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The field of hospitality procurement is a subset of the broader field of procurement or purchasing. Hospitality procurement is focused purely on the purchasing of goods and services for the hotel, restaurant, and resort industry. This industry has very specific needs that are not standard in any other industry. There are four primary aspects to hospitality procurement: sourcing, contract negotiation, payment terms, and end of life management. Although these terms apply generically to all procurement, they have specific meaning in this sector.
The sourcing of materials includes the identification of suitable vendors, issuing of requests for proposals or quotations, and inspection of various manufacturing plants. In the hospitality industry, the materials used for furniture and appliances must be highly durable and designed to be used by a wide range of people. Quality is an issue with all products, but the primary focus in hospitality procurement is longevity and replacement. For example, a hotel may purchase hundreds of chairs for the main lobby. These designs must be unique to the location, but can be easily repaired locally.
The trend toward environmentally friendly solutions presents a unique challenge to hospitality procurement. This industry requires a high rate of turnover for fixtures, furniture, appliances, and consumable products. In addition to the durability issue, products that are made in mass production facilities typically have a high impact on the environment, with the widespread use of non-renewable resources. Although many firms are addressing client requests for environmentally friendly service through reduction in laundry and other services, the actual materials used remains a challenge.
A contract negotiation in hospitality procurement tends to focus on long-term contracts for a range of different brand name locations. For example, a typical hotel chain has four to five different brands that must all have a unique look and feel. The contracts are negotiated by the chain, but may necessitate the use of local suppliers or multiple unique layouts or color and design schemes to meet the different requirements.
Payment terms are a critical aspect of hospitality procurement due to the cash flow issues that are common in this industry. Typically, the terms are quite generous, with payment negotiated for 90 to 120 days after receipt. There has been a recent trend to percentage of contract completion payment terms, which creates a better balance of payment to suppliers while allowing the hospitality firm to manage the project and timing.
End of life management is an ongoing challenge in the hospitality industry. Equipment is generally replaced within a two- to three-year time frame, and may be shorter in higher-end facilities. The need to continually refresh the look results in a range of products with useful life remaining after being replaced. As a result, many firms have built a removal and reimbursement process into the hospitality procurement contracts. The supplier is then free to pick up the equipment, refurbish, and then sell these items again to other firms or direct to the consumer.