New Year. Same Headlines. While the COVID pandemic continues to affect global economies amid ongoing supply chain and inflation challenges – opportunities to centralize purchasing, find hidden gems among substitute products, and become more agile decision-makers have been bright spots in the hospitality industry.
It’s uncertain when the supply chain will fully regain stability, but the creativity and resourcefulness that has brought us this far will continue to inspire new ways of delivering luxury experiences to our guests.
I’ll share some practices from the past year that we have implemented to help luxury properties maximize their budgets, while not wavering on quality or experience for guests. First, though, let’s assess the situation facing the luxury hotel industry in 2022.
Nearly every industry is facing some version of the same struggle: labor shortages, demand outpacing supply, and illness driving higher-than-average absenteeism. Sound familiar? This lack of stability is impacting the manufacturing, distribution, and shipping industries creating an immensely complex situation for managing your properties and guests’ expectations.
Property managers are facing the added strain of having to order farther ahead despite the uncertainties of travel as emerging virus variants lead to new travel restrictions. Items like patio heaters and outdoor furniture can take anywhere from 4 – 30 weeks to be delivered. We are recommending our customers purchase those items now to ensure delivery on time for warmer weather and outdoor events.
Higher freight costs driven by high demand, labor shortages and higher fuel costs are taking their toll on manufacturers and distributors and are among the drivers of price increases. Additionally, increased labor costs, COVID compliance expenses, and commodity price increases are fueling an already difficult business environment for all hospitality segments, including luxury.
Preparing for longer lead times and taking advantage of current pricing are the two biggest pieces of advice I am currently giving our clients. Avendra forecasts that supplies will continue to remain tight and delivery times long. If you know there’s something you’re going to need, don’t wait; get it into your inventory now or it may not be available.
Furthermore, food and non-food suppliers have reduced the number of SKUs available to maximize output. Low-volume items have been temporarily or permanently discontinued. Product availability issues will likely continue for the foreseeable future.
Avendra’s clients, particularly in the luxury sector, find our supplier relationships to be a true benefit in these situations. We are able to help them source what have become hard-to-find supplies for the unique food and non-food experiences luxury travelers have come to expect from them.
Procurement Strategies to Drive Growth
The bright spot in all of this is that you’re not without options. Creative and strategic management of existing and available resources yields surprising successes. Remaining nimble in the face of disruptions and being amenable to suitable substitutions are two important responses to help you weather this storm.
“Promoting a strategic sourcing model instead of a reactive, tactical, or transactional model where the procurement function is recognized as a driver of growth is vital,” said Pierre Sierralta, Regional Manager of Field Support & Customer Relations at Avendra in South Florida, one of the strongest luxury hospitality markets. Additionally, Pierre emphasizes inventory management and demand planning, as well as focusing on long-term partnerships with key suppliers as being critical to managing supply chain challenges and rapidly increasing inflation.
Centralizing purchases among properties saves money and assists hotel operators with long-term solutions. Although it may not make sense for every hotel to have the exact same widget, let’s use key cards for example, it does make sense to consolidate your purchases as a group to get a better price for that key card.
A brand with multiple properties turned to Avendra’s Luxury Account team last year and here’s the solution we offered. We knew how important it was to the brand to have a sense of identity and locality for each property, and each wanted a different design on their key cards. That is possible without raising the costs per card!
With help from an Avendra-approved supplier to consolidate this purchase, they were able to lower their costs on key cards by approximately $23,000 annually. The supplier was able to give each property in the group a better price per key card because the group was purchasing 100,000 at a time (and warehousing at the supplier’s warehouse), rather than each individual property sourcing its own supplies.
Historically, organizations with multiple properties have operated in a de-centralized manner with each property managing their own branded inventory. However, our experience and supplier relationships helped this property group make significant savings while maintaining individual brand identities. Rather than each property going to multiple suppliers and each ending up with a higher cost for their supplies, Avendra provided a profitable solution for the entire organization.
Many of our clients have made similar changes to their procurement habits during the last two years. One brand found $140,000 in savings in 2021 by consolidating just three items: pens, key cards, and slippers. Now more than ever innovative solutions like these lighten the load for individual property operations teams, reduce stress, and give them more time to focus on the day-to-day needs of their guests. Helping clients discover savings and exceed their guests’ expectations is always our goal whether we are in a challenging environment or not.
While we will all probably continue to ask, “When are we returning to normal?” The better question might be, “Why didn’t I think of this time-saving, cost-saving solution before?”
Flexibility, creativity, strategy, and solid relationships will ensure a successful emergence from these pandemic challenges. Avendra’s Luxury Accounts team has seen it time and again with their clients during the last two years. Sharing our expertise and resources with our clients has led to profitable partnerships and unforgettable guest experiences.
About the author
As an Account Director for the Luxury Segment at Avendra, Annie Davidson leverages her extensive knowledge in procurement operations and process improvement. Her experience in hotel operations, corporate procurement, multi-brand growth & supply chain strategy helps her assist clients with strategic insights, growth, savings, and sustainability insights. As North America’s leading hospitality procurement services provider, Avendra’s supply chain management solutions are tailored to a clients’ business strategies. Avendra combines years of hospitality expertise, purchasing power, services, and eProcurement tools to help customers impact the bottom line, improve operational performance and better serve their guests. If you are seeking a procurement partner who has the relevant expertise to support your strategic goals, seek Avendra. www.avendra.com