With the long-anticipated rebound in the hotel industry expected to occur in the second half of 2003 or early 2004, hoteliers will soon begin stepping up their expenditures for furniture, fixtures and equipment (FF&E) to remain competitive and meet brand standards. Development should also begin to increase within the next 18 months as the economy recovers and demand rebounds. In 2003, seven trends will impact FF&E purchasing. Overall, it is good news for hoteliers. Pricing will remain a buyer’s market: One of the few benefits that hoteliers can point to over the past two years is the highly competitive pricing for FF&E. Manufacturers will become even more creative in collaborating with purchasers to lower product costs using technology and other resources. Locking in FF&E costs early in 2003 should prove beneficial to savvy hoteliers. Purchasing professionals will be evaluated differently: Purchasing as a profession has changed dramatically over the past five years. Owners and developers now seek out purchasing professionals who have the following core competencies: recognized purchasing acumen; broad business management expertise, including financial evaluation and project management; effective cross-functional communication/team-building skills; proven track record of significant savings; and the ability to evaluate, accept and manage risk. Owners/developers will seek more services from purchasing companies: To get the best possible pricing, owners will ask for more optional services from purchasing firms, such as sourcing more extensive product and price options; providing for more services and management (beginning with purchasing through complete installation); and overseeing management of freight transportation and its costs. Purchasing systems technology will continue to improve: One example is that more manufacturers now provide real-time order status via the Internet, which allows better coordination and delivery. Purchaser and purchasing company’s ethical and operating standards will come under even greater scrutiny: The corporate scandals and various lawsuits that have been the subject of extensive news coverage in 2002 have caused owners, developers and hoteliers to look more carefully at purchasing procedures and practices. The “agent-only” model, where the purchasing firm acts in a fiduciary role to the owner, will increasingly become the industry standard. It is totally open, tolerates no hidden rebates or kickbacks, and ultimately delivers a lower price and better value to the owner. Look for fiduciary requirements to be part of every progressive purchasing agreement in the very near future. Some small, undercapitalized businesses will continue to be negatively impacted: A fiercely competitive market will continue to negatively impact the least financially strong suppliers. Sadly, many of these businesses will struggle to survive in the current economic climate. The good news is that as the economy rebounds, the survivors will be stronger and more adept competitors. Capital expenditures will increase: After the sharp cutbacks in renovation over the past two years, a growing number of hotels can no longer delay refurbishment programs. Soft goods and public space renovation will lead the way in 2003 as the most popular items. Brands will step up brand standard enforcement and introduce new design prototypes to maintain a competitive edge while providing franchisees with greater value. Look for overall FF&E purchasing activity to increase in 2003, especially in the second half as the hotel industry begins to enter the next upside cycle, and 2004 will likely show a dramatic increase as the economy finally begins to shake off the doldrums of the past few years. The good news is that the ability for hospitality purchasing professionals to create value for owner’s needs has resulted in better management and cost savings for hotel owners and developers. John McDonald is a member of the board of direct
