Why Vendor Management is the Solution Hospitality Needs Today

5.9.2023
Mark Holzberg
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In 2017, the Project Management Institute estimated that the value of project-oriented economic activity worldwide would grow from $12 trillion in 2017 to $20 trillion by 2027. This report obviously could not have foreseen the dramatic uptick in projects that the Covid-19 pandemic would initiate across the world economy – accelerating the wholesale adoption of digital tools and technologies and driving transformation across almost every major industry. Today, as we approach endemicity, and organizations look to meet evolving employee, environmental and customer demands, the flow of new projects and the project economy is developing faster than ever before.

Perhaps that’s why the following statistics are so alarming:

According to recent research, only 2.5% of companies complete all the projects they set out to do

The same study shows that about 1 in 6 projects have a cost overrun of 200% and a schedule overrun of 70%

And according to a recent Project Management Institute (PMI) Pulse Survey, 31% of projects completed in a 12-month period were deemed failures because they did not successfully meet the goals and business intent of the project

These failed projects have very real costs in terms of time, money, and employee engagement.

While there are many contributing factors to project failure, the most prominent one is poor project management. In fact, organizations that undervalue the role of project management experience, on average, a 50% project failure rate.

Hospitality: Many Projects Few Resources

Hospitality is one of the industries poised for enormous project growth. Room occupancies are rising, leisure travel is strong and business travel is picking up steam. Additionally, the average daily rates (ADR) and revenue per available room (RevPAR) have exceeded pre-pandemic levels. After two very challenging years, the hospitality business is looking steadier. This recovery has emboldened many to begin planning for projects that had been shelved during the pandemic, including projects ranging from the everyday upgrade to the transformative renovation.

Added to this, the Covid policy of “relaxed brand standards” that many brands adopted during the height of the pandemic is gone, and hotels are working quickly to assess new capital expenditures and property improvement plans that will get them back into compliance.

While hospitality seems to be on the precipice of an exciting era of change, growth, and innovation, there is one crucial factor holding it back: staffing shortages. As is well known, hospitality was one of the hardest hit industries during the pandemic and has struggled to get back to pre-Covid employment numbers. According to a February 2023 AHLA survey, 79% of hotel respondents indicate they are experiencing a staffing shortage, 22% severely so.

Bottom line? There is a lot of work to be done, but fewer employees to do it. This includes indispensable resources like project managers, IT staff and other functional managers who are critical to successfully launching and managing projects and initiatives.

Meet Vendor Management: Project Management for Hospitality

To meet this challenge and to pursue their project roadmaps more aggressively, many hospitality companies are engaging external resources through a solution called Vendor Management.

What is Vendor Management, exactly? It is a component of project management wherein all the outside vendors that are part of a project and the project itself are managed and held accountable by an external team of certified project managers.

Essentially, Vendor Management helps companies manage the disparate vendors involved in delivering a project, so they can complete their project roadmaps on budget and on time without over-burdening their workforce or substantially increasing their labor costs.

For hospitality companies considering this option, finding a Vendor Management provider that specializes in hospitality and has a deep experience working through the nuances and complexities of hotel projects is key. For example, say a hospitality company needs to upgrade door locks across its properties. To a project manager outside of hospitality, this project might seem simple – just hire a vendor to swap out the locks, right? Wrong. A hospitality-focused Vendor Management team would know that it’s not that simple to change a door lock. The project scope must consider interconnected variables outside the lock itself, such as:

How is the lock connected to the property management system (PMS) or mobile check-in application?

  • Will the property’s network support the additional load?
  • How will the lock be integrated into the network?
  • Is the door lock tied to the thermostat or the in-room entertainment features?
  • Are all these existing systems the same at each property within the project scope?
  • Will the millwork need to be updated to accommodate the new locking mechanisms?

This is just one example of a seemingly “simple” project that’s anything but simple. As the complexity of projects grow, so too does the opportunity for risk, overage, and failure. To mitigate these risks, a Vendor Management solution supported by experienced, hospitality-focused project managers is a must.

Does Your Company Need Vendor Management?

For a hospitality company trying to determine if Vendor Management is something it should explore, below are five indicators that point to “yes”:

1.     It has one or more projects on its roadmap that require coordination between multiple vendors.

2.     It has properties that need operations, facilities, or guestroom updates in the next 23-48 months.

3.     It has properties that are no longer compliant with brand standards, and it needs to make investments and upgrades to regain compliance.

4.     During the pandemic, it lost several staff members who would have normally managed projects and has either had trouble finding replacements for these staff members and/or made new hires with have little prior experience in hospitality.

5.     It has one or more impending projects that are mission-critical to its business.

Answering yes to one or more of these is a good indication that a company would benefit from engaging with a Vendor Management solution. To see a full checklist of indicators that show a hospitality company would benefit from Vendor Management, click here.

As hospitality companies increasingly look to take on projects – whether they be workaday or transformational – they’re up against some significant challenges – both in terms of success rates and resources. Engaging a strong Vendor Management team that has project managers with deep hospitality know-how not only ensures that projects will be more successfully initiated and managed, but also that they’ll be delivered on time, on budget and within scope.

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