By adopting the practice of joint procurement contracts across three properties in Goa, AccorHotels reduced its purchase costs by 57% as compared to last year
By Vinita Bhatia
While AccorHotels in India follows the policy of unit-level procurement, since 2017, Novotel Goa Shrem Hotel, Novotel Goa Resort & Spa and Ibis Styles Calangute decided to do things a little differently. They opted for joint procurement and the benefits are already evident.
Buying for a triumvirate of hotels has helped Pradeep Desai, purchase manager for Novotel Goa Resorts & Spa & Novotel Goa Shrem Hotel along with ibis Styles Goa Calangute, negotiate for, and get better volumes at lower rates. It could also reduce the cost of food products by 57% as compared to the previous year. Additionally, due to higher business volumes, the product delivery is also far more frequent.
However, to get these benefits, Desai said it is important to engage with the right kind of negotiations with a supplier. “Suppliers form the backbone of the hospitality industry; they are essential to the F&B offerings, the hotel’s maintenance, etc., amongst other critical activities. Thus, building strong relations with them becomes essential. While choosing the right vendor is extremely important, at the same time, building long lasting relations with them and negotiating with them is also necessary. This process helps us make sure that we are able to procure the finest quality of supplies at the best rates. Furthermore, it also ensures that we have an uninterrupted supply of produce,” he explained.
Negotiations can affect a hotel’s costs, its pricing and more importantly, its profits at the end of the day. Today, negotiations are more important than ever since there are multiple vendors. At the same time, since competition is fierce, this gives procurement heads an added advantage to ensure they are able to secure the best vendors at the best prices while directly reducing expenses, while improving their purchasing power. “However, while doing so, one should always maintain an open line of communication with your suppliers, and the goal should not be to make one supplier compete with the other,” Desai advised.
He added that negotiations can easily bring down costs, make a hotel price competitive and maintain profits. “Many companies today opt to negotiate contracts at a national level which gives them greater purchasing power to reap these benefits. However, we’re also seeing brands collaborating with each other at a regional level to ensure that the supply of products are consistent and also procure the best of ingredients,” he said.
Over the years, the purchasing contracts have changed. Hotels have realised that managing multiple vendors, with multiple contracts for a number of products is difficult, cumbersome and ineffective. Streamlining vendors into a single-source agreement helps in controlling budgets, with long-term contracts, rates remain constant across markets and condition. Desai, therefore, suggested selecting a supplier with a good reputation, consistent delivery record and high quality products. Of course, ultimately, the price of the product has to be right, as much as timely supply of the products and services. The supplier should also be flexible enough to be able to provide certain products are at short notice. The bottomline is to seek someone who is willing to be a partner, rather than a supplier.