Keeping Pace: Suppliers and Hotel Operators Weigh-in on Challenges Within the Hotel Supply Chain
Keeping Pace: Suppliers and Hotel Operators Weigh-in on Challenges Within the Hotel Supply Chain
- Nov 15, 2019
Courtesy: Amy Bostock | News Source: hoteliermagazine.com
Amy Bostock: What are the biggest challenges your business is facing?
Herman Schumacher: As a procurement-service provider, we have a unique perspective on the challenges facing hoteliers in Canada and across North America. Specifically, from a sourcing perspective, hoteliers are often time and resource challenged, which can lead to price and convenience becoming a primary factor when making a purchase or selecting a supplier. As a result, they can sometimes find themselves sourcing products from suppliers who may care very little about things such as food safety, quality assurance or making sure employees are treated fairly. Finding legitimate suppliers who meet all government regulations in general (and F&B suppliers who meet nationally accredited third-party quality-assurance requirements specifically) can be a time-consuming and daunting challenge.
Meeting demand for locally sourced products — either grown or produced in Canada — is another challenge for Canadian hoteliers. Farm-to-table, farm-to-bottle and forage-to-table are phrases which have become nearly ubiquitous on hotel restaurant menus, as “local” and “sustainable” have grown from buzzwords into business models. Canadians are looking for a locally authentic experience, starting with what they eat, leading to an increased scrutiny of the origin and procurement of their food. Finding enough locally grown products to meet a hotel or restaurant’s daily demand — such as locally raised farm animals for proteins or cage-free chickens for eggs — can be difficult and so can ensuring locally raised cattle are being treated humanely. The same can be said for other more sustainable products, such as drinking straws and alternatives to bottled water. Although hoteliers are encouraged to switch to reusable plastics or even paper, it can still be difficult to find ample suppliers to meet growing demand.
Bill Brooks: Greater competition in the market from overseas is the first thing, which leads to the second challenge — communicating the difference between price and cost when it comes to [buying] equipment. A low-priced machine often costs the operation more over its lifetime than higher-priced machines with advanced energy- and labour-saving features. Solving these challenges starts with our local distributors being trusted resources and making sure we give them the tools they need to be successful in selling the value of new technologies, as well as the added value they deliver after the sale.
Andrew Chlebus: Our biggest challenge — from a technology perspective — is the ever-changing demands and requirements of hotel brands; to have the latest features, the largest possible size, functionality and capability to adjust when brands update and recommend new mandates at a cost-effective price.
Nick Kellock: Changing guest expectations — what your guests expect, how and when they expect it is drastically shifting in the hospitality industry. Today’s traveller comes with new expectations ranging from how they check-in, to amenities in their guestrooms, to menu items. They desire and expect seamless experiences and current technological offerings. Additionally, more business travellers are trying to make the most of their work trips. Rather than just attending a conference or meeting, they want to experience the locality by checking out restaurants, attractions and other offerings. Catering to these “bleisure” (business and leisure) traveller’s needs is of the utmost importance for all our properties across North America.
Secondly, it’s getting harder to find great talent at every level in our business. While our company continues to promote from within successfully, this is not always possible, as our growth outpaces our talent readiness. The war on talent effectively translates to wage pressure and, therefore, increased challenges with sustaining margins.
Anu Saxena: We’re working in a highly competitive and ever-changing environment that presents continuous opportunities to raise the bar. Responsible sourcing and sustainability continue to be at the forefront of our commitment as we increase partnerships with local, small and medium-sized enterprises, as well as minority-owned suppliers. We’re also focused on supporting our partners as the labour market continues to tighten across the industry and unemployment rates remain at all-time lows. To support our partners in markets where labour is highly competitive and seasonal labour shortages are the norm, we’re negotiating agreements with staffing agencies to provide vetted options at negotiated rates to help ensure affordable access to qualified and skilled applicants. We’ll be flexible and adaptable to meet the needs of expanding consolidation.
AB: How does increased M&A activity in the hotel space impact your business?
NK: While increased M&A activity among management companies does not necessarily affect our day-to-day business, M&A among brand companies certainly does — most notably the Marriott/Starwood merger. That deal affects us positively and (potentially) negatively: positively by way of stronger buying power and cost efficiencies; negatively because, in some markets, the Marriott customer now has more hotels to choose from and that may affect us by dilution of channel bookings. It’s too early to tell if this will really be the case.
BB: With technologies that make it easy for management to compare laundry performance of multiple properties against each other, UniMac is well-positioned in the face of mergers and acquisitions. TotalVue allows management and executives to view key performance statistics in their laundry operation — from individual machines to operations spanning multiple locations — including tracking of utilization, productivity, operational expense, labour expense and efficiency. This system will be important when mergers and acquisitions happen, because management can view several properties from one central location and are able to compare properties to ensure they’re delivering the expected results. Ultimately, mergers and acquisitions will make these technologies even more sought after by hotels or their groups.
AS: As major industry players consolidate, we have to ensure that, as a purchasing organization, we evolve to meet the needs of owners and management companies as their portfolios grow. Scale is key — we have relationships with more than 2,000 suppliers around the world, ranging from the largest global suppliers to smaller minority and women-owned businesses.
John O’Neill: We see it as an opportunity — especially at the property level. We’re constantly evaluating the composition of our hotel portfolio to ensure we have the right assets for our long-term strategy and growth. An active and liquid M&A-market provides more opportunity for us to efficiently sell and buy hotel assets. At a REIT level, M&A does seem to be a sector trend and one that will strengthen our industry overall. When we see other hotel REITs merge or be acquired, it sets new valuation benchmarks, which could support publicly traded-hotel owners in the markets.
AB: What industry trends have a direct impact on your business?
HS: As the growth and development of soft brands and boutique hotels continues to grow, so does the need for non-cookie-cutter accommodations and unique amenities to foster more personalized and memorable guest experiences. While differentiation is great, it can be challenging, from a procurement perspective, as the need for a wider array of unique products and solutions to help set each brand apart from the other continually increases. This has impacts across the supply chain and our business as we look to help our clients find cost-effective and innovative solutions.
JO: A big trend is the introduction of new competing brands — even under the same flags — which often erodes our franchise rights within an area. If we sign on for a Marriott- or Hilton-branded hotel catering to a specific segment in a market, we’re often frustrated to see new brands under those same flags introduced and now competing for the same hotel guests. In our opinion, too much brand diversity often erodes the value attached to each franchise, and can cause over-supply issues in markets and pressure hotel performance for loyal franchise owners.
The prevalence of mobile booking, through apps or online, has also shortened the booking window for us and all hotel owners. As a result, it’s often more difficult for our revenue-management team to price rooms based on demand.
AS: The role of procurement has changed significantly over the last few years, we’re no longer solely focused on driving savings through supply-chain reach; we’re also committed to continuously bringing innovative new products to our owners and operators. We challenge our supplier partners to keep us at the forefront of new and unique products and services. For example, we recently cultivated a supplier partnership to provide a biodegradable straw that is not paper or plastic. We understand the trend for faster, more-accurate data analytics and partner with industry-leading innovators to bring our owners access to world-class platforms, such as Tableau, Salesforce and SAP, at no additional cost.
Another trend we’ve seen is the growing diversity of our travellers and their unique preferences. Our role in its rapid growth has been providing solutions that are easily scaled to make the entire procurement process more efficient.
BB: The overall hotel-industry trends highlight the fact that laundry managers want improved efficiency in all areas — including water, gas and labour — which makes technology even more important. Labour shortages, especially in laundry, mean managers and executives are looking to leverage technology to get every bit of efficiency they can out of their equipment and operation as a whole.
AC: The flexibility to adjust to brands’ ever-changing mandates, from a technology provider [perspective], is a trend we see. In response, LG is building and creating ever-adapting TV technology. As the industry leader, when it comes to our technology offerings, the breadth and the depth of our product portfolio and services allows investors and buyers the freedom to adjust to the technology trends fast and easily.
NK: Social media has become a vital component of our business, especially reputation management — few people book a hotel today without checking out the review sites.
Technology is driving ongoing change in every aspect of our business. Digital keys are here to stay, but they reduce the opportunities for guest interaction. In the upper-scale segments, this makes it harder to ensure our guests experience a culture of hospitality when they stay with us.
AB: How are you using technology to be more efficient, customer- friendly and, ultimately, more profitable?
JO: In terms of procurement, our hotels use online procurement programs that enable us to create specific “market baskets” of goods we know our hotels will need on an ongoing basis. By establishing a basket of goods, we order on a recurring basis, which limits the product categories we need to procure and establishes firm pricing. Our hotel vendors are set up within the procurement system and this allows us to place orders electronically and efficiently. We benefit from this process in consistency of product, preferred pricing and streamlined administration.
In terms of using technology in guestrooms to enhance the guest experience or enhance profitability, we have also added smart, touch-screen TVs in some of our guestrooms and occupancy sensors in the rooms, which help us control cooling/heating costs when the room is vacant and, while not yet available, we expect several of our branded hotels will be upgraded to allow mobile check in and “Direct-to-Room” access through an app on their phones.
HS: Generally, we are seeing an increase in the number of hotel companies requiring their properties to implement an e-procurement platform which provides procure-to-pay solutions with the aim of improving business processes through efficiency and cost reduction. As more companies implement e-procurement technology across their portfolios they can expect to gain better visibility into purchasing behaviours which can ultimately help drive compliance and reduce costs.
BB: UniMac employs technologies such as robotic welding and computer-optimized frame designs to produce the industry’s most rugged equipment. Those machines are then put to the test in a state-of-the-art test lab to ensure ultimate performance and reliability.
AS: At Hilton, we understand that partners want an easier, faster and more-efficient way of doing business. Obviously, technology presents itself as a great solution to meet this need and we remain focused on ensuring we create new and innovative solutions to leverage the latest technology to satisfy the needs of our partners.
The launch of our new Hilton Supply Management Center of Excellence is a great example of this. The Center of Excellence uses the latest technology to streamline data, category-intelligence activities and analytics capabilities to provide invaluable information to drive performance and efficiencies in all areas of our business.
NK: On the investor side, Concord partnered with Investor Management Services (IMS) to provide our investors, accountants and other stakeholders easy access to relevant information and updates. This helps them gain a better and more holistic understanding of their current assets through an investment portal powered by the IMS Platform. In our hotels, mobile check-in and check-out services; simplified surveys and rating systems; and even kiosk foodservice ordering has added efficiencies and positively impacted profitability.
In our recruiting world, everything up to the final interview is conducted using technology or mobile applications. Hoops screening and Skype interviews have made the process of hiring swifter to ensure we don’t lose top talent to any process delays.
AB: The shop-local movement is deeply rooted in the hospitality industry. How have you changed the way you do business in order to answer this demand?
HS: The shop-local movement has had a major influence on the way our clients think about their supply chain. Over the past few years, most major hotel brands have developed corporate policies to ensure their operators are sourcing local Canadian products and many are even upping their F&B specifications to now include more ethically and sustainably produced products, such as humanely treated animals, throughout the supply chain. From our standpoint, we have a requirement for produce suppliers to have a “local” offering and we make sure our seafood suppliers carry at least some sustainably harvested products. We also work very closely with our clients to keep them informed and can help them shape their sustainability strategy, while also continually engaging the market to produce high-quality, responsibly sourced products that we can then introduce to our clients.
NK: We’ve increased our emphasis on the guest experience to include relevant local offerings from restaurants, activities and attractions. We make sure all our staff is knowledgeable about events and happenings taking place throughout our local markets to provide guests with recommendations upon request. Many of our newer hotels incorporate local art and other design features. Brand companies are generally seeing the need for creating unique localized themes instead of the old cookie-cutter approach.
BB: The shop-local movement doesn’t really change anything, as the UniMac brand is sold through local distribution partners. Rather than have someone from outside the region selling our products, we have distributors based in the communities they service — so, we essentially have local experts who understand the needs of the various Canadian hospitality markets. This formula also ensures better service and support overall, which reduces downtime.
AS: Our Regional-Operations-Support model means we have dedicated individuals to provide personalized service and market-specific expertise to meet the needs of our hotels. We consider the unique needs of each travel segment and locale and customize supply availability regionally, whenever possible. We cultivate relationships with hotel owners and operators to become more familiar with their hotels’ markets. Our brands conduct extensive market research so they can deliver a fresh approach to hospitality and, in many cases, this means delivering a very locally inspired end product — from the art to the food-and-beverage offerings to design.
AB: What initiatives have you introduced this year to remain competitive?
AS: We’ve invested heavily in our talent and technology, undergoing a global transformation of our Hilton Supply Management business model and transforming how we do business. We have more hotels than ever participating in our procurement program, resulting in global procurement of more than $5 billion in more than 90 countries, with more than 2,000 global suppliers. We’ve changed the way we do business and created exceptional value for our partners. We created a better, bigger version of ourselves with a laser focus on making procurement more efficient for our properties, owners and management companies.
BB: UniMac continues to make improvements on its technology, such as TotalVue, to make it even more user-friendly and the data easier to access and act upon.
AC: LG has technology to assist with all needs and requirements, from in-room technology to being the defacto standard for many hotel brands. Our technology is stretching outside the hotel room to the common areas and integrating with various property-management software programs.
AB: What additional challenges are you predicting in 2020?
NK: Aside from changing customer expectations, the biggest challenge is avoiding margin erosion. This threat is created by wage pressure, brand initiatives and many other factors. Finding ways to mitigate the reality of these upward cost pressures is a challenge all of us face, more now than ever before.
BB: It continues to be a competitive market each year with manufacturers from overseas continually entering the market space. That environment makes it more challenging to get clients to grasp the price-versus-cost message.
HS: Tariffs imposed by the U.S. and other countries will continue to raise supply-chain costs and may ultimately impact Canadian hotels profitability. In response to this situation, Avendra is constantly monitoring developments to understand the potential impact on suppliers and customers. While we take a position of “cautious optimism” in terms of how these trade changes will affect the hospitality industry, it’s clear there are many unknowns, including potential disruption to manufacturing and product supply chains that are globally based.
AC: The economy and slowdown of tourist traffic will both be big challenges in the coming year.
AS: We have industry-leading talent on our team and are leveraging their creativity and innovative minds every day to continue to raise the bar and provide cutting-edge solutions to our partners. As we look to 2020, we’ll continue our focus on simplifying the procurement process to make it more inclusive for our suppliers and more efficient for our properties, owners and management companies.
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