Sunstone’s BuyEfficient E-Marketplace Carves Out A Low-Cost Provider Niche

SAN CLEMENTE, CA— Like its no-nonsense name, BuyEfficient, an Internet-based purchasing consortium based here, makes no bones about what its mission is. Simply put, the wholly owned subsidiary of Sunstone Hotel Investors LLC is out to save money for all of its members via consolidated buying. According to John Noller, BuyEfficient’s COO and Sunstone’s vp/corporate purchasing, his e-marketplace platform is used as a means of consolidating, tracking and reporting on the purchasing habits within an independent hotel or management company’s organization and all of their hotel locations, “and provides them real-time tools with respect to volume purchases and vendors they are doing business with, and in the best-case scenario, provides for 100% capture of rebates and incentives.” “We have subscribers that receive back all of the manufacturers’ rebates, and the only mark-up is our disclosed fee,” said Robert Alter, chairman/CEO, Sunstone. “And we don’t charge the manufacturers to be on our program.” In the current economy, Noller considers such a business model an advantage. He noted some other e-marketplaces require members to sign a supply chain access agreement. “In effect, that’s an acknowledgment that prices could be marked up as a profit center….” or a particular e-marketplace could “capture and retain 100% of any and all rebates and allowances that might be earned on your purchasing spend. To our way of thinking, as independent owners and operators, no one should benefit from the aggregate spend of our purchasing dollars other than ourselves. That’s the basic premise of BuyEfficient,” he said. Originally started in 1999 as a proprietary purchasing platform for Sunstone’s mixed-bag of owned and managed hotels, BuyEfficient now has 212 member hotels and is expected to continue growing at an average rate of six properties per week. Members pay an upfront fee, which Noller said could be recaptured in under two months depending on activity. “The one-time fee”— currently $1,000 for limited-service and $2,500 for full-service properties— “has more to do with certain aspects of our software development than it does with there being a cost for membership. We didn’t take a build-it-and-they-will-come mentality to e-procurement,” said Noller, who noted the fee differentiation basically stems from how much background work goes into system set-up for the hotels. “I think we’re in a unique position because we’re not a brand, and when we sit down with management companies, we’re on the same side of the table instead of across the table,” he said. “We charge a fee based on the software— effectively the medium through which we transact our business— and it allows us to run reports that can invoice manufacturers and suppliers for rebates and incentives based on aggregate participation of membership. We make sure it’s all collected and passed back to the appropriate entities.” Because Sunstone’s 54-property portfolio is heavy with major franchise brands— Hilton, Radisson, Holiday Inn, Sheraton, Ramada and Marriott among them— it was realized first-hand that BuyEfficient could be put to better than just in-house use. “Our frustration came out of the fact that Hilton had a program with Sunbeam and here was the price point; Marriott has a program with Sunbeam and here was a different price point. And my Hiltons had to buy from the Hilton program and my Marriotts from the Marriott program, and so on. If I only owned one or two Holiday Inns, I might be best served going through the Holiday Inn program. The problem is we’ve got price points all over the board,” said Noller. To counter that, BuyEfficient has struck national contract programs with manufacturers so its membership can buy Sunbeam, for example, at a universal price point, noted Noller. Manufacturers also post contracts to a “short-list” folder for a particular hotel to ensure “real-time tracking and monitoring by charter of account expense, by budget.” For example, said Noller