NATIONAL REPORT—Just as tariffs have been a hot topic in the national news, they have also been front and center for hospitality purchasing companies, which have seen the effects on the industry firsthand.
Leslie Tishman, president, Grace Purchasing, in Richmond, VA, has begun sourcing from countries other than China, which, as of press time, had a 25% tariff on certain goods—and has found better prices.
“We are working on a new hotel project, and we were pricing out Axminster carpets; I received quotes from one manufacturer that produces everything in China and another company that is producing in Egypt, and the cost savings in terms of Egyptian looms is significant,” she said.
The price difference in the base cost ended up being $4 per square yard. “When you translated that to the quality and looked at the bottom-line numbers, it was a fairly significant number,” said Tishman. “The quality is very comparable between these two companies. They are both top-tier hospitality producers, so I would not have made a decision or recommendation based just on their design capabilities or their reputation in the industry. It really did come down to the differential of price.”
Tishman noted that this was one of the first times she had been comparison shopping since the tariffs were enacted. “The company had actually mentioned in its comments that they had had a slight price increase,” she said. “That was, for me, when it really resonated as a real factor that it is having an impact on FF&E specs. It certainly encouraged us to think about who has looms in Europe, so we can avoid the concentration of looms that are in China right now, and help our clients get the same quality product for less.”
Tammy Miller, president/founder of Alternate Resources in Hartsdale, NY, has also been sourcing from countries other than China, including domestically. “We, personally, have been doing a lot of domestic sourcing…of wherever we can get things, and trying to work with our vendors to address the price issue so that it is not significantly more,” she said. “It has become more realistic. There are also vendors here that have stocked up their warehouses with a lot of merchandise, so we don’t have those issues. They are honoring the lower prices without the tariffs. I think the industry stood ready for this for a long time and has addressed a lot of things around it.”
Tishman has been looking at domestic items as well. “We like doing things domestically,” she said. “It makes a lot more sense with the time line, and you can negotiate budgets based on volume. Sometimes, you have a closer relationship with the actual factory that is making the goods.”
Lori Patten, principal/founder, Patten Purchasing, in Yorkville, IL, has noticed that prices between goods manufactured in China and those manufactured domestically are coming in line with one another. “The medium-quality vendors think that they can get close to the China prices,” she said.
Miller is concerned about the quality of items now that some vendors have moved factories from China to other countries. “The vendor response is that they are moving it out of China, to places like Malaysia or Vietnam,” she said. “Ten years ago, China had all kinds of quality-control issues because the factories were all new, the staffing wasn’t all right, the quality wasn’t right. There were tons and tons of issues. Now, you are 10 years into that cycle, and it has been drastically improved. Now, you go to a new country and you build a new factory, and you are out of the tariff situation, but you still have a good learning curve just to get the quality and the quantity output of what you need to be successful. We, as purchasing agents, are very nervous about those answers right now.”
Foresight also comes into play. For instance, Patten has been preparing for the tariffs for some time. “Because people knew it was coming, we had to pad budgets ahead of time for it,” she said. “For bids we are getting now for the future, we are making sure that everything is covered; in September, when it was the 10% tariff, some of our vendors actually offered to take care of some of the percentage so the owners would have to pay 2% and they were paying 8%. Vendors I have worked with have been more than accommodating, but now it seems like it is going to get a lot worse.”
Tishman reports that she has heard from several vendors that have added a surcharge since the tariffs on China increased from 10% to 25%. “I think we are going to shift to companies that are producing in countries other than China,” she said. “They are probably going to see a bump in their business for no other reason than that people are avoiding the tariff impact.” HB