Hotel Project Supply Chain Update – June 30, 2021
The hotel FF&E supply chain has experienced significant disruption the past several months as COVID-19 has skewed both supply and demand. Since new construction and renovation projects depend on the availability of raw materials and finished goods within tight schedules, this disruption has been painful for the hotel industry. The question now: are things getting better or worse?
As a leader in hotel design and FF&E procurement, Innvision is here to help answer that question in this blog, a follow-up to our last supply chain update six weeks ago. This time around, we have some good news to report for our hotel owners and developers.
Hotel Projects: The Good News
Lumber pricing, sky-high in May, was in free fall during June. The cash price of lumber per thousand board feet, which soared to record levels this spring, fell 27% from late May to mid-June. The futures price of lumber, which affects costs months ahead, has dropped even more, down 47% in late June compared to early May (from Random Lengths data). Fortunately, lumber’s lower cost and greater accessibility will help hotel project budgets and timelines considerably.
Pricing on other construction materials have been moving in the right direction. Copper prices doubled over the past year, but have declined in June. However, supply constraints and continued demand for copper in clean energy and clean transportation may spur price increases again. Steel prices have fallen farther in China, but US steel prices were down in June compared to late May.
In February, foam used in mattresses, sofas, loveseats, and other upholstered items began to suffer production shortages. To make matters worse, increased demand for foam in home seating and bedding products was putting more pressure on supplies. The result was that lead times for these items doubled. Fortunately, we are now to the point where foam production is no longer an issue. Mattress and soft seating manufacturers are still working to clear a backlog, but they should return to normal lead times (4-6 weeks) by the end of July.
For multiple reasons, American FF&E manufacturers in 2021 have struggled to meet the staffing levels needed to fulfill the orders in their pipeline. However, with widespread vaccinations, a decline in COVID cases, and more states discontinuing $300 weekly unemployment payments, many domestic producers are now starting to see an uptick in job applicants. More factory workers should help these suppliers reduce FF&E product lead times.
Hotel Projects: The Not-So-Good News
Container shortages and a lack of container space on vessels continue to be issues for importers. A number of factors are at play. The Suez Canal blockage for nearly a week in March did not help the global supply chain, nor did restrictions that shut down Shenzhen’s Yantian port/terminal for a week in May due to a COVID outbreak there. This closure drove the price of shipping a container to over 500% of what it was a year ago, and Yantian still hasn’t gotten back to full capacity. One sign of how bad things have been or may get is Home Depot’s decision to charter its own ship, side-stepping the existing ocean carriers, to better control when its products can deliver from overseas.
Port congestion, especially at American west coast ports, remains a problem. Most sources feel it won’t be until the fourth quarter when container pricing, availability, and delays begin to abate. If that weren’t enough already, tariffs, especially on Chinese goods, are still a factor. Where possible, Innvision manufacturers are shifting production from Asia to North America.
The prices of cement and several other key building materials are still elevated. Although Fed Chairman Jerome Powell believes current inflation in the US is more from bottleneck effects and will be transitory, in the meantime it’s challenging to estimate costs going into a hotel project.
Managing Through Disruption
All of the delays and higher costs mean it’s more difficult to complete a hotel project within budget and on time. However, proactive hotel owners are actively addressing this unfortunate reality by making sure they work with the right partners.
The best step you can take is to hire the right FF&E provider. Innvision asks the right questions and does the legwork for you to find manufacturers and freight carriers who can meet desired schedules and budgets. Every day, our procurement and logistics experts search for alternate vendors, select and manage transportation carriers, and smoothly guide clients through the hotel project process.
By the way, Innvision has excellent relationships with many high-quality North American manufacturers. Contact us today to learn how we can help you.