Feature

FF&E challenges in hotel boom

While the hospitality industry is experiencing an unprecedented boom, these are testing times for both suppliers and buyers of furniture, fixtures and equipments (FF&E). By Dinkar Farwaha

If viewed from a broader perspective, hotel FF&E costs have been altered, of late, by a fairly large number of factors. Buyers are more abreast and informed today than ever before, about designs and amenities pertaining to hotels. Moreover, the level of expectancy from both hotels and guests has increased considerably. Hotels have risen to the occasion and are therefore spending a larger amount on FF&E today, by buying technologically advanced products.

Changing FF&E trends

However, the FF&E trends in the recent past have taken the industry by storm. An extraordinary demand for FF&E due to an increase in the supply of hotels; an increase in FF&E cost for buyers because of an increase in cost of production for vendors; a lesser profit margin for vendors due to hotels importing more and more FF&E materials from foreign countries like China, as well as increasing quality concerns have surprised one and all.

According to experts, overall FF&E costs have been on the rise for the industry. According to Patu Keswani, chairman and managing director, Lemon Tree hotels, "FF&E costs for the industry have seen a sharp rise over the last few years. Due to an increase in cost of labour and raw materials, the cost of production has increased for the vendors and therefore the final cost of the product too has increased."

Param Kannampilly, director, Concept Hospitality, elucidating on the cost of each component of FF&E says, "The overall cost of fixture has gone up for the industry as not only the cost of raw materials has increased, but also a majority of hotels are using technologically advanced products like compact fluorescent lamps (CFL) and light-emitting diode (LED) lights which are more expensive." As far as equipment cost is concerned, Kannampilly remarks that there are various factors that can be attributed to its hike, namely labour costs, costs of raw materials, fuel, equipment repair, and the fixed and variable operating costs wasted during the equipment downtime, among others.

Changing bar graph

The bar graph displaying furniture costs has shown a steady decline due to more and more hotels importing products from countries like China where, due to cheap labour and raw materials, prices are substantially lesser. However, like Keswani, Kannampilly too concurs on the hypothesis that on the whole, FF&E prices have witnessed an increase.

Besides the cost factor, another reason that can be attributed to hotels going to markets like China, is the time gap between renovation and refurbishment of the properties and hiring the right design and purchasing firms. Not hiring purchasing firms and designs at the right time leads to a sudden increase in the number of transactions, which results in an unexpected increase in demand for FF&E. The gap between this unforeseen demand and available supply pushes the hotels to look at other markets like China. Issues like customs, import/export taxes, logistical costs, container availability, and others in the foreign market bring a whole new set of complexities for hotels.

Ashish Kapoor, business head, hospitality division, Hafele India, throws light on this from the point of view of the Indian vendor, "Owing to stiff competition offered by foreign companies who attract customers by offering products at lower prices with equal quality, the Indian market has been compelled to cut down on its selling price. However the price of production has increased and hence little or no profit is earned."

Despite the boom in the industry and consumer willingness to spend more on FF&E than before, what emerges clearly is that the profit margins of vendors have surprisingly not increased.