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Thursday, 17 July 2008

Sub-standard motels..

This story over the weekend certainly brought some form of relief. The state of our hospitality industry is truly shambolic. Its not that Zambia has no motels / hotels, on the contrary, we have so many that the authorities find it difficult to enforce standards. The number of hotels have outstripped government's ability to check their operations. This is a problem because hospitality is an experience good, or is it a "credence good"? The other point is that a good hospitality industry is crucial for tourism and the associated evenue it brings into government coffers. The rationale for government intervention, in form of standard setting there appears solid.

One possible policy intervention worth seriously considering is to make it mandatory that motels/hotels that use "electricity" also have generators or some other emergency power. It is seems like common sense that someone who runs an hotel would have a generator. Unfortunately, very few Zambian motels / hotels seem to have generators, as my wife and I found out in January when we moved from place to place in Ndola in search of power. For many of our motels when the power goes out, everything goes out, including appropriate standards of cleanliness.

12 comments:

  1. The rationale for government intervention, in form of standard setting there appears solid.

    Is it ? Considering you wrote " The number of hotels have outstripped government's ability to check their operations"

    And hospitality is an experience good, not a credence good. That's why rating hotels, be it by professionals (Michelin Guide) or by other consumers (global hotel review or trip advisor) is such a big industry. And that's without all sorts of semi-informal "local knowledge" recommendations made by friends, family or travel agents.

    I tend to think that it may not be a good idea to have the government actually do the ratings.. Corruption issues added to a lack of incentives for mantaining credibility, basically.

    One possible policy intervention worth seriously considering is to make it mandatory that motels/hotels that use "electricity" also have generators or some other emergency power. It is seems like common sense that someone who runs an hotel would have a generator. Unfortunately, very few Zambian motels / hotels seem to have generators
    And who pays for that ?
    I mean it is common sense to have a generator if power cuts happen often enough and if your consumers value having electricity enough (and probably are willing to pay for it). One or both of those conditions may not have yet reached critical mass in Ndola. Or someone is about to make a killing by opening the first motel with a generator.
    Beyond that, it would take serious chuptaz from the government to mandate that private owners make investment to protect themselves from failure of a government agency to deliver a service, don't you think ?

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  2. "Is it ? Considering you wrote " The number of hotels have outstripped government's ability to check their operations"

    The sentence was too packed! A little unpacking. The market failure clear are there and the case for examining the rationale for intervention is clearly strong. The question is what form of intervention would provide value for money or maximise benefits to society. Standard setting as I note has struggled, so the question is whether we continue down that route or slow down hospitality growth to match it with government's ability to monitor.

    "And hospitality is an experience good, not a credence good.

    I am suprised you reach that conclusion so definitively. I mean yes it is an experience good in general, but there are elements of it which are unobserved even after experiencing it...e.g. food that you ate there which may have had mad cow disease but you will never know...or Dog food you might eat in China during the Olympics...and you won't know....

    "I tend to think that it may not be a good idea to have the government actually do the ratings.. Corruption issues added to a lack of incentives for mantaining credibility, basically."

    I agree that "regulatory capture" is always a problem, especially with the corruption angle.

    "I mean it is common sense to have a generator if power cuts happen often enough and if your consumers value having electricity enough (and probably are willing to pay for it). One or both of those conditions may not have yet reached critical mass in Ndola."

    lol! they have :)
    but that aside...I accept that this requirement would raise the cost of doing hospitality business...the challenge therefore is to consider the scale....we have hotels servicing 200 people per night...and they have no emergence power.... I see no reason why those hotels would not be able to handle such a requirement..

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  3. The market failure clear are there and the case for examining the rationale for intervention is clearly strong.

    I don't know. Is it ? I don't see the argument..

    I am suprised you reach that conclusion so definitively. I mean yes it is an experience good in general, but there are elements of it which are unobserved even after experiencing it...e.g. food that you ate there which may have had mad cow disease but you will never know...or Dog food you might eat in China during the Olympics...and you won't know....


    C'mon, Cho, that's a very large definition of credence good, one so large that all the goods would become a credence good.

    It's not supposed to be about unobserved possible mistake but about the utility of the good itself being impossible to value even after consuming the good or service.

    And yes, usually after having been in a hotel, people know if they want to come back or not, if it was a good deal or not.

    I agree that "regulatory capture" is always a problem, especially with the corruption angle.

    Nah.
    I don't think this is the issue. After all, if there's a corrupt rating system, people will just stop trusting it and nobody will care about getting an extra star.
    The issue is that the private company in that position (nobody cares) will simply disappear. If it's a goverment agency, you'll hear calls to fix it in the press on a weekly basis while it continues to give ratings nobody cares about.

    lol! they have :)
but that aside...I accept that this requirement would raise the cost of doing hospitality business...the challenge therefore is to consider the scale....we have hotels servicing 200 people per night...and they have no emergence power.... I see no reason why those hotels would not be able to handle such a requirement..

    Why haven't they done then ? Seriously, why haven't they made an investment that supposedly would bring them more business ?

    And I see you didn't comment on the issue of the government mandating that businesses protect themselves from the failure of one of its own agencies, but it's sort of important, isn't ?

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  4. ”I don't know. Is it ? I don't see the argument..”

    The market failure emerges from asymmetric information between the provider and the consumer. The question is whether that asymmetric information warrants intervention. I think it does because of the failure of the market to “correct itself” even in repeated interactions. Then comes the next step whether it is actually value for money to intervene. That clear depends on how one intervenes and “scarcity” of public funds relative to other alternative interventions (in other spheres of life).

    Incidentally, the other point is the efficiency argument – if you can make the hospitality industry internalise some of these external costs, it may actually have long term spillovers e.g. Zambia could become a more attractive destination in the long term etc.

    I am surprised you reach that conclusion so definitively. I mean yes it is an experience good in general, but there are elements of it which are unobserved even after experiencing it...e.g. food that you ate there which may have had mad cow disease but you will never know...or Dog food you might eat in China during the Olympics...and you won't know....


    ”..that's a very large definition of credence good, one so large that all the goods would become a credence good.”

    Lol!
    But I am happy you get the idea :) It’s about “degrees of credence”.

    ”It's not supposed to be about unobserved possible mistake but about the utility of the good itself being impossible to value even after consuming the good or service.”

    Same thing. The impossibility to value emanates from incomplete information.

    ”And yes, usually after having been in a hotel, people know if they want to come back or not, if it was a good deal or not.”

    Isn’t the point I am making that there are elements where that may not apply?

    I agree that "regulatory capture" is always a problem, especially with the corruption angle.

    ”I don't think this is the issue. After all, if there's a corrupt rating system, people will just stop trusting it and nobody will care about getting an extra star.”

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  5. The market failure emerges from asymmetric information between the provider and the consumer. The question is whether that asymmetric information warrants intervention. I think it does because of the failure of the market to “correct itself” even in repeated interactions.

    Because hospitality is an experience good, there is a fundamental asymmetric information issue. But like I said before, that's exactly why rating and reviews are a big business and why informal recommendations matter so much.

    As far as the failure to correct itself, what are the repeated interactions ? I mean I still can't wrap my head around the idea that no one thought of having a gen if the demand was so high. It would imply that Zambian hotel/motel owners have less entreprenarial spirit than their counter-part in Congo or Nigeria.

    Then comes the next step whether it is actually value for money to intervene. That clear depends on how one intervenes and “scarcity” of public funds relative to other alternative interventions (in other spheres of life).

    Well mandating an investment that would compensate for the failure of a state-owned company is maximum value for government money.

    Incidentally, the other point is the efficiency argument – if you can make the hospitality industry internalise some of these external costs, it may actually have long term spillovers e.g. Zambia could become a more attractive destination in the long term etc. 


    First of all, internalize what cost ? I mean are those costs externalized right now ? Or should the term be "realize" ?
    Secondly, I'm not sure having gens in every hotel/motel would have that much incidence of the attractiveness of Zambia as a touristic destination. Except for Cho and his wife.

    ”..that's a very large definition of credence good, one so large that all the goods would become a credence good.”

Lol!
But I am happy you get the idea :) It’s about “degrees of credence”. 

”It's not supposed to be about unobserved possible mistake but about the utility of the good itself being impossible to value even after consuming the good or service.”

Same thing. The impossibility to value emanates from incomplete information. 

”And yes, usually after having been in a hotel, people know if they want to come back or not, if it was a good deal or not.”

Isn’t the point I am making that there are elements where that may not apply?



    Cho, it's about the fundamental function of the good.
    If I take the bus, I'll be able to properly estimate the utility of the good I've purchased which is taking me from point A to B. The fact that someone in that bus had cholera and contaminated me doesn't have anything to do with my ability to estimate how much I value a bus ride.
    For something to be a credence good, it has to be impossible to estimate the utility of the good itself. You can't know if that vitamin worked, few have any idea about what the plumber has done (though you will know if the sink works after being clogged), etc..
    It's not about fraud, incomplete information on the side-effects of one particular good or whatever. It's about not having enough knowledge to be able to judge if the good fulfilled or not its main function.


    I agree that "regulatory capture" is always a problem, especially with the corruption angle. 

”I don't think this is the issue. After all, if there's a corrupt rating system, people will just stop trusting it and nobody will care about getting an extra star.”

    Seems like you were about to reply to this.

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  6. Blogger has lost my entire response!

    Frustrating!

    Now what do I write?
    Okay, let me address the points relating the lost script.

    ”I don't think this is the issue. After all, if there's a corrupt rating system, people will just stop trusting it and nobody will care about getting an extra star.”

    I think my point here was that this is too idealistic. I mean for many tourists these sorts of principles don't apply. They visit not no so often. I think I was also going to say that your point assumes that information is readily available. whilst that applies to the famous ones in the capital, in many places such information does not exist, because the locals don't really use these facilities that much.

    "Why haven't they done then ? Seriously, why haven't they made an investment that supposedly would bring them more business ?"

    I thought this was a good question. But actually, it misses the point. My point is that it makes good business for them not to invest. I am not saying that they somehow miss the point. No its because its good busines not to invest, thats why they don't.

    Now I think its good business for principally two reasons. First, these companies are often monopolies. SO there are not really in a position to be challenged. Second, the government is a principal customers. For many of these companies, government officials owe them lots of money (the parastatal madness problem). This has reduced government ability to enforce regulations. I suspect the failure to enforce regulations is a combination of poor resources and unwillingness to do so for reasons stated above.

    "And I see you didn't comment on the issue of the government mandating that businesses protect themselves from the failure of one of its own agencies, but it's sort of important, isn't ?"

    Because it is irrelevant. The interaction between ZESCO (the electricity supplier) and the hospitality providers is purely commercial. There's no reason why they cannot reflect that in their service agreements with ZESCO.

    I'll revert back on your other points.

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  7. I think my point here was that this is too idealistic. I mean for many tourists these sorts of principles don't apply. They visit not no so often. I think I was also going to say that your point assumes that information is readily available. whilst that applies to the famous ones in the capital, in many places such information does not exist, because the locals don't really use these facilities that much.

    It seems like this doesn't answer my point about regulatory capture being so much of an issue.

    but here's a few things:

    - most people who rarely visit Zambia will not just pack up and go. they go through travel agencies and whatever, and it is travel agencies' business to have knowledge about the hotels (through previous clients or through deals with local agents). And for those who pack up and go, either they go to the 5 stars hotels or they don't care (the people who do "tours" of Africa in Land Rovers).

    - the informations for places outside the capital (and Livingstone) doesn't exist because there's little demand. Although I admit the Copperbelt should have demand, right ?

    - the fact that locals don't use a facility doesn't stop them from having knowledge. They have cousins, uncles who may have stayed there (your relatives would now be able to tell anyone about gens in Ndola motels), they know someone who knows someone who worked there, etc.. In fact, often, the problem becomes the credibility of the information given.

    And just in case you really meant it to answer my thought about regulatory capture not being an issue, the issue is whether the credibility of the system can be affected. i say yes, because it doesn't take much. One disatisfied consumer and travel agencies will pass memos to each other saying "you can't trust the rating system", same with country guides or whatever. They may not say "this hotel is overrated" but they're say the system can't be trusted.

    First, these companies are often monopolies. SO there are not really in a position to be challenged.

    Hmmm.. Didn't you say something about numerous hotels/motels in Ndola not having gens ? Doesn't that mean there was more than one ? Had you said, the only hotel in Ndola, I would have not been so confused.

    And beyond that, wouldn't breaking the monopoly/lowering the cost of entry be a better solution ?

    Second, the government is a principal customers. For many of these companies, government officials owe them lots of money (the parastatal madness problem). This has reduced government ability to enforce regulations. I suspect the failure to enforce regulations is a combination of poor resources and unwillingness to do so for reasons stated above.

    Well 2 things:
    1. If government debt reduced the ability to enforce regulations and is therefore part of the problem, why are you proposing a new regulation as part of the solution ? I mean either it's possible or it's not.
    2. the gen issue has little to do with regulations. I mean, those hotels compete for government money don't they ? (yes, even if the government is a bad payer. that doesn't stop anyone from competiting for contracts and such). If a hotel invested in a generator, they'd have all the government business and probably at higher prices. That's assuming government officials value having a generator (and don't choose to go to a cheaper hotel and cash in the difference).

    Because it is irrelevant. The interaction between ZESCO (the electricity supplier) and the hospitality providers is purely commercial. There's no reason why they cannot reflect that in their service agreements with ZESCO.

    Isn't ZESCO a monopoly ? Can the hotel owners go and purchase electricity from someone else ?
    I mean, it may be technically a different entity, but because of the monopolistic status AND the ownership issue, there's a conflict of interest here.

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  8. ”Because hospitality is an experience good, there is a fundamental asymmetric information issue. But like I said before, that's exactly why rating and reviews are a big business and why informal recommendations matter so much.”

    I question the “big business” assumption.
    As for the “informal recommendations”. This really does not work if you are tourist (I deal with your other tourist related comments later).

    As far as the failure to correct itself, what are the repeated interactions ? I mean I still can't wrap my head around the idea that no one thought of having a gen if the demand was so high. It would imply that Zambian hotel/motel owners have less entreprenarial spirit than their counter-part in Congo or Nigeria.

    Its not that they lack an entreprenueral spirit, it is because it makes good business. The point probably I didn’t get across with the “repeated interactions” phrase was that, for many in the hospitality industry in Zambia, they never get the same tourists come and visit them (well may that’s why! I certainly won’t be going back to the Savoy…lol!). Its actually interesting that the more effective and with resilient demand (the Safari hotels), they seem to have emergency power.

    ”First of all, internalize what cost ? I mean are those costs externalized right now ? Or should the term be "realize" ?”

    Okay let us go through this step by step.
    The problem here is that motels / hotels have poor standards (acute uncleanliness and so forth).
    Normally this would not be a problem if people can readily identify the status of the hotel and are more certaint about the product they’ve just bought (combining the experience and credence dimensions here).
    Unfortunately, as I have often found out when I travel, you can go into a fantastic hotel, only to fall ill days later.

    The cost of my illness is borne usually by the public sector – it’s therefore an external cost on society not borne by the both myself or the provider of the horrible hotel. Incidentally, this is actually also the case with an hotel with poor security.
    Now if most of the visitors live in the same time, repeated interactions with the hotel would reduce the likelihood of these “external costs”. But if they don’t then we can expect, as is standard with all “one shot” interactions, that the hotel would have little incentive, apart from the “ratings mechanism” to address some of the hygiene problems.
    Government therefore needs to intervene to prevent people falling ill and being a burden to the state..etc etc… But as I said, its not just preventative but also because of positive spillovers to other sectors e.g. more tourism etc…

    ”Secondly, I'm not sure having gens in every hotel/motel would have that much incidence of the attractiveness of Zambia as a touristic destination. Except for Cho and his wife.”

    We just stay with my mother or my in-laws :)
    On a serious note, hotel infrastructure is a critical part of a viable tourism industry. I would say that electricity is crucial to the viability of an hotel – how that comes is irrelevant. Those it seems a generator is a cheaper alternative.

    ”it's about the fundamental function of the good. …..It's not about fraud, incomplete information on the side-effects of one particular good or whatever. It's about not having enough knowledge to be able to judge if the good fulfilled or not its main function.”

    I happen to think that goods generally have many attributes and good policy needs to look at all the attributes and suggest solutions. Okay, may be the hospitality industry is 90% experience, but there’s nothing wrong to also consider the other 10% credence attribute, if I can put it crudely like that, in the assessment.

    ”Hmmm.. Didn't you say something about numerous hotels/motels in Ndola not having gens ? Doesn't that mean there was more than one ? Had you said, the only hotel in Ndola, I would have not been so confused. “
    Put it this way, we have a sort of one local monopoly supported by little ones. The local monopoly are usually legacies of the One Party state, when the government controlled everything. When privatization came, they handed it to their friends. The little ones have mushroomed around also led by Government employees. Its not uncommon to find Ministers converting their large houses into motels. Lol!

    ”And beyond that, wouldn't breaking the monopoly/lowering the cost of entry be a better solution ?”
    I think minimum standards are a better way forward. Those standards increase the cost of business, that would only be marginal for the local monopolies. That way customers may even benefit from increasing economies of scale and scope.

    ” 1. If government debt reduced the ability to enforce regulations and is therefore part of the problem, why are you proposing a new regulation as part of the solution ? I mean either it's possible or it's not.”
    Better and more transparent legislation would work I think. But I agree other interventions could also help. E.g. making the rating process more transparent or randomized monitoring etc.
    But note that the problem is that these guys in government also own some of these motels. The problem we have in Zambia, and much of Africa is that the politicians and the business men / women are usually one and the same.

    ”Isn't ZESCO a monopoly ? Can the hotel owners go and purchase electricity from someone else ? I mean, it may be technically a different entity, but because of the monopolistic status AND the ownership issue, there's a conflict of interest here.”
    I just knew that was coming!
    Yes, it’s a monopoly and state owned…of everything…generation, transmission and distribution. Total disaster!
    Nevertheless, I think large hotels can have sufficient “countervailing power” to secure good agreements. But even without that, solar power is a realistic alternative I think for large hotels. It could actually save them money (with positive externalities).

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  9. I question the “big business” assumption.
As for the “informal recommendations”. This really does not work if you are tourist (I deal with your other tourist related comments later).


    I'm saying that country guides, travel press, travel agencies, hotel ratings as a whole are a big business. And they all only exist to balance the asymmetrical information problem.

    The point probably I didn’t get across with the “repeated interactions” phrase was that, for many in the hospitality industry in Zambia, they never get the same tourists come and visit them (well may that’s why! I certainly won’t be going back to the Savoy…lol!).

    It's not only you. I won't go there because if I ever go to Zambia, I'll ask you for recommendation. None of those relatives or friends or collegues would either because they have heard your story. And they may have told your story to other people. That's a pretty large network out of one disatisfied consumer.

    Foreign tourists who had your experience could have complained to their travel agent and get the hotel dropped off of that agent's list. Or the embassy, or a travel guide or to the guy in a bar in Lusaka who recommended it to them.

    Just think about the effect a few hundred disatisfied consumers can have.

    Its actually interesting that the more effective and with resilient demand (the Safari hotels), they seem to have emergency power.

    well...

    Normally this would not be a problem if people can readily identify the status of the hotel and are more certaint about the product they’ve just bought (combining the experience and credence dimensions here).

    That's actually just experience.
    But in any case, is identifying the status of the hotel that hard ? I mean one can visit the rooms, ask about the water and the electricity, right ?
    And even if one does book it before hand, will owners LIE about the conditions if asked ?

    Unfortunately, as I have often found out when I travel, you can go into a fantastic hotel, only to fall ill days later.

    That's still experience. (since you know you got ill).

    The cost of my illness is borne usually by the public sector – it’s therefore an external cost on society not borne by the both myself or the provider of the horrible hotel. Incidentally, this is actually also the case with an hotel with poor security.

    Hold on. The cost is not borne by the hotel because no one asks the hotel to bear the cost. You can sue. Seriously you can.

    Now if most of the visitors live in the same time, repeated interactions with the hotel would reduce the likelihood of these “external costs”. But if they don’t then we can expect, as is standard with all “one shot” interactions, that the hotel would have little incentive, apart from the “ratings mechanism” to address some of the hygiene problems.

    Not necessarily. Like I said, they can be sued. But msot importantly, because everyone know hospitality is an experience good, reputation is crucial. I told you above how your bad experience can result in them loosing more than just your business.

    Government therefore needs to intervene to prevent people falling ill and being a burden to the state..etc etc… But as I said, its not just preventative but also because of positive spillovers to other sectors e.g. more tourism etc…

    There's a few things here:
    - government can intervene by encouraging littigation for cases where the hotel responsibility can be proven.
    - government has an incentive to intervene in health even when it doesn't bear the cost because of spill-over issues (contagion) so i agree with you

    On a serious note, hotel infrastructure is a critical part of a viable tourism industry. I would say that electricity is crucial to the viability of an hotel – how that comes is irrelevant. Those it seems a generator is a cheaper alternative.

    1. I'm making a Rodrik-an "ranking the constrains" type of argument.
    And hotels may not be the biggest issue to improve the attractiveness of Zambia as a destination. (and not all hotels rely on tourists either..)
    2. if electricity is so crucial and we're concerned about Zambia's attractiveness as a touristic destination, wouldn't fixing ZESCO be a better idea ? I mean, generators ain't cheap. Running them isn't either. And buying and running gens powerful to run stuff like fridges or ACs or water pumps is even more expensive.


    Okay, may be the hospitality industry is 90% experience, but there’s nothing wrong to also consider the other 10% credence attribute, if I can put it crudely like that, in the assessment.

    Shall we call it the "the health and sanitation department has inspected this establishment on date" clause ?
    This part is credence, I'll give you that.

    Put it this way, we have a sort of one local monopoly supported by little ones. The local monopoly are usually legacies of the One Party state, when the government controlled everything. When privatization came, they handed it to their friends. The little ones have mushroomed around also led by Government employees. Its not uncommon to find Ministers converting their large houses into motels. Lol!

    So there's competition, right ?
    I mean, that set up is basically common all over Africa (or at least the countries I've been in).. one or two big hotel that was at some point owned by the government and smaller ones, often, former villas.
    One of the smaller ones could invest in a gen and would get much more business than its competitors. In fact, the most luxurious hotels I've been in have been small.

    I think minimum standards are a better way forward. Those standards increase the cost of business, that would only be marginal for the local monopolies. That way customers may even benefit from increasing economies of scale and scope.

    The local monopoly is the big hotel, right ?
    I don't know, Cho. Having a network of smaller establishments has its advantages, mostly, room for innovation and experimentation.

    Better and more transparent legislation would work I think. But I agree other interventions could also help. E.g. making the rating process more transparent or randomized monitoring etc.

    But you've argued that "the number of hotel makes it impossible for government to properly regulate them" and that "the government debt reduced the ability of the government to enforce regulation".
    The quality of the regulation won't resolve either of those issues.

    But note that the problem is that these guys in government also own some of these motels. The problem we have in Zambia, and much of Africa is that the politicians and the business men / women are usually one and the same.

    Well, yeah. but like I said, a corrupt rating would just make people not pay attention to it. That's sort of why it's better if it's private.
    Do you want to start a hotel review website or magazine ? lol.

    Nevertheless, I think large hotels can have sufficient “countervailing power” to secure good agreements.

    How so ? They can't take their business elsewhere. They can only pressure the government. And, the mining industry hasn't managed to pressure enough for the problem to get fixed, I don't see how hotels would.

    But even without that, solar power is a realistic alternative I think for large hotels. It could actually save them money (with positive externalities).

    Well, it's just too expensive for now. I mean what kind of market is there in Ndola ? How much can one expect to make ? How many potential clients are there who are willing to pay enough for a solar powered hotel to run a profit ? Is such a huge investment worth it ?

    That's the sort of question that need to be answered. I mean, yes one would expect monopolies to have room for increased cost of business but it's not necessarily the case. And the "get a gen" mandate may be well over the room they have.

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  10. ”Hold on. The cost is not borne by the hotel because no one asks the hotel to bear the cost. You can sue. Seriously you can.”
    C’mon..are you being serious? In Zambia? Suing the hotel? Only if you have poor value of time and rich enough to somehow persuade the judge to hear your case quickly…lol!

    ”Not necessarily. Like I said, they can be sued. But msot importantly, because everyone know hospitality is an experience good, reputation is crucial. I told you above how your bad experience can result in them loosing more than just your business.”
    As it turns out, my wife said for a small town, suing the owner would cause unnecessary “difficulties” ….lol!
    But I agree, I think clearly reputation is the key.

    ”2. if electricity is so crucial and we're concerned about Zambia's attractiveness as a touristic destination, wouldn't fixing ZESCO be a better idea ? I mean, generators ain't cheap. Running them isn't either. And buying and running gens powerful to run stuff like fridges or ACs or water pumps is even more expensive.”

    Absolutely. Fixing ZESCO is crucial, though it would still not eliminate other perverse incentives for poor managements (assuming the “reputational costs” are not significant or aren’t able to be successfully borne by the hotel, due to poor rating mechanisms or for any other reason).

    But I was thinking of second best world here. Which is realistic, because really ZESCO is a political issue and the government just don’t get it.


    ”So there's competition, right ?
    I mean, that set up is basically common all over Africa (or at least the countries I've been in).. one or two big hotel that was at some point owned by the government and smaller ones, often, former villas.
    One of the smaller ones could invest in a gen and would get much more business than its competitors. In fact, the most luxurious hotels I've been in have been small.”


    Certainly agree with the last sentence!
    But no, there’s no competition, because lodges and hotels deal with different market. The hotels appear to carter for people with little time or can only book in advance (they normally have websites) or largely government employees. Lodges appear to carter for people with more time and also the cheaper end of the scale ….

    The disparity in prices is quite huge actually…
    Incidentally, one of the things that has baffled is why Holiday Inn (With emergence power) is TWICE as expensive in Zambia than in the UK . This goes for many other hotels.

    ” Having a network of smaller establishments has its advantages, mostly, room for innovation and experimentation.”

    The Microsoft argument!

    I would question whether this is an industry that has many frontiers of innovation one can cross. But I do agree that smaller establishments may have more brand royalty.

    ”Well, yeah. but like I said, a corrupt rating would just make people not pay attention to it. That's sort of why it's better if it's private.
    Do you want to start a hotel review website or magazine ? lol.”


    I’ll speak to my brother! It’s not a bad idea. He likes these sort of ideas. He could it “myZambia” and people can rate things not just on hospitality, but local areas and so forth. Lol!

    ”How so ? They can't take their business elsewhere. They can only pressure the government. And, the mining industry hasn't managed to pressure enough for the problem to get fixed, I don't see how hotels would.”

    The mining companies are now trying to generate their own power. But you are correct, the bargaini

    But even without that, solar power is a realistic alternative I think for large hotels. It could actually save them money (with positive externalities).

    ”Well, it's just too expensive for now. I mean what kind of market is there in Ndola ? How much can one expect to make ? How many potential clients are there who are willing to pay enough for a solar powered hotel to run a profit ? Is such a huge investment worth it ? That's the sort of question that need to be answered. I mean, yes one would expect monopolies to have room for increased cost of business but it's not necessarily the case. And the "get a gen" mandate may be well over the room they have.”

    Scale might be a problem, but I am reliably told that solar powered instruments are available in RSA for a few rands and can be set up.
    For example a typical 6 bedroomed house could get very good solar powered technology for $10k - $15k. I suspect economies of scale existing as you trade up.

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  11. C’mon..are you being serious? In Zambia? Suing the hotel? Only if you have poor value of time and rich enough to somehow persuade the judge to hear your case quickly…lol!

    Well, of course, as of right now it's an unrealistic option. But then again, the government can improve that. Making easier to seek compensation for such cases.

    Hell, the government can go at it and seek reimbursement for their expenses.

    As it turns out, my wife said for a small town, suing the owner would cause unnecessary “difficulties” ….lol!

    ahahah.
    Just remember that quote when you're talking about chiefs.

    But I was thinking of second best world here. Which is realistic, because really ZESCO is a political issue and the government just don’t get it. 


    Once again, it's quite shaky to assume the government cannot fix ZESCO but can properly regulate the hospitality industry.

    And the generator solution is incredibly inadequate.

    But no, there’s no competition, because lodges and hotels deal with different market. The hotels appear to carter for people with little time or can only book in advance (they normally have websites) or largely government employees. Lodges appear to carter for people with more time and also the cheaper end of the scale ….

    And you agree with my last sentence ?
    I mean I don't know how it is in Zambia but anywhere I've been, the upper scale market is actually divided between some large hotels (usually part of foreign chains) and smaller lodges with excellent service. And the lower end market is generally small to mid-size hotels.

    I mean, I guess it all varies but if hotels suck in Ndola, it does mean there's a big opportunity to exploit.

    The disparity in prices is quite huge actually…
Incidentally, one of the things that has baffled is why Holiday Inn (With emergence power) is TWICE as expensive in Zambia than in the UK . This goes for many other hotels.

    That is exactly the issue with mandating generators !

    I would question whether this is an industry that has many frontiers of innovation one can cross. But I do agree that smaller establishments may have more brand royalty.

    We may not agree on what innovation means.
    But in the case of the hospitality industry it involves creating new services and the list is incredibly long (especially in Africa where the industry is not exactly old).
    The first hotel to have cable innovated, the first hotel to have a gym innovated, the first hotel to provide wireless internet innovated, the first hotel to have guides or cabs on call innovated, the first hotel to decide to provide pick-up at the airport for its foreign guests innovated, the first hotel to have credit payment innovated, the first hotel to have a website with a virtual tour of the room innovated, the first hotel that iron your clothes for free innovated, the first hotel to say "the hell with all those services, all we give you is a cheap, clean room with AC" innovated etc..etc..etc..

    Of course, I've mentionned obvious stuff, many of which probably exist in Zambia but there's virtually no limits to making people feel comfortable and providing services they may or may not value.
    That's why experimentation is cool.

    But even without that, solar power is a realistic alternative I think for large hotels. It could actually save them money (with positive externalities). 


    The larger the hotel, the bigger the investment.
    I mean I can't wait till solar power becomes cheap but as of right now, it's a high sunk cost.

    Scale might be a problem, but I am reliably told that solar powered instruments are available in RSA for a few rands and can be set up. 
For example a typical 6 bedroomed house could get very good solar powered technology for $10k - $15k. I suspect economies of scale existing as you trade up.

    Hmmm.. Interesting.

    I wouldn't necessarily suspect the economies of scale are that large. After all, the most expensive part is the panels. And the number panels are more or less proportionnal to the amount of energy they generate.

    But hey, may be it got much cheaper.

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  12. I think we agree that in the long term competition coupled with more information about performance is the best way forward. The challenge then is how to increase both.

    On information, I think on top of the rating websites, government could adopt randomised assessments and publish them. But this would be difficult to push for. I mean one of the problems is that foreigners and Zambians at home have different aspirations about what is a good hotel. Sounds bad that, to be honest what someone coming from abroad might judge as poor service is not exactly what a local customer would have in mind.

    So here, we have a classic problem. The tourist's could complain and have ratings website, but its unlikely they would push for the kind of randomised tests. The hotels would naturally oppose that idea, though the good ones might welcome it, as it helps them avoid the lemons problem.

    The competition one is interesting. Clearly reducing the cost of business is a first step. Encouraging more foreign participation is also important. There are positive signs this is taking place.

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