Case study: Unlocking cost savings and operational efficiencies through procurement

In the hospitality industry, effective spend management is essential for protecting a property’s bottom line, and HSM’s innovative procurement-led property review service helps hoteliers identify significant cost-saving opportunities without compromising service quality. By leveraging leading-edge spend analytics, site visits and a team backed by extensive property-level expertise, HSM empowers hotel operators to optimize purchasing strategies and enhance operational efficiencies. The results demonstrate how strategic procurement can solve for operational pain points, streamline logistical workflows and deliver actionable, immediate savings.

Challenge: Industry hurdles are adding pressure on property bottom lines around the globe.

As rising inflation, labor shortages and escalating commodity prices challenge profitability across the industry, many owners and operators are struggling to identify effective cost-saving measures without sacrificing quality, increasing labor or passing along a price increase to guests.

Solution: Develop a new property review service to uncover actionable savings opportunities.

HSM has developed a white-glove property review service to help properties identify new product and process alternatives, operational efficiencies and cost-savings opportunities by category. Led by HSM’s Procurement Operations team, each review delivers a comprehensive analysis of a property’s spending patterns and operations. HSM leverages its hospitality-focused expertise to deliver actionable insights, strategies and solutions tailored to each property’s unique needs.

Methodology

1. Pre-site review: Each review begins with an extensive analysis of property-level spend reporting to identify potential savings in five key areas:

• Product price and savings opportunities
• Supplier and commodity alternatives
• Contract and agreement terms
• Ordering and delivery cadence
• In-house preparation and operations

2. On-site audit: After identifying potential cost-savings by category, HSM’s Procurement Operations team conducts a site visit to validate findings and offer solutions. Visits include:

• In-depth walkthrough of each department, engaging frontline staff to assess the flow of goods, delivery schedules, inventory levels and storage/prep areas.
• Conversations with frontline staff and leadership to review staffing practices and uncover operational pain points.
• Review of product quality and sourcing practices, ensuring alignment with contracted agreements and brand standards.
• Analysis of pre-made items against those made in-house, with site-specific suggestions to improve the balance of labor vs. cost.
• In-person meeting with the General Manager to provide a general overview of findings.

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3. Post-audit reporting: HSM prepares and delivers reporting to property and above-property stakeholders, outlining findings and proven cost- and time-saving solutions.

Results: Saved millions in spend across participating properties

HSM’s procurement experts have conducted more than 40 property reviews in 2024, uncovering millions in actionable savings opportunities for partnering hotels.

Across all properties, we explored similar opportunities of savings and cost avoidances.

• Utilizing contracted suppliers: On average, properties utilizing non-contracted suppliers for similar products experience negative cost impacts up to 33%.
• Aligning purchasing programs: Misaligned purchasing (ordering commodities outside of the program agreement from contracted suppliers) can increase costs by up to 68%.
• Forecasting labor: Reactive vs. forecasted staffing approach leads to inefficiencies in labor.
• Establishing a delivery cadence: Designated delivery days can create a culture of predictability.

The following examples highlight specific ways in which HSM identified savings at the property level:

• Switched to beef from a local farm offering low carbon emission, grass-fed beef. Along with maintaining quality and telling a compelling story about the origins of the beef, this adjustment yielded 34% in savings for the property. 
• Rephrased offering guests one key card instead of two and brought 25% in property savings.
• Transitioned from a pre-cooked muffin to a gourmet scoop-and-bake batter, elevating product quality, reducing spoilage and introducing a gluten-free option that resulted in property savings of 48%.

Conclusion

HSM’s property review service illustrates the significant value a strategic procurement partnership can bring to hospitality operations. By focusing on actionable insights and real-time solutions, HSM helps properties not only achieve monetary savings but also foster a culture of efficient purchasing practices. This case study highlights the importance of aligning procurement strategies with operational goals to enhance a property’s overall performance.

Hotels looking to enhance their operational efficiency and identify significant cost-saving opportunities are encouraged to reach out to HSM for an in-depth spend analysis. For more information on initiating a property review, contact [email protected] or visit our website to learn more.

HSM is the world’s largest and only hospitality-focused procurement, logistics and end-to-end supply chain provider.

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The views and opinions expressed in this content do not necessarily reflect the opinions of Hotel Investment Today by Northstar or Northstar Travel Group and its affiliated companies.