Hotel exchanges on the increase
A joint venture of Hyatt Hotels and Marriott International - Avendra - began beta testing online procurement for 16 hotels last month. Competing marketplace PurchasePro recently announced new deals bringing its customer count to more than 3,100 hotels.
Additionally, Wyndham International hopes to organize a consortium buying group of hotel management companies this year. And GoCo-op, the tech firm powering Avendra and Wyndham said it could close deals with two large hotel companies by this week, said Chris Cogan, chairman of GoCo-op.
The activity is increasing because the industry is ripe for e-commerce, analysts and industry officials said.
"It's the highly fragmented nature of procurement [in the hotel industry] that creates a lot of local buying, both physically and functionally," said Dennis Baker, president of Avendra.
That vexes hotel companies, which do all they can to keep their local managers buying from nationally approved vendors instead of locals. But the industry is divided on how to do this. Several models are emerging, and more than one may succeed.
"You may see two strong players emerge in this vertical [sector]," said Ian Toll, an analyst at Credit Suisse First Boston.
After 18 months in the works, Avendra formally launched Feb. 1. Hyatt and Marriott hope to do $2 billion worth of procurement in food and beverage and daily supplies like cleaning supplies, office forms and even shampoo, Baker said. Three other hotel chains - Bass, ClubCorp and Fairmont - have signed letters of intent to join the exchange, Baker said.
But even with the backing of Marriott, the world's biggest hotel company, Avendra has to prove it can jump from its slow start to a profit in a market that three months ago claimed its first victim.
Hsupply.com shut down when it couldn't attract buyers and sellers or venture capital. Some believe Avendra can't count on including Marriott-branded hotels, because nearly all are franchises that can't be forced to join.
Meanwhile, many franchises have already gone elsewhere. PurchasePro counts 150 Marriott hotels as customers, said Richard Moskal, senior vice president of the hospitality business at PurchasePro.
The business is nearing profitability, with roughly 300 hotel companies that buy, on average, about 75 percent to 80 percent of their supplies through the marketplace, Moskal said. He notes that hotel operators are concerned about the financial stability of their technology providers.
"Knowing that the company is going to be there seems to be the biggest thing out there," he said. "They remember what happened to Hsupply."
Others believe different kinds of alliances will succeed, like nonprofit Wyndham. It hopes to organize a consortium for hotel management companies and independent operators this year.
"Our concept is to be more of an association without the overhead that Avendra has, so we don't have markup to pass on," said Rod Fruth of Wyndham's year-old internal e-procurement system. "I don't think there's any that have as robust a system as we have with 50,000 orders on our system."