Posts in category Business and finance


Business and financeGulliver

Hotels are finding out what amenities guests really want

IT HAS been more than once that Gulliver has found himself putting the incorrect electrical plug into the wrong socket or dock at a hotel—whether it be for a smartphone, laptop or shaver. Since such gadgets have proliferated, the hotel industry too has been confused about what facilities they should offer to service weary travellers. But after much trial and error, hotels finally seem to be figuring out which amenities guests truly value—and which ones are little more than gimmicks.

The latest survey of American hotels from the American Hotel and Lodging Association, an industry group, reveals a plethora of shifts in the hospitality industry, including the rapid disappearance of smoking rooms. But when it comes to gadgets, the trends are particularly interesting, since they are not always in the direction of more technology.

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Business and financeGulliver

Proposed changes to frequent-flyer programmes may be bad news for budget travellers

ALONGSIDE Eurocrats, straight bananas and anyone who opposes Brexit, Britain’s tabloid press has found something new to hate this year: British Airways (BA). Britain’s flag carrier has been criticised for cutting legroom in economy, axeing free food and drink on short-haul flights and—horror of horror—the amuse bouche that used to be served before dinner in first class. To save face, this week BA’s chief executive, Alex Cruz, who has come under sustained criticism for the cuts to service quality, announced that the carrier would be tarting up its offer. This would include more free meals, better wi-fi and 72 new planes. “We’re bringing back the glory days”, Mr Cruz proudly crowed. But not all of the improvements may be as good for frequent flyers as he advertised.

Among the changes planned for 2018, BA is moving to so-called “dynamic award pricing” in Executive Club, its loyalty programme. This means that tickets paid for with points from the programme will be no longer calculated in distance, but the cost BA is…Continue reading

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ApprovedBusinessBusiness and finance

Publishers are wary of Facebook and Google but must work with them

IN RECENT months Google and Facebook have made changes that may escape the notice of most of their billions of users, but not of news organisations. Facebook began displaying the logos of publishers in some of its posts, so readers can identify the news source. And Google for the first time gave publishers the ability to control how many times the search engine’s users can visit news sites free of charge. Both will directly help papers to sell subscriptions.

To critics of the social-media giants, that might look like wolves offering to help the sheep while still feasting on the herd. The business of both Facebook and Alphabet, parent of Google and YouTube, is to occupy people’s time and attention with their free services and content, and to sell ads against those eyeballs. For them, quality journalism is just another hook.

Facebook calls its “News Feed” offering its most important product, but in recent years it has tweaked the feed in ways that de-emphasise actual…Continue reading

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ApprovedBusinessBusiness and finance

A German hardware giant tries to become an ultra-secure tech platform

Bosch mobilises

BOSCH is everywhere. It has 440 subsidiaries and employs 400,000 people in 60 countries. Its technology opens London’s Tower Bridge and closes packets of crisps and biscuits in factories from India to Mexico. Analysts call it a car-parts maker: it is the world’s largest, making everything from fuel-injection pumps to windscreen wipers. Consumers know it for white goods and power tools synonymous with “Made in Germany” solidity.

The company itself prefers to be called a “supplier of technology and services”, or “the IoT [internet-of-things] company”. On a hill overlooking Stuttgart, robotic lawnmowers whizz around its headquarters and a window displays dishwashers and blenders. Inside are signs of a company in transition: posters call on staff to rip off ties, celebrate “error-culture” and “just do it” opposite a quote from Robert Bosch, the founder: “Whatever is made in my name must be both first-class and faultless.”

The 130-year-old giant’s…Continue reading

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ApprovedBusinessBusiness and finance

Trouble for the AT&T-Time Warner deal

In the eye of a storm

THE titans of media in America have decided this is an opportune moment to join together in mega-mergers, the better to take on the giants of Silicon Valley. The problem for them is that the Department of Justice (DoJ), and President Donald Trump himself, are less keen.

On November 8th reports surfaced that the DoJ is preparing to block a proposed $109bn acquisition by AT&T of Time Warner, owner of CNN, HBO and the Warner Brothers film studio—a deal that was announced a year ago and which had been expected to win approval by the end of 2017. The DoJ have reportedly told AT&T executives that to get the merger through they would have to sell off assets: either Time Warner’s Turner Broadcasting division, including CNN, which Mr Trump has repeatedly attacked as “fake news”, or DirecTV, the wireless giant’s satellite-TV business. Randall Stephenson, AT&T’s chief executive, said on November 8th he would not sell CNN to…Continue reading

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ApprovedBusinessBusiness and finance

Japan’s top two lavatory-makers are at last making inroads overseas

WHEN staff at the Louvre in Paris head to the bathroom, the toilet lid opens as they approach, a warm seat heats their derrières, and, once done, their nether regions are washed and dried precisely. Selling the equipment is a coup for Toto, Japan’s biggest producer of “shower toilets”.

Toto and its rival Lixil carve up the Japanese market for fancy, multi-function loos between them. At home they have market shares of 60% and 30% respectively, according to Nomura Securities, a brokerage. Yet they have struggled to win foreign bottoms over to luxuries enjoyed in Japan for many decades.

Today 26% of Toto’s and 30% of Lixil’s revenues come from abroad (much of it from products other than shower toilets). The Japanese market is profitable, but their loos are already ubiquitous there (including in public facilities, from Tokyo’s metro system to remote hiking trails); the majority of domestic sales come from the renovation of private homes and hotels. And whereas Japan’s population is…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Activist shareholders take on the London Stock Exchange

Rolet: who knows?

ACTIVIST hedge funds like Elliott Management, Cevian Capital or The Children’s Investment Fund (TCI) are famed for pushing for change at the companies they buy into. A favoured tactic is to install a new chief executive at a floundering firm. So it is odd to find a fund lobbying for an existing boss to stay on, as TCI has done in a spat with the London Stock Exchange (LSE).

In over eight years at the LSE, Xavier Rolet has transformed it from a share-trading venue to a clearing and data-services powerhouse, through acquisitions such as Russell, an index-maker, and a majority stake in LCH, a clearing-house. His hope of merging with the LSE’s big German rival, Deutsche Börse, fell through, largely because of Britain’s vote to leave the EU. But Mr Rolet remains widely respected. So eyebrows were raised when the LSE’s announcement on October 19th that Mr Rolet would leave in 2018 gave no reason.

In a fiery letter penned on…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

ING, a Dutch bank, finds a winning digital strategy

GERMANY’S third-biggest retail bank has no branches. It is also Dutch. And it is highly profitable. ING-DiBa, an online bank owned by ING, the Netherlands’ biggest lender, looks after €133bn ($154bn) of deposits for over 8m customers. In a fragmented market—most Germans entrust their savings to small, local banks—that means a share of around 6%. ING-DiBa’s lack of branches keeps costs down, allowing it to resist charging for current accounts and offer savers a tad more than rivals, despite a recent cut; and it has won a name for good service in a country not renowned for it. While other banks struggle after years of ultra-low interest rates, ING-DiBa thrives. Its return on equity exceeds 20%.

ING as a whole is in fair shape, too. On November 2nd it reported net third-quarter earnings of €1.4bn, slightly more than a year earlier. The group’s return on equity was a healthy 11%, nearly two percentage points up. Since 2014 the number of “primary” customers (with an active current account and another product) has…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

America’s Republicans take aim at mortgage subsidies

IN THE 1980s Margaret Thatcher and Ronald Reagan were both proud of their efforts to expand home ownership. In Britain, Thatcher presided over a fire sale of state-owned homes to tenants. In America, Reagan deregulated financial markets and expanded mortgage lending. At the time both countries provided generous mortgage-related tax breaks, making it easier to flog homes to the masses.

Britain’s 1980s housing boom turned to bust; the mortgage subsidies that helped to fuel it were abolished. America still subsidises mortgages to the tune of $64bn a year, by allowing homeowners to deduct interest costs from their tax liabilities. But a tax plan unveiled by Republicans on November 2nd proposes to limit the subsidy.

Twelve European Union countries also include some form of mortgage-interest deduction (MID) in their tax code. The average European subsidy, however, is around a tenth of America’s—about 0.05% of GDP. The Netherlands is much the most generous, at 2% of…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

The Paradise Papers shed new light on offshore finance

THIS week was uncomfortable for a host of well-heeled figures. In the frame were U2’s Bono, America’s commerce secretary, Wilbur Ross, and Britain’s Queen Elizabeth, as well as some of the world’s most valuable companies, including Apple and Nike. All these, and many more, feature in the “Paradise Papers”, a trove of more than 13m documents, many of them stolen from Appleby, a leading offshore law firm. The International Consortium of Investigative Journalists (ICIJ) and its 95 press partners, including the BBC and the New York Times, began publishing stories based on the papers on November 5th. Dozens appeared this week, with more to follow after The Economist went to press.

The ICIJ’s last big splash, the Panama Papers in April 2016, shed light on some of the darkest corners of offshore finance. In contrast, many of the activities highlighted by this leak are legal. But they would be widely seen as flouting the spirit of national tax laws by exploiting the gaps that open…Continue reading

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ApprovedBusinessBusiness and finance

3G Capital, magicians of the consumer industry, need to learn a new act

OCCASIONALLY a business idea emerges that is so simple you cannot believe it works. Consider the five founders of 3G Capital, an investment firm. Warren Buffett co-invests with them and calls them “among the best businessmen in the world”. They use debt to buy consumer-product firms, then they revamp their brands and slash costs. In total, since 1997, they have launched $470bn of deals, through 3G Capital or earlier entities (for simplicity this article lumps these all together and calls them “3G”). That makes 3G the second most acquisitive organisation in modern history. It sells every Budweiser slurped, Whopper burger munched and bottle of Heinz ketchup squirted on the planet.

Yet despite its superb long-term record, 3G is losing steam. In the past two years its total portfolio has lagged slightly behind the S&P 500 index, Schumpeter estimates. Its two biggest firms, AB InBev, a beer giant, and Kraft Heinz, a food company, have returned 6% and 16% respectively, well behind…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Regulators begin to tackle the craze for initial coin offerings

“I’M GONNA make a $hit t$n of money on August 2nd on the Stox.com ICO.” Written in July on Instagram, these words made Floyd Mayweather, a boxer, the first big celebrity to endorse an “initial coin offering”, a form of crowdfunding that issues cryptographic coins, or “tokens”. Stox, an online prediction market, went on to raise more than $30m, some of which seems to have gone directly into Mr Mayweather’s pocket. Other VIPs, including Paris Hilton, a socialite, followed suit and endorsed ICOs. But this source of easy cash may now be drying up: on November 1st America’s Securities and Exchange Commission (SEC) warned that such promotions may be unlawful, if celebrities fail to disclose what they receive in return.

The endorsements and the SEC’s attempt to rein them in are the latest episodes of token mania. Virtually unknown a year ago, ICOs are now more celebrated than initial public offerings (IPOs), the conventional way of floating a firm. Over the past 12 months…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Venezuela seeks the restructuring of its massive foreign debts

Maduro has a cunning plan. Maybe

INVESTORS have long seen a default on Venezuelan sovereign debt as a question of when, not if. Its bonds have been priced at levels implying imminent bankruptcy, but somehow the cash-strapped oil exporter has stayed afloat. Until now. On November 2nd Nicolás Maduro, the country’s authoritarian president, announced that he would order a “refinancing and restructuring” of foreign debt worth about $105bn. The prices of government bonds fell by up to half. Markets braced themselves for one of history’s most complex sovereign-debt renegotiations.

Mr Maduro’s brief statement was cryptic as to the concrete steps he will take. He invited “everyone involved in foreign debt” to talks in Caracas, the capital, on November 13th. Many creditors want a neutral venue. Moreover, Mr Maduro appears to have pre-emptively dashed any hope of a voluntary agreement by naming his vice-president, Tareck El Aissami, as head of his debt-restructuring committee. America’s Treasury…Continue reading

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ApprovedBusiness and financeFinance and economics

The New York Fed’s president announces his retirement

APPLICATIONS sought for leading Wall Street post. Perks: lovely office in Italianate palace; large staff. Duties: important role in setting interest rates (some vaguely defined other responsibilities). Requirements: eligibility for highest-level security clearance; tacit support in Washington, DC. Desirable but optional: broad knowledge of banking.

This week the New York Federal Reserve Bank announced that its president, Bill Dudley, will retire next year. He will leave a mixed legacy. He is thought to have given important help to Janet Yellen, the outgoing chair of the Federal Reserve. But he also presided over a steep decline in his institution’s influence over the banks that used to revere and fear it.

Located in America’s financial centre, the New York Fed has powers not vested in the country’s 11 other reserve banks. Its president has a permanent seat on the Fed committee that sets interest rates. Its trading desk puts board policies into effect. And it is the regulator responsible for many of the world’s largest…Continue reading

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Business and financeGulliver

Why Qatar Airways has bought 9.6% of Cathay Pacific

THIS morning’s news that Qatar Airways, a national carrier with global ambitions, has bought nearly 10% of Cathay Pacific, Hong Kong’s flag-carrier, came as a shock for financial markets. Shares in Cathay Pacific dropped in value by around 5% in the minutes after trading resumed first thing today. But the idea that Qatar Airways was the market for another acquisition came as no surprise for analysts in the aviation industry. Since 2015 Qatar has acquired 20% of IAG, a European group of airlines that flies 100m passengers a year, 10% of LATAM, Latin America’s biggest carrier, and 49% of Meridiana, an Italian outfit. It has even been invited by the Indian government to start up a new airline there with 100 jets. So why has Akbar al-Baker, Qatar Airways’ outspoken chief executive, gone on a shopping spree worth billions of dollars? 

On the face of…Continue reading

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ApprovedBusiness and financeFinance and economics

A massive trove of data on offshore transactions is leaked

IN APRIL 2016, the International Consortium of Investigative Journalists (ICIJ) dropped a bombshell. Its articles about the “Panama Papers”, a leaked trove of documents which had been stolen from Mossack Fonseca, a Panama-based law firm, sent shock waves round the world—felling the leaders of Pakistan and Iceland, leading to multiple arrests and pushing several countries to tighten laws related to offshore financial dealings. The revelations also caused a further hardening in public attitudes towards offshore finance, which had been souring since the global financial crisis.

Now the ICIJ and its 95 media partners around the world—including the BBC and the New York Times—are back with another cache of pilfered files, this time dubbed the “Paradise Papers”. This latest batch of revelations, the organisation’s sixth substantial leak investigation, began on November 6th and will be rolled out over a week. It shines light on offshore transactions linked to hundreds of wealthy clients of Appleby, a Bermuda-based law…Continue reading

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Business and financeGulliver

Southwest Airlines tries to bring music concerts to the skies

LAST week brought some good news for those who are fans of both flying and country music. Warner Music Nashville, a record label, and Southwest Airlines announced that they will be bringing concerts to the skies. The scheme is an expansion of the airline’s existing “Live at 35” series, in which bands surprise passengers by playing a few songs in the plane’s cabin. Devin Dawson (pictured), an artist on the label, marked the occasion with a performance on a flight from Nashville to Philadelphia. He told Billboard, a music publication, that:

Some people don’t really enjoy flying; some people get very nervous and don’t like it. I hope that something like this [performance] is just a cool surprise for some [passengers] that helps them forget about their everyday woes, and I’ll just play a couple of songs to make them smile.

However, Mr Dawson’s enthusiasm was not…Continue reading

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Business and financeGulliver

Smoking rooms are disappearing from hotels

TO THE list of endangered travel facilities—which includes pay phones, communal aeroplane screens and concierges—there is one more to add: smoking rooms. Even a few years ago, guests were routinely asked whether they would prefer a smoking room or not. But today fewer hotels are offering smoking rooms and those that do have a vanishingly small supply.

According to the latest report from the American Hotel and Lodging Association, a trade group, the share of hotel rooms that are non-smoking has steadily risen from 74% to 97% over the last decade. And the proportion of hotels that only offer non-smoking rooms has jumped from 38% in 2008 to 85% last year.

For a business traveller with a tobacco habit, then, there are few options. Those seeking a dash of glamour will struggle, as 97% of luxury hotels do not have smoking rooms. Only among budget-hotel category—the lowest price segment of five listed in the survey—do the majority of…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Jerome Powell is poised to be named chairman of the Fed

Heir to the chair?

YOU could forgive Janet Yellen, the chair of the Federal Reserve, for feeling peeved. With unemployment at just 4.2%, and inflation at 1.6%, she is close to achieving the Fed’s two goals of curbing joblessness and pinning price rises at 2%. Ms Yellen is a Democrat appointed by Barack Obama in 2014. The tenures of past three Fed chairs were all extended by presidents from the other party. Yet as we went to press, President Donald Trump was expected to nominate Jerome Powell, a Republican on the Fed’s board, to replace Ms Yellen.

If picked, Mr Powell—also an Obama appointee—would stand out from recent incumbents. He would be the first Fed chairman since William Miller, who left office in 1979, with no formal economics training; and, according to the Washington Post, the richest since the 1940s.

Mr Powell, who is 64, is a lawyer-turned-banker. His first role in Washington was at the Treasury during the…Continue reading

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October 30th marked the 70th birthday of the WTO’s precursor

Britain signs up

SUPERLATIVES surrounded the General Agreement on Tariffs and Trade (GATT) when it was signed on October 30th 1947. A press release heralded it as “the most far-reaching negotiation[s] ever undertaken in the history of world trade.” The Economist grumbled it was “one of the longest and most complicated public documents ever issued—and one of the hardest to comprehend.” The Daily Express, a British newspaper, growled: “The big bad bargain is sealed.”

The agreement’s complexity matched the tangle of global trade affairs. In the preceding decades a thicket of protectionism had strangled commerce and slowed recovery from the Depression of the 1930s. The GATT’s length matched its scope. It included both tariff cuts and promises to forswear new duties. Covering 23 countries responsible for 70% of world trade, it came to embody the rules-based multilateral system.

After 48…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Asian households binge on debt

ONE of the more persistent beliefs about the global economy is that Asians are more frugal than others. Explanations have drawn on culture (the self-discipline of Confucianism), history (memories of privation) and public policy (flimsy social safety-nets forcing people to save). For Lee Kuan Yew, the founding father of Singapore, and other theorists of “Asian values”, thrift was one of them. Whatever the true reason, data long supported the basic claim that Asian households were indeed careful with their cash. But over the past few years consumers across the region have done their best to prove that prudence was perhaps just a passing phase.

Household debt in advanced economies has generally declined as a percentage of GDP since the 2008 global financial crisis, according to the Bank for International Settlements. In a number of Asian countries, however, it has been going in the opposite direction (see chart). The biggest increase has been in China, where households have borrowed about $4.5trn over the past decade. But Chinese…Continue reading

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