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< Back to news 17 February, 2011

Changing business models - A purchasing agenda

Purchasing and procurement have become increasingly important to the hospitality sector in recent years, with operators and suppliers working together to find new solutions. At this morning's Purchasing Forum, proudly sponsored by Beacon, the conversation centered on how changing business models will have to impact the hospitality sector in the future.

Purchasing and procurement have become increasingly important to the hospitality sector in recent years, with operators and suppliers working together to find new solutions.


At this morning's Purchasing Forum, proudly sponsored by Beacon, the conversation centered on how changing business models will have to impact the hospitality sector in the future.


Making the observation that perhaps the average consumer hasn't in fact “felt” the impact of the recession yet, the question was asked whether or not they can survive the upcoming increase in VAT along with food prices and NI contributions? If the hospitality industry isn't proactive in its approach, then it will feel the brunt of consumer breaking-point.


The evolution of voucher offers, loyalty schemes, discount websites and online price-cuts has resulted in a consumer mentality of “Unless it's on offer, I'm going else where!” But with significant increases in costings across the board, is it even feasible for these types of offers to continue?


One mindset in the room this morning was that it's better to attract consumers to a venue in the first place and then ensure servers are vigilant in up-selling at POS. On the other hand, there's the train of thought that serving a product at a price that is good value from day one will ensure brand loyalty regardless of there being no “special offer”.


Hotels were pointed to as an example of a sector in the industry that adapted well to changing business models in the past, but have some catching-up to do now. Standard practice once dictated that a set price for accommodation was applied during the week and another at the weekend, but hotels were quick to note that discounted rates in traditionally quiet times could bolster revenue, and so too could higher rates in busier times.


The general consensus in the room this morning was that suppliers have “held off” on increasing costs significantly in recent years. The last VAT increase was swallowed by companies, as were hikes in food costs. But to pass on a massive 5%+ basic cost to the consumer at a time when fuel, rates and NI contributions are also increasing is just not feasible.


And yet something must be done for business to stay competitive.


“The relationship between manufacturers > wholesalers > customers needs to be worked on to make it more open and honest”


The importance of communication and flexibility between a business and its suppliers was noted as having become especially important. In order to remain profitable businesses are always striving to be one step ahead of their competition. As important as it is for suppliers to be flexible in their offerings, so too much companies keep changing their profiles so that they are attractive as customers.


Some ideas that were suggested for how suppliers and wholesalers can negotiate on value as opposed to quality of produce were:


• Extended credit periods (45 days instead of 30 days could have a significant impact on a stand-alone restaurant)
• Reduce frequency of deliveries (thus reducing operating costs for delivery)
• Cross docking for delivery
• Understanding commodity prices

With thanks to those attendance the forum:

Alison Head - Hand Picked Hotels
Andrew Merrett – Amcomm
Andy Kemp – 3663
Bruce Isaacs - Mod Comms
Bruce McLaughlin - Partners in Purchasing
Carl Weldon – BAHA
Chris Theofanus - Ping Pong Restaurants
Fiona Winter-Vine - Nandos Restaurants
Heather Gibson (Chair) – EP
Jonathan Watson – MOOW
Huw O’ Connor – MOOW
Mark Pitcher - Fourth Hospitality
Paul Connelly - Beacon Purchasing
Peter Backman - Horizons for success
Phil Street - Chess Partnership
Shawn Halloran - Fairmont Hotels