel. The company will not be in a position to bear the brunt of a mishap if repeated.
Foreign visitors may also shun travel, just as they did after the 9/11 attacks on America. The global economic slowdown will add to the woes of the hotel industry when occupancy rates in hotels are expected to fall across the board. But the flipside of the attacks on the two leading hotels will be that the other hotels in the city will benefit.
The recent terror attacks also show the vulnerability of the Indian civil society to terror attacks.
These attacks highlight several failures-political failure, intelligence failure, and security failure. If civil society is to be thought of as a collective of intellectuals, public figures, and the media engaged in debating and formulating a wider consensus then the Mumbai attacks and its consequences suggest the idea that this collective has failed in its task of retaining the vision of a liberal and democratic society.
Combating terror entails carrying out police reforms, ensuring better intelligence gathering and co-ordination between various security agencies. There has to be more agility and teeth in the operations of the anti terror squads. The larger, long term process of eradication of terror would also include cracking down upon the socio political space within which that 'extremism' is created and operates. The sense of a political failure, articulated in its most basic form expressed in the post terror anti-political statements, is but a manifestation of the wider failure of our civil society to envision and deliver an alternative form of public culture and socio political space.
Within five days of the worst-ever attack on India's hospitality, Mumbai's Leopold café has reopened. The staff had insisted that the 137 year old café be reopened at the earliest. At the Taj, the GM Karambir Kang is at work even after his family was wiped out. He is reported to have told his chairman that the first priority should be to restore the 105 year old property to its pristine glory as one of the world's leading hotels.
That's the spirit of India that keeps us going.
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