The organisation responsible for supplying billions of pounds’ worth of goods into Hilton hotels is doubling down on catering equipment and it’s looking for suppliers that can offer more than just the best prices. FEJ reports.
Hilton Supply Management actually started life as an equipment distributor, but after quickly discovering that its specialism didn’t really lie in that field it turned its attention to developing a portfolio of core hospitality goods and amenities that every hotel needs.
That was more than 50 years ago and the business hasn’t looked back since. Today it is a full hospitality supply chain solution provider with more than 8,000 properties on its books.
Hilton naturally accounts for the lion’s share of its work, but it also supplies to some 1,500 non-Hilton branded hotels that are keen to benefit from its ability to drive economies of scale and negotiate competitive contracts with suppliers. Globally, the company estimates that it influences $6 billion (£4.5 billion) in spend every year.
In the UK, HSM supplies more than 200 hotels and, for Andy Earley, senior director, category management EMEA, one of its main USPs is that it is purely geared to delivering hospitality procurement and nothing else.
“A lot of our competitors in the market place will also sell into other industries but we are solely focused on the profitability and bottom line of hotels — that is where our core focus is, where our expertise is and where we continue to focus,” he explains. “Since the founding days of Conrad Hilton 100 years ago, we are an organisation of people serving people.”
One of the most noteworthy changes in recent times has been HSM’s transformation from a cost-centred business into a revenue-generating platform for the organisation. That underpins the culture that it is seeking to foster, says Earley.
“Our philosophy is to develop goods and services programmes that we can actually sell onto our franchisees, which may already purchase from other supply chain solutions, and then bring them into our ecosystem to leverage the greater good of the ecosystem to deliver value for our customers,” he explains.
Hilton runs hotels in 117 countries around the world and HSM is present in 108 of those, supporting the best part of 76 global brands in the process. But the company’s relationship with F&B and kitchen equipment has generally been an inconsistent one over the years — although measures have now been taken to change that.
For a start, the business recently made catering equipment a focused category within its organisation and it intends to build on that in 2020.
“One of the things we have not done very well — and I will hold my hands up — is we have never really had an effective equipment strategy. I am delighted to say that as of June [last year] we recruited a dedicated equipment category manager to fulfil that research gap that we needed. Equipment is now a dedicated category and we will develop the resource for that category going forward.”
Speaking at the recent CESA Conference in London, Mr Earley — who revealed that the new equipment head is based in Frankfurt but will travel to the UK regularly — told manufacturers that it will be “delighted to have conversations with you about how we develop our equipment sourcing strategy”.
Earley insists catering equipment is now a “key focus” for his team and it will increase the level of resource attached to it as it influences more of the equipment spend that takes place.
One area of particular interest for the organisation is project procurement and assisting new hotels with F&B planning, concept development and food delivery.
“That project procurement team has solely been focused on front-of-house, rooms and public areas, but we will start to get to grips with kitchen design and supporting the kitchen consultants with our preferred programmes and get those preferred brands and manufacturers into the hotel openings,” reveals Earley.
One of the things we have not done very well — and I will hold my hands up — is we have never really had an effective equipment strategy”
There will certainly be no shortage of new openings in the future. The chain currently has nearly million rooms globally, and in the next three or four years it is plotting to release a further 200,000 rooms.
“That is significant,” insists Earley. “And the challenge for me and my team is how do we fulfil that demand for goods and services into far-flung places as we grow the presence across 108 countries into other areas, such as Sub-Saharan Africa and China. Here in the UK we are going to be opening 40 properties in the next three years.”
For HSM, category management is really about trying to understand how it can deliver value to the many different functions of a hotel business. F&B is a vital area and the right alliances can play a crucial role in margin enhancement.
Earley elaborates: “We have to understand how we can create value with our partners’ support, so we are moving away from traditional procurement right the way through to value creation and understanding innovation, being first to market, and moving ourselves away from the ‘sea of sameness’ that we see in so many hospitality organisations. It is really about how we can differentiate as a brand and as an organisation.”
Of course, there will be suppliers out there that view procurement organisations as vehicles which solely exist to drive down the price of goods. What is Earley’s take on that?
“We look to leverage our spend globally, it is not rocket science — we are a procurement function. We look at the volumes, we look at where we can affect change and influence our spend. We want to spend smart and we want to spend together, so we work with our partners to innovate.”
At the CESA conference, he stressed that cost wasn’t the only conversation it looks to have with suppliers, telling delegates: “You knock on the door of a hotel and I am sure you speak to chefs every day, and they will hammer you on price. We are looking to generate a bit more value around the supply chain solution.
“It is about quality, it is about service, it is about innovation. We look to partner with leaders and, just to caveat that point, partnering with leaders is great, but I would also love to partner with more new companies or start-ups to understand how they can affect change in our organisation.”
So what’s on Earley’s mind as we move beyond 2020 and into the next five or 10 years? He recognises that sustainability is a major theme among Hilton’s current and future customer base, and that category management will play a role in underpinning this, but he also sees brand protection as an important element of what his organisation does.
“I was doing a presentation two weeks ago in Washington and we were looking at the brand-damaging impact of Chipotle Mexican Grill in the US, where they lost a significant amount of their share value because of a disrupted supply chain that was compromised. That is the thing that keeps me awake at night — the brand protection. I don’t want to be the person that destroys the Hilton brand because my supply chains are compromised in some way and I am not doing something that is aligned to the organisation’s ambitions.”
We will start to get to grips with kitchen design and supporting the kitchen consultants with our preferred programmes”
Technology is another element of procurement that cannot be ignored and will have implications for catering equipment supply. Blockchain, cloud systems and the Internet of Things are all terms that Earley’s team are getting increasingly au fait with.
He has already seen how hotel kitchens can benefit from the vast amount of data that modern equipment can offer, although he wishes there was great uniformity.
“The digitalisation, the efficiencies, the way that you present your information — I would love you all to get together and have one system for us all but I don’t think that’s going to happen in the short term,” he told CESA members at the annual conference. “Keep doing what you are doing because the information that you provide us really does affect change and we can manage the operations much better.”
As HSM ramps up its catering focus, it is leaving suppliers in no doubt as to what they must bring to the table to add value to its supply chain.
– Hilton Supply Management was founded more than 50 years ago
– More than 8,000 properties in its programme
– More than 1,500 non-Hilton-branded hotels in programme
– £4.5 billion combined annual spend
– Global and regional pricing agreements with hundreds of suppliers of hospitality products and services
– Agreements with more than 1,000 smaller contracted suppliers
– Regional operations support model aligns specialist advisers with properties
‘White glove’ kitchen project solutions for hotels
The HSM food and beverage strategic sourcing team works closely with national and regional food and beverage manufacturers to provide customers with an extensive offering of consumable products, supplies and equipment.
It claims to provide superior pricing with a variety of manufacturer programmes for the food and beverage products that are required to successfully run a hotel property.
Its consumable programmes include food and beverages, while it also offers equipment and supplies such as china, glassware, flatware, kitchen equipment, banquet equipment, large and small appliances and other smallwares.
HSM says that its F&B sourcing experts provide additional value-added services, including a comprehensive food safety management programme that gives operators the tools to maintain hygiene standards and access to staff training and regular audits.
Its ‘white glove’ project management service provides a turnkey kitchen project offer, including design, planning, identifying and specifying equipment, procurement, logistics and installation.
By leveraging the strategic relationships that it has in place with food and beverage equipment manufacturers and installers, HSM says it is able to provide competitive prices on the products needed to complete a hotel kitchen construction, renovation or replenishment.