14 July 2011 | Nick Martindale
While most of us welcome a summer break, it can actually be a bit of a busman's holiday for some holiday sector buyers. Nick Martindale takes a walk in their flipflops
The summer months are traditionally when the procurement profession puts down its tender documents and heads off for a well-earned break. However, for those actually working in holiday procurement, this is all they think about day in, day out. So what is it like to live and breathe sunhats, sangria and swimming trunks all year round?
Perhaps the most striking element of procuring for the holiday sector is the vast range of categories that buyers are expected to source. For instance, Helen Bennett, UK purchasing manager at Center Parcs, sources products across the accommodation, leisure, health and beauty, and retail sectors, as well as contracting services such as cleaning and preventative maintenance.
“The big categories in terms of spend are energy, food and drink, and services such as laundry,” she says. “But there are also other areas that are high-criticality, but not necessarily high spend, such as uniforms or cleaning services – right down to something as basic as toilet roll. Anything that creates revenue is a big item for us, too. For example, guests pay to hire bikes every day so clearly, if our bikes aren’t working or there aren’t enough in, then that’s a problem.”
Some of the stranger items Bennett has been asked to source include Garra Rufa fish to put into tanks in the spa area for foot pedicures (they nibble dead skin away), a giant transparent inflatable water wheel for use on a lake and a batch of Segways – two-wheeled electric vehicles. “They were a new one for us, but we have to be on top of what people are demanding in leisure,” she says.
For John Hillier, purchasing manager at cruise ship operator Carnival, which owns brands including P&O Cruises and Cunard, the range is arguably even broader. “I look after anything from the nuts and bolts that keep the ship running below decks, right the way through to the food products, alcoholic beverages and hotel items that we take on board. It’s basically everything you need to keep a large ship – or even a small village – running.
“On food and beverage alone, we probably purchase somewhere between 3,500 and 4,000 unique items each year, and on the hotel side, it’s in excess of 9,000 items. I’m not even sure how many different things we purchase in technical because we only purchase them when something breaks.”
Some of the more bizarre items his team has had to find include replacement heads for snare drums, kosher wine and cat and dog food for customers who cannot bear to be parted with their pets for the duration of the cruise.
Yvonne Kemsley is now managing director of Eden Consulting, but formerly worked as strategic sourcing manager for Carnival UK. “The most unusual thing I sourced and tendered for was Cirque Ventura – a circus school held on the upper deck and exposed to the elements,” she recalls.
“We had to tender for things like tightropes and bungee jumps and find circus specialists, who were very few and far between in the marketplace. No other ship had ever done anything like it.” .
Getting the edge
For others in the industry, however, the role can be much more specific and require extensive category expertise. Mark Nisbet, for instance, is head of purchasing at Hotels4u, a brand owned by Thomas Cook that sells hotel rooms across the world to consumers and travel agents. “In a way, we’re not actually buying anything. All we’re doing is negotiating the best rate possible so we can get an edge for our customers,” he says.
“We have a team of over 20 contractors who have all come from major tour operators and they know the suppliers, the hoteliers and the agents. Our competitors who don’t have that experience get the second or third rate down the line.”
The unique requirements of the holiday sector often mean that finding suppliers that are able to deliver to the required standard and volumes is no easy matter.
For Carnival, the unforgiving nature of shipping itineraries further limits the choice, says Hillier. “We have a relatively short window to get passengers off and get up to 250 tonnes of new provisions and the new passengers on.
“Suppliers that are used to our industry can gear up for that, but when we’ve used suppliers that usually sell to the food services industry, they have often been challenged.”
At Center Parcs, Bennett says: “There aren’t many suppliers that offer exactly what we want. A good example would be laundry. We have a twice-a-week turnaround on a huge volume and it needs to be returned very quickly.
“We also have to buy things that are more robust because they are used every day by people who are on holiday and may therefore not treat them in the same way as they would at home,” she adds. “It’s a false economy to buy cheaply. If a guest sits on a chair and the legs snap, you not only have to replace it, but you may also have to pay compensation.”
Even smaller holiday parks are now realising the need for an effective procurement set-up and the importance of quality, says Paul Connelly, head of purchasing at hospitality and leisure buying consortium Beacon Purchasing. “Increasingly, holiday parks are having to raise their game,” he says. “The expectations of customers now are to be able to get a decent cappuccino or latte. We’re a long way these days from scampi in a basket.”
In certain parts of the industry, a lack of choice can make life very difficult. Lisa James is currently working in an interim role as outsourced services manager at TUI after spending three years as head of IT procurement at Thomas Cook – the two main organisations in the package holiday space. The most challenging area for her is the firm’s use of travel booking systems, where there are only a couple of vendors used across the industry.
“Everybody in the industry uses these. You can’t go anywhere else unless you actually write those systems yourself and initiating them from scratch would cost multi-millions,” she says. “When it’s single-source, it makes no difference how big you are. It makes for a very interesting conversation when you go to your single-source supplier and say you think you’re paying too much money for a system you can’t actually buy from anyone else.” The emergence of online systems is helping slightly, she says, and vendors also acknowledge the low margins in the travel industry – about 5 per cent, says James – and the tough market conditions.
Against this backdrop, procurement has an increasingly important role to play in ensuring holiday companies remain competitive and profitable, says Martin Hall, former procurement manager at Thomas Cook and now senior category manager at financial services organisation Aviva.
“It’s quite an aggressive industry in terms of pricing and the reason for that is because the holiday market has been battered by crisis upon crisis over the years and top-line growth has been non-existent,” he says. “So cost management and reduction has been the primary driver, not just for Thomas Cook, but for Kuoni, TUI and Mark Warner. You have to buy short-term and on aggressive margins.”
One potential option open to procurement departments could be to pool resources with other companies that have similar buying requirements, and even competitors, suggests Kemsley. “If we’re going to continue to be successful in today’s climate we need to alter how we procure and collaborate with fellow buyers to get the volumes and economies of scale,” she says. “You don’t necessarily have to divulge all your secrets.”
Demand on the high seas
The seasonal nature of some parts of the holiday industry also filters through to procurement, from both a cash flow and demand management perspective. “We have seasonal cash flows, so from a purchasing perspective we try to match payments to that,” says James. “There are points in the year when we are cash-rich and points where we have absolutely no money. That goes for all the industry.
“In IT, we also have seasonal peaks between new year and the end of February, when the systems are absolutely maxed out,” she adds. “That’s a real challenge from a procurement perspective because you need a huge server capacity for two months and then you don’t need it for the rest of the year. You have to work very closely with your suppliers.”
It’s also hard to predict demand on the high seas, says Hillier at Carnival. “You don’t know if the next group of passengers are going to prefer steak or lobster, or red or white wine,” he says. “We give suppliers an indication of what our annual consumption was last year and we just ask them to be aware that it is no more than an indicative view.”
Working in such a vibrant industry, where the job can often involve a hefty amount of travel for work purposes, can also mean that life is rarely dull. Craig Cherry, head of group procurement at low-cost airline Monarch recalls a situation where a senior professional came out of the bathroom in Gibraltar to be greeted by a monkey helping itself to her breakfast. For Bennett at Center Parcs, a rather different experience springs to mind: along with the rest of her team, she found herself digging out cars during the exceptional snowfalls last winter.
For some, it can be hard to leave work behind when it comes to their own time to go on holiday. “With staff perks, you do tend to book your holiday with your company,” says James. “But when I go to the checkout I can’t help looking at the system and wondering if it’s working. You can’t switch off.”
“To this day I still check cutlery and crockery manufacturers in restaurants and I haven’t bought that for over 10 years,” adds Cherry. “The same applies to airports, airlines, hotels – everything connected with the goods and services we buy or sell. You can always learn how to do things
better – or conversely be quietly smug when you see how often the competition gets it wrong.”
Despite the perils of a busman’s holiday, the majority of those working in the sector seem to thrive on the variety and challenges that come from buying in a unique industry. “It’s not a nine-to-five job; it’s 24 hours a day, seven days a week and you get to experience different cultures and foods – and different types of supplier,” says Hotels4u’s Nisbet, who previously worked as a regional contracting manager for Thomas Cook.
“It’s also nice to see new properties and destinations starting to sell. Around 1999, we started going out to Sharm El Sheikh in Egypt, which was just a small place where a few people used to go diving,” he says. “Now it’s a huge destination and I was one of the first people there doing the contracting. That gives you a real boost.”
Case study - Olympic dreams play havoc with purchasing plans
The Olympic Games may be almost a year away, but it is already dominating the procurement agenda for Guoman & Thistle’s London hotels as it starts to prepare for an influx of tourists.
“It’s going to be the biggest tourist event in the UK ever and it will change our supply chain for eight weeks,” says Quentin Neville, purchasing director.
The pledge by the UK’s Olympic bid to tie down hotel rates means a large number of rooms will be allocated to particular groups, likely to be of the same nationality, by the London Organising Committee. This will have a big impact on food and drink procurement.
“We will have to tweak our offers by hotel, which is something we wouldn’t normally do,” says Neville. “So, if we have CNN staying, we’ll have a very American menu, or with a predominantly Muslim group, it will all be halal.”
The restrictions imposed on daytime travel during the Games will also have an impact on deliveries. “It looks like we’re going to have night deliveries because most roads will be shut to heavy goods vehicles.
“We’re also looking at whether to have central stores in London in one of the car parks for things like frozen food.
“It’s a bit like the year 2000 – we don’t know how different it’s going to be, but we want to plan a backup.”
