The COVID-19 pandemic has affected nearly every aspect of the hospitality industry. We caught up with purchasing company executives Mark Friesen, principal, Beyer Brown; Carl Long, SVP, Purchasing Management International (PMI); Bruce McMahan, president, CMA Purchasing; and Mitchell Parker, partner, The Parker Company, to see how this segment of the industry has fared.
How has purchasing changed since the COVID-19 pandemic started?
Friesen: Currently, the obvious change has been to ensure orders of quantity are placed as early as possible. We are seeing a decrease in sailings from overseas right now, so preparing for this on the front end allows for no disruption in the project schedule.
Long: Supply chain challenges include starts and stops in production, limited raw material availability, limited finished good availability and limited labor. Those factors cause timelines to be extended and project completion dates to be less predictable.
The way the supply chain was shut down so abruptly opened many owners’ eyes to the risks of using offshore manufacturing. They are more willing to accept slightly higher costs with more predictability in delivery by using domestic manufacturing.
McMahan: We have seen the initial supply chain interruptions caused by the closure of overseas sources largely dissipate recently. The larger issue now is working with suppliers’ U.S. personnel, many of whom have abbreviated work schedules in an effort to manage costs. For example, many suppliers have sales and support staff working every other week, so there are two or more people managing our orders with a given supplier rather than one. This requires our project managers and expeditors to spend more time communicating with our suppliers and reviewing order details to ensure items are produced according to our specifications and shipped according to schedule.
Another area where our industry has changed significantly is in face-to-face meetings. While we have had several site meetings locally recently, we are no longer jumping on a plane at short notice to meet with a prospect or make a site visit. Every businessperson in America is proficient with virtual platforms at this point, and I believe they will continue to be utilized extensively until the pandemic is under control.
Parker: For the most part, everything has slowed down from the frenetic pre-COVID-19 pace. I think once the quarantine/work-from-home standards set in, everyone realized that there will be delays on all sides of the equation.
Some experts have said hotels should take advantage of low occupancy to renovate. Have you seen a change in the number of projects happening?
Friesen: While there are some projects that have been put on hold, most of our projects have continued without any delays. We have seen more projects that were looking to get started in the next few months go on hold, as there is interest in waiting to see how occupancy changes as we begin to open back up. Still, there are groups really wanting to take advantage of low occupancy and accelerating renovations.
Long: Using the opportunity of a hotel that has zero occupancy to renovate is a good idea. The challenge with that idea is no product is sitting on the shelf available to do it immediately, and owners with a hotel with zero occupancy don’t have a lot of cash sitting around. Production timelines are extended so an owner who decides to renovate now will still have to wait for design to be completed, brand to approve the design, and the product to be sourced, manufactured and delivered.
Owners should really first invest in a comprehensive market analysis instead of blindly throwing money into a renovation. If they take a hard look at their competitive set, the impact of a renovation on the asset value and whether or not they remain a branded hotel could give insight into the best way to come out of the other side of this never-before-experienced situation. This is the same type of analysis that lenders and special servicers will have to perform on assets that come back to them.
One of the biggest effects of the shutdown will be sales of distressed assets in the year to come. Lenders and special servicers will be forced to complete a PIP, which will cause an uptick in renovation projects.
McMahan: For well-capitalized properties with low occupancies, now is a great time to renovate as the operational issues related to a renovation would be minimized. While our projects currently in the pipeline have fared very well, we have seen a decrease in the number of owners moving forward with renovations slated for Q4 and Q121.
Parker: We have had quite a few of our renovation projects put on hold. Only a couple have restarted. This would be perfect timing for a renovation, but the client has to have the funds designated and not needed to cover debt service.
What are some of the trends you expect to see moving forward?
Friesen: Hotels are taking out as many touchpoints from the room as possible, such as coffeemakers, irons, minibars, throw pillows, throw blankets, etc. Technology also is going to continue to play a big role in operating trends.
Long: We’re seeing public-area reconfiguration, F&B reconfiguration, [and], most obviously, changing self-service food venues. We’ve seen changes to room amenities and the way that front-desk service interacts with guests. Much like after 9/11, when airports had to engage in the theater of security so that travelers felt safe, hotels will have to have a theater of cleanliness so that guests feel they are safe.
McMahan: A trend I believe is here to stay is virtual model room reviews. They have run very smoothly, and the project stakeholders have been pleased with the results.
There is more attention paid to the cleanability of materials and the potential damage certain cleaners can have on finishes. We are seeing more requirements for fabrics that are bleach cleanable or ones that have antimicrobial properties, and in heavy touchpoint applications, upholstery has been eliminated. It’s been known for hundreds of years that viruses and bacteria rapidly die on copper surfaces; I suspect we will see more copper being used in hospitality settings where touchpoints cannot be eliminated entirely.
Parker: Unfortunately, we are seeing more and more designer specifications for online furniture retailers, many of which provide products that are not suitable for hospitality.