By Annie Davidson, Director of Luxury Accounts. Published 3rd Quarter 2022 in Luxury Hoteliers Magazine.

Guests have largely regained the confidence to travel, driving demand for luxury hotel stays.

The future looks bright but reigning in budgets during surging inflation is a top-of-mind concern for luxury property managers today, with the consumer price index in the U.S. hitting 40-year highs just in the past few months.

As the leading hospitality procurement services provider, our supply-chain experts at Avendra continually monitor the supply chain and provide data-driven guidance to clients. In my role as Account Director at Avendra, I’ve had the opportunity to hone my purchasing expertise for luxury and lifestyle clients and that allows me to provide creative solutions for maximizing the guest experience while minimizing the budgetary impact for clients.

Recently, Avendra published our 2023 Cost Outlook, and there are four key areas impacting the Luxury sector: Food and Beverage, Rooms (Amenities), Textiles, and Golf Agronomy.

Food & Beverage

Whether it’s your full-service restaurant, in-room snacks, or grab-and-go food choices, the food and beverage category is being battered by inflationary forces from all sides. Some good news, though, as seafood prices are expected to decrease up to 8% in the short-term and up to 10% in the long-term as availability is expected to improve. We suggest exploring additional sustainable seafood items or adding more shrimp dishes to your menus. Shrimp is expected to have favorable pricing and sufficient supply for all sizes.

For other proteins, we recommend adjusting menu items, downsizing items/portions, being flexible with protein and produce choices, and adjusting menu prices as needed to best manage food costs.

Avendra is forecasting mid to high single-digit inflation in the food and beverage category for Q4 2022, for the U.S., and more of the same into 2023 as raw input costs remain high in most categories. The threat of a potential recession may put some downward pressure on prices toward the middle of next year. In Mexico, expect food and beverage price increases of around 7% to 15% depending on the product category.

Rooms (Amenities)

In the rooms category, increased labor, freight, chemicals, and packaging costs – driven in large part by fossil fuels and commodity vegetable oils – will continue to keep prices higher in 2022. A smart strategy to manage costs in amenities is to change the mix or SKU size. You should also consider high-quality, well-designed, large-scale amenities. For brand programs, work with your distributor to understand the availability of brand-specified products. When items are back-ordered, you can also use brand-approved substitutions or have products shipped from a non-local distribution center. We’re advising our clients to budget for a 7% to 12% increase for the remainder of the year as some key ingredients and raw materials remain in short supply due to ongoing international conflict.