There may be plenty of ambition for creating boutique hotels, but those aspirations may be thwarted by an unexpected challenge: supply crunch. Rob Alexander, from procurement specialists Occumen, offers some useful advice.
Simply scanning this magazine over the past few months highlights the sheer scale of building and refurbishment projects in the boutique hotel sector. While London may be at the centre of this boom, it is certainly not unique. With the brakes coming off corporate budgets for refurb and expansion, everyone is looking for a good builder and, just like the domestic market, you can never find one when you want one.
And this supply crunch is not just restricted to the boutique end of the hotel sector. Only recently, construction giant Balfour Beatty reported delays to its £30m development of Citizen M’s flagship London hotel. Meanwhile analysis by EC Harris has highlighted a shortage of luxury construction companies in the capital which is delaying projects. While smaller construction firms flock to London to pave its hotel lobbies with gold, the rest of the country is feeling the pinch.
A sum of the parts
The challenge doesn’t just apply to construction itself. Boutique hotels set themselves apart by offering something different. In terms of infrastructure, that means quirky design features, luxury fixtures and fittings and bespoke furnishings. That often needs niche suppliers – from architects to artisan cloth weavers – all of whom are under increasing pressure as the market expands and order books start to bulge.
Given that, since around 2008, a buyers’ market has shifted dramatically in favour of the suppliers, the question being asked in many boardrooms is: “how can we ensure security of supply?”
The big five
In essence, there are five key elements that can help restore the supply balance. All of them require a procurement team that is skillful, empathic and in-tune with the market.
1. Be attractive. In a seller’s market, the ‘beauty parade’ is no longer conducted by the purchaser looking for the best deal, it’s the other way round. Yes, choosing the right supplier or building contractor is critical, but now the purchasers have to make themselves attractive. It can be by bundling work together to create scale; agreeing more attractive commercial terms or, simply, presenting a procurement culture that is pleasant, reliable and empathic to deal with. Sure, play hard-ball if it is justified, but being awkward for the sake of it could mean suppliers walking away from your business.
2. Do your homework. Whether the build plans require specialist suppliers, or just general contractors, it is essential to review regional, national and even international supplier networks. If the whole restaurant design is predicated on an intricate meringue of brushed steel and formed glass, are there suppliers that can meet the delivery deadline to keep construction on track? If not, are the timescales or designs themselves unrealistic?
3. Keep it clear. The tender process requires absolute clarity, from initial brief through to appointment. As well as clearly-written documents, due diligence is essential to ensure those suppliers that are tendering have the capability to fulfil the contract and will stay in business long enough to do so. This should include looking at outside indicators such as progress with their pipeline of projects and, if listed, movements in their share price. Once underway, establish a framework of contracts to speed-up the process of awarding new pieces of work – another way to remain attractive and avoid the costly ‘beauty parades’.
4. Lock the gate. Procurement best practice now recommends using a ‘stage-gate’ process throughout any project. Basically, it does what it says: each element of the project is segmented and suppliers are only allowed through the gate to the next stage if all the contract criteria are met. This also puts the onus on the purchaser to avoid unplanned design/supply changes that can move the time and cost goalposts.
5. Play nicely. This may sound trite, but securing supply comes from building close, long-term relationships with professional teams and contractors. It requires strong communication and collaboration skills from the in-house procurement team as well as smart strategies. Consider ‘grouping’ certain professionals across a number of projects: structural engineers, for example, because they work using generic calculations, rather than architects who provide creative input unique to each project. Alternatively, consider companies that can provide a bundle of professional services for one project.