Avendra recently released its 2022 Q1 Commodity Report with expectations for the hospitality industry. The key findings fall generally in two broad areas: inflation and supply chain challenges. Our experienced team of procurement professionals have been pushing back against price increases, proactively managing the supply chain challenges, and finding creative solutions to mitigate the budgetary impact to our clients and their guests.
Throughout North America, we expect to see continued inflation, mostly due to supply chain issues. While the United States is projected to see inflation rates of 4%-8%, in Mexico rates could rise to 7%-8% or more. Certain categories within the hospitality industry will be hit harder than others by inflationary pressure. The categories that will experience the highest inflation for early 2022:
Disposables: Guests are looking for healthy food and beverage items they can take on the go to avoid crowded dining rooms. The hospitality industry has responded and quickly turned lobby spaces that previously only offered coffee, bottled water, and pre-packaged cookies into grab-and-go destinations with healthy meals and snacks.
While this has offered unique new opportunities for hotels to provide additional services, we project inflation of 5%-15% for packaging products for the first half of 2022. These high-demand products that support grab-and-go initiatives continue to be impacted significantly by freight challenges, high demand, and labor shortages.
Advanced planning and communication with distribution will help mitigate the impact. Being flexible and creative with alternatives can also help you find cost-savings. Your Avendra rep is connected to a large network of suppliers that can offer great solutions.
Smallwares and Equipment: Rising freight costs due to fuel increases, driver shortages, and bottlenecks at international ports are being passed through the supply chain all the way to you. Shortages of raw materials and components add to the increasing costs in this category. Anticipate 5%-15% increases in this category. These issues may ease through the year but won’t fully resolve.
Planning ahead has never been more important than now. Some products, outdoor furniture for example, may have delivery times of more than 20 weeks. The time to order is now to avoid ongoing price increases and to have inventory when you’re ready to use it.
Value engineering, assessing the functionality of each product, fixture, and raw material, can help you prepare in advance and consider alternatives. Doing so can also help you find them at optimized prices. Avendra is currently recommending to our clients that they consider value engineering opportunities on large-scale renovations or consider postponing until the market is more stable.
Rooms (Amenities): Currently, we project 5%-15% increases in the short term. We expect prices to stabilize later in the year, likely at this higher level.
Very few industries have been unaffected by the economic impacts of the global pandemic. Shortages in labor and raw materials, rising freight costs, increased costs to address COVID issues, and higher labor costs have made purchasing room amenities a challenge.
To mitigate the impact, Avendra has identified and communicated brand-approved substitutions that you can transition to when there are back orders of your standard products. Good communication with your distributor sales representative, or someone in Avendra Customer Service can help you assess the availability of brand-specific products and acceptable substitutes.
Textiles (Linens and Towels): This is the area where we do see some elasticity. At this point, our projection is a 5%-15% increase. Cotton is currently more than $1 per pound. We expect that elevated price to remain for the short term. However, we do foresee some stabilization in supply and demand later in the year that may re-adjust cotton prices to less than $1 per pound.
Labor and freight costs will continue to remain high, though, so don’t expect prices to drop to pre-COVID levels. Long-term, Avendra is projecting a 5%-10% increase in this category.
Our recommendations are to slightly lower PAR levels, and purchase available substitutions if needed. Avendra’s guest-first approach helps our customers deliver and exceed their guests’ expectations, while managing inventory and expenses in the most profitable manner. We can help you reassess your daily needs and adjust PAR levels that ensure you are not left without supply.