Aimbridge Hospitality Leverages Creative Procurement and Project Management Solutions to Address Evolving Economic Climate
Industry leader applies scale to navigate supply chain disruptions driving procurement trends
Hotel operational challenges are present in all aspects of procurement and supply chain management as part of global economic uncertainties driving a renewed demand for innovative solutions, according to Aimbridge Hospitality, a leading global hospitality company with more than 1,500 properties under management.
“Procurement has a role in the entire life cycle of a hotel, encompassing the various phases of expenditures a hotel owner may have,” said Shahid Javed, Executive Vice President and Chief Procurement Officer at Aimbridge. “At a time when the industry has experienced cost increases and inflation, it is critically important for procurement teams to be innovative and create solutions that minimize impact on properties.”
“Because of Aimbridge’s expertise, broad scale, and relationships with suppliers, we are positioned to ensure our owners and properties remain in good standing,” Javed continued. “We are the only hotel management company prepared to advise and assist owners with their procurement and project management needs in all phases of hotel ownership, from technical services advisory to CapEx (capital expenditure) repair and equipment replacement projects to PIPs and renovations required to achieve success.”
Procurement in Today’s Economy
The rising costs for procurement in hotels mirror global inflation trends, driven by interest rates and ongoing supply chain issues. Procurement and project management are especially key to the success of hotels during inflationary times.
Per U.S. Labor Department Consumer Price Index data, the annual inflation rate in the United States reached a 12-month high of 9.1 percent in June 2022. By the end of December 2022, the rate dropped to 6.5 percent (for 12 months beginning December 2021)—the lowest rate of the entire year. The average rate of 8.0 percent for 2022 was higher than any point in more than 20 years.
Leveraging its scale, establishing preferred supplier agreements, and maintaining deeper relationships with select suppliers have been critical components in offsetting inflationary pressures. In some cases, thoughtful forecasting and contract negotiations have resulted in significant savings for properties in the Aimbridge portfolio.
“We have many long-term supplier agreements with firm pricing, which lessened the impact of inflation on our operations,” Javed said. “Additionally, we have proactively managed variable pricing contracts, negotiated with our preferred suppliers to keep cost increases to a minimum, and put creative solutions in place to mitigate inflation.”
Beyond inflation, ongoing supply chain disruption has also affected procurement, depending on the category of purchase. “Day-to-day products like food and supplies are more readily available now. FF&E (furniture, fixtures, and equipment) supply is also getting back to pre-COVID lead times of 3-6 months.” (Shahid Javed)
The Right Team
The Aimbridge Procurement team is composed of seasoned industry professionals with strategic backgrounds aligned to their areas of focus. The Aimbridge CapEx Management team has hotel engineering backgrounds, whereas the Project Management team boasts a combination of hotel design and construction management backgrounds.
The right people are essential to navigating the hotel procurement processes of today. Aimbridge has doubled its team in the past 18 months and is entrenched in the areas of category sourcing and procurement, project management, and CapEx management.
“Our project managers pride ourselves on working closely with the operations team and staying on to support owners through the entire life cycle of their hotels.” (Shahid Javed)
Introducing Creative Solutions
Procurement is a people-driven function to source the right materials for properties, ranging from in-room linens and guest amenities to FF&E and F&B. The working relationship with suppliers and contractors is paramount to navigating today’s supply chain. “When you have a deep relationship with your suppliers, they bring innovative ideas and alternative options,” Javed said.
Procurement and suppliers work very closely with operations, especially in F&B and dining. In on-site restaurants, this leads to creative menu engineering, where procurement and suppliers collaborate with operations to assist chefs with developing menus based on available food products and the cost of products, particularly when regularly used items are impacted by supply shortages, increased costs, and other environmental factors.
“Based on pricing, availability of products, and substitutions, the menu can be altered, and different menu items can be defined. This approach is cost-effective and incorporates the products available.” (Shahid Javed)
Amenities and other supplies impacted by supply chain disruptions require a thoughtful approach to address shortages as brand standards must be considered.
“Our suppliers have proposed alternative soaps, lotions, and other items to swap out, and we work with brands to gain approval and stock those items in hotels. The goal is to have product in hotels for them to operate as travel and occupancy increase.” (Shahid Javed)
Bespoke Approach to Capital Projects
CapEx projects with an emphasis on maintenance, repairs, and equipment replacements have been an area for hotel investment after the throes of the pandemic. During the pandemic, maintenance and repairs was deferred. Now, equipment is aging and needs significant repair. This is where Aimbridge’s focus on value engineering comes into play.
Aimbridge CapEx project managers work with suppliers to review options to minimize costs for owners. “Through creative problem solving and value engineering, we find bespoke solutions to align with our owners’ objectives, such as repairing versus completely replacing equipment.” (Shahid Javed)
The Return of PIPs
While PIPs (Property Improvement Plans) are typically scheduled to occur every 7-10 years, brands provided relief to owners during the pandemic, and the volume of PIPs declined in 2020-21.
As travel returns, there is a significant increase in the number of PIPs brands are enforcing. Aimbridge has increased its project management team to manage the increase in demand while navigating the supply chain challenges.
“Today’s PIPs process is an opportunity for us to have a more collaborative, collective approach with our brand partners as we make exciting and necessary updates to hotels,” Javed said. “We work closely with the brands to ensure their requirements are met while giving owners some cost relief in an inflationary environment through scheduling, product sourcing, and other creative solutions to ensure projects are completed on time and on budget.”
“We are seeing a significant increase in demand for projects to repair and replace equipment, from elevators to roofs to parking lots and lobby renovations,” Javed said. “Some hotels are pushing for the implementation of digital keys after delaying that brand requirement in recent years. Others have transitioned to a chip and pin machine for the check-in process. Digital signage is another area of focus. These were brand requirements that had been paused during COVID and those are all coming back.”