The hotel industry’s most overlooked profit center may be vendor contract optimization, a strategy generating significant cost savings for properties willing to leverage collective buying power, according to Jennifer Barnwell, Senior Vice President of Asset Management at Pebblebrook Hotel Trust.
Barnwell and her team identified this opportunity when Pebblebrook acquired LaSalle Hotel Properties, more than doubling the company’s size. “Just because Pebblebrook had gotten so much bigger, vendors were reaching out to us, you know, a lot more than they used to, and we had the leverage to negotiate more so than we did in the past,” she said.
The results were immediate. The internal team focused on vendor negotiations achieved substantial cost savings across the portfolio and developed new internal business intelligence platforms. This success led to the creation of Curator, Barnwell’s platform serving independent boutique hotels.
This strategy goes beyond traditional procurement categories. Barnwell’s team has negotiated over 100 master service agreements, covering everything from technology infrastructure to operational necessities. “We have deals with parking operators, with real estate tax consultants. We have a partnership with a global purchasing organization where you buy all your towels and your tissues, but all you all of your meats and your veggies and your fruits and like every your pencils, you know, everything you need.”
This broad approach recognizes that hotels have hundreds of vendor relationships, each representing a potential opportunity for improvement. Incremental gains across multiple categories can significantly impact profitability.
For independent boutique hotels, vendor negotiations offer both opportunity and difficulty. These properties usually lack the volume to command favorable terms and often do not have the resources to conduct thorough vendor evaluations. “We’re just trying to capture most. You know, have an alternative for most of what independent and boutique hotels need to operate, and we try our best, and we think we’re pretty good at finding best in class, and then at a better price and better terms, then independents and boutiques can get on their own again, going back to scale.”
The process involves detailed RFP procedures followed by negotiations on pricing and contract terms. Barnwell’s team revisits these agreements every 12 to 18 months to ensure they remain competitive as vendor landscapes change.
The vendor optimization strategy is guided by return-on-investment. Properties can often achieve immediate savings by switching to pre-negotiated contracts, while some opportunities require vendor transitions or new service implementation that improves guest satisfaction or employee efficiency.
This approach suggests that hotel profitability may depend less on traditional revenue management and more on effective vendor relationship management. Properties that excel in this discipline may gain sustainable competitive advantages that endure despite changing market conditions.
Explore similar articles from Our Team of Experts.
A new surge of social media-driven investment activity is inflating retail property values across the DMV region, creating conditions that could lead to a bubble similar to the multifamily i...
