Costs and Delays Drive Innovation and Creativity in Facing Challenges
Like many industries, hotels are at the mercy of the delays in the global supply chain.
Sarah Churchill is a senior manager of business development for Benjamin West, a procurement company that spends $1.5 million daily on furniture fixtures and equipment and operating supplies and equipment. She said global supply chain issues have produced issues with freight and logistics to the point of delays and higher costs.
“This is the most challenging climate we’ve seen in the industry,” Churchill said.
Hotel operators agree this is a time unlike any other as far as obtaining goods and supplies.
Rob Auerbach, senior vice president of purchasing for Island Hospitality Management, said the procurement situation is “much worse than usual” with inventories low and freight more expensive.
Philip Bates, CEO of TMC Hospitality, agreed that the procurement situation is “much worse than usual.” For instance, a contractor approached TMC Hospitality toward the end of a contract in an attempt to retroactively recoup material cost overages backdated to March 2020.
“We rejected the request,” Bates said. “But it is just one example of how the construction market is responding to the recent challenges.”
While peak lumber pricing has softened, order backlogs and supply chain issues are a long way from meeting demand “and therefore we have found that price reductions have not substantially fed through to job pricing at this point,” Bates added.
What has driven the problems, Churchill said, is that “parts of the world did not slow down during COVID.” The hospitality industry represents just a small portion of the home furnishings industry and the overall global supply chain, she said. With so many people stuck at home during the pandemic, home improvement projects soared in number and so demand was rechanneled.
One complication that became worldwide news was the blocking of the Suez Canal in March, which further slowed deliveries. Benjamin West actually had a container on that ship, Churchill said, but fortunately it had placed the order early enough so there was no issue with the overall project turnover.
Even during the pandemic, some well-capitalized hospitality clients “did not hit the pause button,” Churchill said. They realized this was the time to do a 20- or 30-year renovation so they could address major building issues that cannot be handled with normal occupancy so they could be ready when guests returned.
Kim Kushner, managing director of supply and studio design for Best Western Hotels & Resorts, said the company is experiencing an “unprecedented global disruption” to the supply chain.
Production issues related to a scarcity of materials, labor shortages, factory shutdowns due to COVID-19 outbreaks and lack of staffing and transportation issues have created “the perfect storm,” she said. Shipping costs have also increased because manufacturers are dealing with a scarcity of containers, port closures and congestion and containers costing at least three times more than usual.
Raw materials that are used in so many products — nylon, yarn, rubber, lumber — are scarce and costs have increased, Kushner said. Bigger projects with high-dollar spend, including hotel renovations, are expected to take longer than they typically would, and Best Western is advising hotels to take that into consideration when planning.
Bjorn Hanson, adjunct professor at the Jonathan M. Tisch Center of Hospitality at New York University, said procurement is inconsistent even by category of equipment and material. For example, small air handlers are generally available while large air handlers are not. Some stone flooring materials are readily available; others are unavailable and vendors are unable to commit to a delivery time.
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