June 21, 2021
Contributing Expert: Charles Welch | Senior Manager, Hospitality
There's no question that the pandemic forcibly disrupted how we conduct business across the globe. The way-of-the-world is unrecognizable as previously stable industries transformed overnight as markets took a hit. Perhaps one of the markets most impacted by Covid-19 was the hotel industry. With travel bans and businesses in popular destinations closed, hotels are hurting. With that, hotel investors and franchisees who rely on an operating hotel for cash flow have greatly suffered since the start of the pandemic.
The coronavirus wreaked havoc on global supply chains as lockdowns closed manufacturing facilities and disrupted the regular flow of trade. At the beginning of the pandemic, the slowdown of economic activity followed by a rapid rebound in high trade volumes caught companies off guard. In addition, freight costs have nearly tripled this last year, adding another challenge for hotel franchises and investors to complete their hotel projects within budget and on time.
Another issue the hospitality industry must contend with is that most FF&E (furniture, fixtures, and equipment) arrive as imports. As retailers and manufacturers try to rebuild inventories, the surge in shipping volumes creates a shortage of shipping containers. Both empty and product-filled shipping containers traveling across oceans to meet demand create a considerable influx of shipments arriving at domestic ports, causing massive bottlenecks. Therefore, making it increasingly difficult for hotels looking to renovate or expand as the world reopens to partner with suppliers who can meet on-budget deadlines.
According to CNN Business, "The bottlenecks are widespread, affecting transport by air, ocean and road." Bob Biesterfeld, CEO of C.H. Robinson, one of the largest global logistics firms, told CNN Business in a recent interview, "There's been a great convergence of constraints in supply chains like I've never seen before. It really has been unprecedented."
CNN further reports that the port of Los Angeles, which accounts for nearly 37% of all imports, processed the equivalent of nearly 800,000 20-foot containers in February of this year—the busiest in its 114-year history.
If hotel owners and their parent companies have learned anything from the pandemic, it's how fragile the global supply chain really is. As the U.S. and other economies start to move toward normalcy, these disruptions show how messy the reopening of businesses and an entire industry can be, even a year after the beginning of the pandemic. STR Reports predict that the hospitality industry won’t make a full recovery to pre-pandemic levels until 2024, so there is still a long road ahead for hoteliers.
The global pandemic’s supply chain disruption has stressed the importance of trusted supplier relationships. When it comes to lead times and product quality issues, hotel owners need to have a supplier they can trust to fulfill their needs and show empathy for what they went through last year.
Transparent communication between suppliers and customers has also become increasingly essential. Proactively communicating about the difficulties suppliers face and how it might affect their ability to manufacture, source, and distribute product on time helps customers anticipate realistic timelines. Hotel interior providers with a strong balance sheet and well-established supply chain can confidently communicate and monitor their supply chains in real-time. This allows suppliers to share changes as closely to their occurrence as possible and avoid significant project impacts. However, providers must also show an element of trust and have the confidence to communicate openly.
The interference in the global supply chain has also shed light on the issues smaller, less diverse suppliers are currently facing. Smaller, more local suppliers often rely on just one location for their business. At any point, disruption is a risk, putting hotel owners at higher uncertainty for project delays and, in turn, considerable revenue loss. As a result, some hoteliers opt for more extensive, better-established suppliers with more diverse supply management.
As the supply chain starts to recover, hoteliers must consider where they are getting their FF&E, millwork, and casegoods. In the event of a fallout from the COVID-19 pandemic, will their hotel renovation or new build be put on hold indefinitely, or will their supplier be able to fulfill promises made and keep their project on schedule? As people begin to travel again, hotels and resorts want to get back to increasing revenue. The construction community must focus on current project completion so hotel owners can start benefiting from renovation and new build investments. A stable global supply chain helps hotels get their project on track and begin serving guests as quickly as possible.
With locations in Asia-Pacific, Latin America, North America, and Europe, EIS’s clients benefit from flexibility and consistency wherever their project needs may be. We have strengthened our supply chain resilience through our Supplier Diversity Program and strategic global partnerships. For hospitality specifically, our North America supply chain and manufacturing facilities, along with strong supplier relationships in the Asia-Pacific market, reduce costs, minimize risk, and keep our hotel clients’ projects on schedule.
We are proud to partner with a network of 896 unique suppliers and source from 27 countries in 186 different product categories. Together we deliver unmatched quality and reliability. Our dedication to innovation has positioned us to provide seamless experiences. We simplify the complicated.
Contact EIS to start your hospitality consultation. We’re here to help you get your property up, running, and moving toward profitability.