Travel & Hospitality Tech Outlook | Tuesday, December 06, 2022
The hospitality industry consists solely of hotels, restaurants, and resorts that purchase goods and services.
FREMONT, CA: Hospitality procurement is a division of the larger field of purchasing or procurement. The exclusive focus of hospitality procurement is the acquisition of goods and services for the hotel, restaurant, and resort industries. This industry has requirements that are not typical of other industries. There are four critical areas of procurement in the hotel industry: sourcing, contract negotiation, payment terms, and end-of-life management. Although these concepts apply to all procurement, they have distinct meanings in this industry.
The sourcing of materials entails the identification of suitable suppliers, the issuance of requests for proposals or bids, and the inspection of various manufacturing facilities. In the hotel business, the materials used for furniture and equipment must be highly long-lasting and suited for use by multiple individuals. Quality is an issue with all items, but longevity and replacement are critical concerns in hospitality buying. For instance, a hotel might acquire hundreds of seats in the lobby. These designs must be distinctive to the area while also being easily repairable.
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The push toward eco-friendly solutions poses a particular procurement difficulty for the hospitality industry. This sector requires a high turnover rate for fixtures, furniture, appliances, and consumables. In addition to the durability issue, mass-produced goods often have a significant environmental impact due to the widespread usage of nonrenewable resources. Although many businesses are meeting client requests for ecologically friendly service by reducing washing and other services, the materials used remain a barrier.
The focus of contract negotiations in hospitality procurement is typically on long-term agreements for various brand-name sites. Typically, a hotel chain has four to five distinct brands, each of which must have a distinct look and feel. Contracts are negotiated by the chain, although differing requirements may mandate the employment of local suppliers or several unique layouts or color and design schemes.
Due to the prevalence of cash flow problems in the hospitality business, payment terms are a crucial part of procurement. Typically, payment terms of 90 to 120 days following receipt are arranged. There has been a recent shift toward payment terms based on a percentage of contract fulfillment, which establishes a better balance between payment to suppliers and the ability of the hospitality company to manage the project and its timeline.
In the hospitality sector, end-of-life management is a recurring challenge. In most cases, equipment is replaced every two to three years. However, it may be replaced more frequently in high-end facilities—the requirement to regularly update the appearance results in various items with residual usable lives after being replaced. As a result, several companies have included removal and compensation procedures in their hospitality industry procurement contracts. The supplier may then collect the equipment, renovate it, and resell it to other businesses or directly to the consumer.
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