Four Things to Know About Today's Hotel
FF&E Supply Chain
In February, we published this blog on how the Red Sea crisis and Panama Canal drought affected the hotel FF&E supply chain. Now that a few months have passed, we are back to provide an update on these situations. We also share our perspective below on the global FF&E supply chain to help hoteliers anticipate what’s ahead, plan, and make decisions that could benefit their upcoming projects.
As it relates to today’s supply chain for hotel FF&E, here are four things hoteliers should know:
#1: Red Sea & Panama Canal update
Many shipments that would otherwise flow through the Suez Canal are instead rerouting to avoid attacks from pirates that are still a risk for ships heading towards the Red Sea. As in February, this redirection continues to be necessary for the safety of vessels, which adds significant time and distance to shipments in multiple FF&E product categories. While everyone is hopeful that the Middle East conflicts will soon be resolved, we are still seeing increased lead times of up to two weeks.
Fortunately, there is relief on the Panama Canal front. As of the publication of this blog, drought conditions that challenged the flow of traffic through the Canal earlier in the year have eased. Since 2023, rules restricted the number of vessels able to pass through the Canal in a day and created record delays. However, the good news now is that Panama Canal Authority is increasing the number of daily booking slots back to its normal levels.
#2: The landed price of FF&E produced overseas has increased
Although the Panama Canal situation has gotten better, with rerouting to avoid the Suez Canal still necessary, ocean freight rates are up. Demand for ships and containers have influenced prices and they are currently at an elevated level. In addition, tariffs are anticipated to rise on imported products.
Throw in seaport challenges and elevated labor costs worldwide due to inflation, and you may find that buying overseas does not offer a price advantage. With U.S. domestic shipping rates and lead times much lower, domestic producers may be more appealing when compared to their competition abroad.
#3: Brand mandates for PIPs could become a factor
It is no secret that major hotel brands allowed their franchisees to defer property renovations during and after the pandemic while business was down. But now that hotel room revenues and occupancy rates have improved significantly, hotel franchisors are putting more pressure on franchisees to refresh their brands to ensure consistency and relevancy amongst travelers. These brand mandates affect hundreds of thousands of hotel rooms in the U.S. alone, with the deadlines looming for hoteliers to complete this work.
At the same time, hoteliers are watching closely as the Federal Reserve considers when to reduce interest rates. Innvision anticipates that a quarter-point cut would send a very positive financial signal to the hospitality industry as a whole.
An interest rate cut could spur additional activity in new construction and renovations. Coupled with the fact that PIPs that must get moving soon to finish by their deadlines, this could challenge hotel FF&E suppliers to keep up with the level of demand and increase lead times. Brands also would need longer to review and approve submittals if the volume of them increased. This would add time to the project process apart from the FF&E supply chain.
#4: Lunar New Year’s cutoff date is right around the corner
Although it’s hard to believe it, we are three months away from the LNY cutoff date for many FF&E manufacturers in Asia. For purchase orders placed after the LNY cutoff, they can be delayed 6-10 weeks during first quarter 2025. Innvision advises clients to plan now and take action soon to avoid the annual supply chain crunch known as Lunar New Year.
As the four points above remind us, the hotel FF&E supply chain can be sensitive to many factors. Some of them we can foresee, while others we cannot. By the way, we haven’t discussed the possible impacts on the supply chain of the November elections and any volatility surrounding them.
But for those hoteliers who are or will be involved with upcoming new build, renovation, or PIP-related projects, the best advice we can give is to encourage you to act sooner rather than later. At Innvision, we work closely with our vendor partners on your behalf to minimize lead times and deliver FF&E when your project needs it. We remain vigilant regarding any changes within the supply chain so that we can meet our clients’ interior design, procurement, and project management needs without delays or cost overruns.
Contact us to see how we can support you on your next hotel project.
