New E-Procurement Groups Sweep Through Industry

While most of us have been focusing in on the obvious in the hotel industry such as consolidation, franchising, new construction financing, in-room technology, etc., there has been another quiet revolution going on that will ultimately effect everyone?s bottom line? on-line procurement. And if you?ve been following industry news the past few weeks, there has been a lot of buzz regarding this new method of purchasing. Marriott International and Hyatt Hotels Corp. led the way with an announcement that the two hotel companies will combine their purchasing program under one entity, and hinted broadly that others would join in their initiative at a later date. Then Starwood, which was expected to join Marriott/Hyatt, went its own way, signing on with Zoho Corp., one of the e-procurement companies growing in the hotel industry. Shortly thereafter, Hilton Hotels Corp. announced that it too will do its purchasing over the internet by signing a deal with Purchase Pro and inviting other chains to join. When you consider the combined resources of these chains, there is no doubt that e-procurement is fast becoming a fact of life in the hotel industry. While many still argue that purchasing via the web takes the human element out of this very important function for most hotel owners and purchasing agents, there is every reason to believe that cost savings are going to be dynamic and will further reduce the break-even point for hotels. It is estimated that hotels worldwide purchase goods and services in the neighborhood of $150-billion annually. With e-procurement, some of the web-based companies estimate that savings can be in the 15% to 20% range. Moreover, the fact that not all the chains are under the same electronic umbrella, will further enhance the competitiveness among the various groupings as all involved try to bring their franchisees, other franchisees and independents into their B2B service knowing full well that increased numbers and volume will mean lower prices. The pressure will be on everyone to compete, which should produce some very interesting times ahead. What about the major distributors in the hotel business like American Hotel Register, Nationwide Hotel Supply and also the new Allegiant? They can?t stand still and watch e-procurement take away their shares of the market. They are going to have to address this new fact of life in the hotel business and get with e-procurement as they enjoy having a bricks and mortar advantage with warehouses full of product. Order today and have it on your doorstep tomorrow. Competition, competition. And the hotel owner benefits.

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