Understanding the Changing Dynamics of Procurement in Hospitality

Posted by Rick Yvanovich

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Procurement in the hospitality industry is not just about buying goods and services; it is a strategic process that impacts the overall quality of operations. With responsibilities ranging from sourcing furniture, equipment, food, and beverage supplies to managing relationships with suppliers, this function has evolved from mere cost-cutting to becoming essential in achieving business goals.

The gear shift was necessary to keep up with the dynamic market and customer demands. So, what does the future hold for procurement in hospitality?


Understanding the Changing Dynamics of Procurement in Hospitality

The changing role of procurement in hospitality

The sole purpose of the procurement function in hotel businesses used to be mainly cost savings centred around negotiating cheaper prices from suppliers and vendors for items needed to run daily operations.

However, as technologies have advanced, the procurement function in hotels has gradually become more strategic. Procurement teams now have access to vast amounts of data and advanced analytical tools, which allow them to gain deeper insights into spending patterns, supplier relationships, and market trends.

Read more: These 8 Tech Breakthroughs May Redefine Your Supply Chain

These insights have certainly enabled procurement officers to not only negotiate lower costs but also streamline operations, influence the design and development of new products, enhance quality standards, and ensure supply chain resilience. More importantly, this evolution also empowers hotels to gain a competitive edge beyond cost reduction.

For instance, analysing five years of supplier performance data helps procurement identify key areas for improvement and work with top suppliers to jointly develop customised, higher-quality products that enhance the guest experience. Implementing cloud procurement systems gives hotels control over their extensive supply chains and makes ordering more efficient.

Moreover, adopting new technologies also allows procurement to explore innovative solutions and new categories of goods and services, such as piloting new green initiatives or collaborating with local producers to offer unique dining experiences.

As a result, over the years, the procurement role has transformed from a support function to a value-creator involved in strategic decision-making at hotels.

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Key challenges in hospitality procurement

The hospitality industry faces multifaceted challenges in procurement, intensified by recent global disruptions and evolving market demands. Here is an overview of the critical issues currently impacting procurement strategies within the sector:

  1. Supply chain disruptions: The COVID-19 pandemic has severely affected sourcing and supply chain management, leading to delays and increased costs. To mitigate this, hotels are diversifying their supplier base and investing in digital solutions to build more resilient supply chains.
  2. Health and safety compliance: Ensuring compliance with stringent hygiene protocols is more crucial than ever. This includes procuring adequate personal protective equipment (PPE) and advanced cleaning technologies to meet heightened safety standards.
  3. Cybersecurity risks: According to Statista, the global average data breach cost across all sectors between March 2022 and March 2023 was 4.45 million U.S. dollars. Thus, managing cybersecurity risks in procurement is vital. Investment in securing procurement processes is expected to increase to protect sensitive data and maintain both guest and partner trust.
  4. Consumer preferences: Shifts in consumer behaviour now favour contactless services and sustainable practices, requiring adjustments in procurement strategies to align with these preferences.
  5. Inefficient software integration: Challenges with disparate software can lead to issues like lost or duplicated orders and maverick spending. A centralised procurement solution can provide better control and efficiency through features like transaction transparency, social collaboration, and analytics.
  6. Supplier relationship management: Building strong relationships with suppliers is essential for ensuring timely deliveries and obtaining high-quality products at competitive prices. However, poor communication and a lack of flexibility in supplier relationships can severely impact operations.

These challenges underscore the need for adaptive strategies and technologies to streamline procurement processes and enhance operational efficiency in the hospitality industry.

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Sustainability in procurement

Sustainability has been the most talked-about topic in many industries, hospitality included. It is thus natural for hotels' procurement functions to also adopt sustainable practices and source materials more responsibly.

Numerous factors contribute to the global trend's growing momentum.

Most notably, more and more travellers today are environmentally conscious and seek out hotels that are doing their part to lessen their environmental impact. This drives the demand for hotels to procure more eco-friendly supplies like reusable amenities and organic food options. This, in turn, helps market hotels as ethically conscious and attract this growing segment of sustainability-focused guests.

Stricter regulations are another factor. With governments worldwide enacting stricter laws around waste reduction, emissions reporting, and environmental certification standards, strategic procurement can play a role in helping hoteliers meet these evolving compliance needs.

Read more: Why Sustainability Is Important in Hospitality and the Best Practices

Looking at a hotel's procurement portfolio through a sustainability lens allows them to identify high-impact changes that will not only be better for the planet but also ensure the business remains legally compliant with its operational practices.

While sustainable products may cost more upfront, factors such as energy and water efficiency translate to long-term cost savings. Working with suppliers committed to sustainability also helps future-proof hotels against risks linked to climate change, resource constraints, and supply chain volatility, all while boosting the brand's reputation for responsible stewardship.

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Technological innovations shaping procurement

Modern procurement takes on a drastically different form. Procurement teams today can ditch the pens and paper and leverage advanced tools to communicate within and outside of their team and manage suppliers and vendors with ease while still having ample time for more strategic tasks. 

Technological innovations are dramatically reshaping procurement in the hospitality industry, making processes more efficient and responsive to changing market dynamics.

What technology specifically?

Artificial Intelligence

Artificial Intelligence (AI) is at the forefront of enhancing supply chain operations, assisting in data processing and pattern recognition, and optimising inventory management and customer service.

AI algorithms can analyse vast amounts of data with unparalleled speed and accuracy, providing valuable insights into purchasing patterns, supplier performance, and market trends. This allows procurement officers to make informed decisions that drive efficiency, reduce costs, and enhance operational agility.

Moreover, AI-powered inventory management systems can predict demand fluctuations, prevent stockouts, and automate replenishment processes, ensuring that hotels always have the right products available at the right time. This level of foresight not only improves overall supply chain efficiency but also enhances customer satisfaction by delivering a seamless and personalised experience.

Read more: Should Food Packaging Manufacturers Leverage AI to Optimise Operations?

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Cloud procurement platforms

The COVID-19 pandemic has accelerated the adoption of cloud solutions in the hospitality industry. This shift towards innovative technologies has enabled hotels to better manage their suppliers, communicate, automate tasks, and integrate systems, centralising all information to provide a comprehensive overview.

The more streamlined and automated processes have allowed the procurement team to reduce costs associated with manual labour and human error. In addition, many advanced solutions today also offer integration capabilities that enable seamless connectivity with existing systems, thus enhancing overall operational effectiveness.

By automating invoice processing, modern cloud procurement platforms can expedite financial transactions and improve transparency in the process, ensuring hotels adhere to industry regulations and standards.

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The Internet of Things and advanced analytics

The Internet of Things (IoT) and advanced data analytics are becoming crucial in enhancing spending visibility and supply chain management. IoT devices collect and analyse data across hotel operations, aiding in efficient resource use and better demand forecasting. Predictive analytics further allow for proactive decision-making by identifying trends and anomalies in procurement data.

Cloud procurement platforms utilise data analytics to monitor price fluctuations and inventory levels, which aids in negotiating cost-effective deals without sacrificing quality. These platforms also help centralise purchases, reduce unauthorised spending, and achieve better pricing agreements through aggregated purchasing.

These technologies not only address current operational challenges but also pave the way for future advancements in the hospitality sector, ensuring sustainability and improved guest experiences.

It is not an understatement to say that the future of procurement is digital!

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As hotel businesses navigate through the complexities of procurement dynamics, the significance of innovation, sustainability, and strategic supplier relationships cannot be overstated.

These elements, underpinned by digital advancements and a forward-thinking approach, have not only reshaped procurement processes but have also set a new benchmark for operational efficiency and guest satisfaction. The exploration of these dynamics emphasises the crucial role of procurement in steering the industry towards a more resilient, efficient, and guest-centric future.

The shift in procurement roles in this article calls for industry leaders to remain adaptable, leverage technology, and adopt sustainable practices. To stay updated on the latest trends and movements happening in hospitality, subscribe to the TRG Blog today.

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Topics: Hospitality solutions, Technology trends

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Rick Yvanovich

 Rick Yvanovich
 /Founder & CEO/

With TRG International Blog, it is our mission to be your preferred partner providing solutions that work and we will make sure to guide your business to greatness every day.

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