Friend or foe
As this is a chance for suppliers to have their say in Hotelier Middle East, let’s have a look at what headaches the hotels have been causing suppliers in 2012.

Outstanding payments from hotels may not be the biggest worry for suppliers in 2013, but they are still a problem.

Nearly one third of suppliers (or 31.4% to be precise) can count themselves lucky that they are owed “nothing” by hotels, while more than half (56.2%) of participants are awaiting up to US $500,000 payments, 8.6% are owed between $500,000 and $1 million, and one is reclaiming debts of more than $1 million.

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There is a greater confidence in your hotel partners’ abilities to pay up this year though, with 42.9% of suppliers expecting to “definitely” get paid outstanding debts in 2013, and another 19% who are very confident. The other half are not so sure, with nearly a quarter (23.8%) either not very confident of getting paid, or having given up all hope.

Shockingly, two suppliers face a “strong” chance of going out of business if they do not receive payment in 2013, while another four companies believe there is a “slight” threat that they will have to shut up shop.

For those that have survived sticky financial situations due to unpaid hotel debts, they will be more careful in future. Stating reasons they would not work with certain hotel companies, suppliers said: “lack of transparency”, “they don’t pay their cheques on time” and “they’re part of a group that don’t pay suppliers”.

Just as well, as avoiding these hotels should make for a happier future for the suppliers, with “chasing payments”, “unreliable partners” and “collecting money” all named as the worst parts of the job.

So if outstanding payment is not the biggest problem, what is? Slowdowns in hotel construction and market saturation are both said to be major obstacles. But the undesirable combination of increasing competition and rising costs of materials tops outstanding payments as the biggest challenges outlined by our suppliers this year.

Increasing competition among suppliers would typically force prices down, but 89.6% of suppliers have had to up price tags by up to 30% over the past 12 months, and another 15.9% increased prices between 30% and 60% on last year just to cover rising costs of materials, meaning margins are getting smaller.

Suppliers listed a number of reasons behind the increasing costs of goods, including: “increased overheads”, “raw materials prices up”, “freight charges and customs duty”, “weak [US] dollar and exchange rates”, “inflation” and “increased salaries”. See the performance table below to understand how that has impacted on average turnover and net profits generated in 2012, compared to 2011.

For many suppliers, their hands are tied when it comes to hotels. They need to secure the contract with a not-to-be-missed deal before their competitor sneaks in, but cannot lower prices significantly. Ideally, the buyer would recognise the quality and value of the product for sale, but as 71.9% of suppliers accuse hotels of scrimping on quality due to reduced budgets, that is not realistic.

Furthermore, “negotiating prices”, “dishonesty”, “having products compared with low-price equipment” and “bargaining and haggling prices” are all mentioned as the parts of the job our suppliers enjoy the least.

Naturally, suppliers continue to find ways to undercut each other — 23 companies say this is an issue — and other dirty tactics are still at play. Corruption, in terms of bribery, is a problem in the Middle East supplier industry that 40.6% of you say is negatively impacting your business.

“Companies playing under the table” is the biggest challenge for one vendor.
“The suppliers that pay the most to hotels get the business,” said another, adding that bribes came in the form of trade deals and discounts. “This market is corrupted and the food service market is negatively affected”.

One said “personal favours” were overshadowing consumer rights and safety:
“It affects the overall approach to quality and damages the smooth management of day-to-day operations”.

A significant 62.5% of suppliers said they know other suppliers using monetary bribes to secure orders, and a crafty 15.6% of participants admitted that they themselves may even resort to foul play.

The buyers are no better; more than a third of suppliers say they have been asked for a bribe by a procurement manager.

“There are many forms of bribery occurring in the industry. Previously, mainly purchasers were involved in such transactions, but now even chefs are involved. Bribes are even offered in terms of gifts for the staff parties,” revealed another supplier.

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