Cutting costs means finding alternative products that fit clients’ quality profile.
When Hôtel Le Crystal opened its doors in Montreal in 2008 the economy was in a recession and the hotel, which promised a high-value, full-service experience was about to celebrate its grand opening. Before it did, though, there were items to buy, public spaces to furnish, rooms to stock, linens and toiletries to choose — all in the midst of economic turmoil. “We walked into the market with the promise of a very high standard on opening, in a marketplace that was flat at best and encroaching into a declining period,” recalls Geoff Allan, GM of the 131-room hotel.
The model, specifically, relied on a certain level of detail, and a selection of choice products and materials that added to the guest experience, which meant that quality had to be maintained. It’s a challenge at any time, but even more so during a recessionary period when budgets are tight.
The team had a purchasing budget of approximately $3.2 million to work with for the entire hotel. Cuts had to be made: the heated mirrors planned for the guest bathrooms were nixed, saving approximately $32,000 and loop nylon carpeting was chosen instead of wool, with a built-in underlay, saving approximately $1 million. “It was smart purchasing, in terms of being innovative and entrepreneurial,” says Allan.
Le Crystal isn’t the only hotel that had to stretch its purchasing dollars further. Hoteliers have always tried to get the most bang for their buck, but today, more than ever, they’re looking for ways to spread their budgets further, while keeping up with their purchasing needs. But many, like Allan, aren’t willing to compromise quality to cut costs.
“Hoteliers understand they have to be creative; they have to find ways to cut costs”
“Hoteliers understand they have to be creative; they have to find ways to cut costs,” says Yanick Tremblay, president of the Quebec-based YK Purchasing Group. Tremblay works with hoteliers across Canada and the United States (including Intrawest and Ritz-Carlton), helping them purchase products for new properties or sites being renovated.
Working with his clients’ favoured suppliers as well as his own network, Tremblay searches out products that are hotel-durable, fit the designer’s vision for the space and meet the quality level the client expects — all for the best prices. And, for Tremblay, getting the best price requires a certain amount of skill. It means knowing what to buy locally [televisions, for instance, so they’ll have the necessary warranties] and what to source from China, like artwork and lamps. By way of example, Tremblay cites an example of a chandelier he recently bought for a client. Had it been purchased in Canada, it would have cost $15,000. However, he managed to have it made for about $5,000 in China. In some instances, it may mean not buying anything at all. In fact, Tremblay’s been known to suggest holding off on purchases, or for renting items such as dance floors or extra chairs for functions on a case-to-case basis. A dance floor, for instance, can cost $5,000 to buy, while hotels that rent for a specific function can pass the rental fee on to their client.
As for any non-value-added costs, Tremblay avoids them whenever possible. “We try to avoid warehousing fees,” he says. “We count on the manufacturer to hold the merchandise until we’re ready to do the installation.”
Tremblay’s know-how and his relationship with suppliers help him source the best deals for his clients. Avendra, an American procurement company, also prides itself on the relationships it has with the 900 suppliers. The company purchases for hotels and other hospitality organizations across North America, taking care of ongoing items, including food, bar supplies, towels, TVs and lighting. Avendra’s clients are top-tier brands such as the Marriott, Fairmont and Hyatt.
“Sometimes saving money can mean spending more at the onset”
Don Hecht and Alex Dudnik — Avendra’s vice-president of Strategic Contracting for Food and Beverage, and director of Strategic Contracting for National Food and Beverage respectively — have both noticed budgets being cut throughout the regions they service, in Canada and the United States. With increasing food costs, money has been particularly tight in that department. But buying in bulk for multiple clients, the pair says, can save money.
Cutting costs means finding alternative products that fit clients’ quality profile, Hecht adds. Take olive oil, for example, a staple in many hotel kitchens. As most people know, pure extra-virgin olive oil can be costly. To help cut food costs, Avendra’s food and beverage team recently sought out an alternative that didn’t compromise quality. Working closely with its clients’ chefs to test potential products, it discovered there was another option to traditional pure extra-virgin olive oil. “What we found was a couple of sources that do Mediterranean pure olive oils,” Hecht says. “It may be a mix of a Spanish olive oil and an Italian olive oil, but they’re both pure; they’re both extra-virgin. So we were able to significantly reduce the cost.” The amount of those savings vary from client to client.
Sometimes saving money can mean spending more at the onset, adds Hecht. Take rib eye steak as an example. While it’s often purchased as a whole rib section that the hotel’s chefs will ‘portion,’ Hecht and his team have suggested to certain clients they purchase it pre-cut instead. While it’s theoretically more expensive, because there may be less waste and labour involved, they can choose cuts specifically for their needs, which can result in savings in the end. “We’re trying to find the right product for the right application, which ultimately yields the customer the best savings overall,” he says.
“You get what you pay for, and there’s no benefit to purchasing a product of lower value if the quality isn’t the same”
For some hoteliers, a highly focused purchasing company like Avendra is the answer to help them reduce budgets and meet their purchasing needs. Other hoteliers, though, prefer to create relationships with suppliers themselves, working one-on-one in purchasing and procurement.
Best Western, for example, has an in-house purchasing team. And, it’s business as usual for its purchasing department, says Priscilla Nesbitt, director of Best Western Supply Canada. “The economic downturn in Canada hasn’t affected our brand as much as in the U.S. Therefore we haven’t felt the effect on our purchasing,” she says. While member hotels, independently owned and operated, may decide to hold off on capital expenditures such as new televisions, carpeting or case goods, overall there haven’t been any major budget cuts.
And, like Allan, Nesbitt doesn’t believe in reducing quality to cut costs; keeping quality consistent through all of the Best Western hotels is imperative. “You get what you pay for, and there’s no benefit to purchasing a product of lower value if the quality isn’t the same,” she says. Costs can be cut, she says, in other ways, including working with the manufacturer directly whenever possible.
Meanwhile, keeping costs in line has always been part of the Starwood Canada mandate regardless of the state of the economy. Still, there are certain products it won’t compromise on either, says Abdul Hafeez, director of Procurement for the Toronto-based company. Those include Westin’s Heavenly Bed — a brand the chain is known for — and the upscale products used at the luxurious St. Regis and Luxury Collection Hotels and Resorts.
Trends and company commitments can also affect purchasing, and Starwood, like many other hotel companies these days, has made it a corporate mandate to purchase green and ethically produced products. For them, it means working closely with suppliers to ensure those commitments are met.
Quality, it seems, isn’t the only thing that can’t be compromised. Even in these challenging economic times “we are very careful,” Hafeez says. “We do our proper due diligence on the suppliers. We’re cognizant about it.”
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