Results: Hotelier Middle East Supplier Survey 2014

The Hotelier Middle East Supplier Survey 2014 uncovers a worrying trend as corruption and bribery plays a greater part in the market’s growing competition for hotel contracts

Middle East hotel suppliers are more concerned than ever about the rising levels of corruption in the region’s hospitality industry, with suppliers admitting to being approached for or considering offering a bribe to secure a hotel contract.

That is just one of the findings of the Hotelier Middle East Supplier Survey 2014, which for the last five years has been an outlet for the region’s hospitality suppliers to share their views and experiences of the Middle East hotel business.

For example, back in 2012 our suppliers’ minds were very much on the market’s continuing economic struggles, as some reported they were clinging to existence as invoices went unpaid. Last year, however, the story was very different, with suppliers noticing a marked improvement in business, while also becoming wary of rising levels of competition.

This increasing level of optimism from suppliers regarding performance appears to have continued this year, with 86.4% of our respondents expecting their annual turnover to be higher in 2014 than in 2013.

This is in spite of the fact that the majority of our suppliers (65%) have insisted that their prices are remaining the same this year as in 2013, while of those that have raised their prices, 77% claim that they will only go up by a maximum of 10%.

However, suppliers also expressed concerns about the rising levels of competition in the market and when our respondents were asked about potential challenges for the next 12 months, there was only one clear winner, with increased competition taking a clear 40% of the vote and the increased cost of materials in second place, with 21% of respondents citing this as the biggest challenge.

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Dirty Tricks
This level of concern over competition appears to be having a negative effect on the market, with suppliers even considering breaking the law in order to maintain their market share, as well as to please operators who are out to benefit financially from their concerns.

For example, when our suppliers were asked if corruption, in terms of bribery, was becoming a problem that was negatively affecting their business, almost half (49%) of our respondents said that it was, compared to only 40% in 2013.

One of the main examples of corruption appears to be the increasing number of occurrences in
which potential clients have asked for a bribe in order to secure an order, with 54.8% of our suppliers reporting this had happened to them, compared to only 34% in 2013.

This pressure from clients to bend the rules also appears to have got the better of some of the region’s suppliers, with 73% of respondents admitting that they know of other suppliers who use monetary bribes to secure orders, up from 63% last year, while 7% of our respondents have openly admitted that they would offer a bribe to a client, compared to 0% in 2013.

As the Hotelier Supplier Survey is completely confidential, our respondents were happy to share their views on this market trend, and even why they themselves were tempted.

One supplier admitted that “the biggest challenge we pose [sic] is bribe ... Right from receiver to purchasing we have to pay and hotels need competitive prices as well.”

Another respondent also bemoaned the fact that “most chefs and purchase managers ask for commission” while another said that “who gives more to the purchasing department ... he will have the deal. And the big companies have more money to spend in this situation.”

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While bribery is a problem in all markets, when approached with our findings , Middle East suppliers expressed surprise that the problem appeared to be so widespread and revealed concern that it seems to be getting worse.

Commenting on our results, A.Ronai managing director Gavin Dodd said he was aware of the issue, but thought the situation had improved in recent years: “The results of the recent survey do not surprise me at all, however, I am surprised at the previous year’s results.

My personal feeling is that as the market matures and more international standards take hold people will understand the moral issues with this type of behaviour”.

“In the 20 years that I have been working in this market I believe that these issues are declining. I believe that the actions that are being taken by the largest companies in the Middle East will filter through to the entire industry,” he added.

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The Bright Side
In order to understand the level of impact that these trends may be having on the market, it is necessary to understand exactly who our suppliers are, with more than 100 people taking part in this year’s Hotelier Middle East survey.

Of those respondents, over two thirds (67%) receive the majority of their business from hotels while the majority of respondents were kitchen equipment suppliers (20%), closely followed by a tie for second place between food products and housekeeping suppliers (16%).

Regarding location, the clear majority of respondents are operating in the UAE (90%), followed by 73% who operate in Qatar, 63% in Bahrain and 62% in Saudi Arabia.

Our suppliers also continued to operate in the region’s more turbulent markets with Egypt (36%), Iraq (24%) and Syria (18%) still being viable markets for a number of our suppliers.

The UAE was also a firm favourite when it came to choosing which market presents the biggest opportunity, with 68% of choosing the thriving hotel market ahead of another popular choice in Saudi Arabia, with 21%.

This response was also matched by the choice of hospitality sectors in which our suppliers saw the most potential growth, with the luxury market selected by 48% of respondents, followed by a close split between economy hotels (13%), resorts (11%) and standalone F&B outlets (11%).

However, according to our results, the Middle Eastern market may not be looking quite so rosy for those in the hospitality job market, with the percentage of companies who admitted to making redundancies increasing to 43% from 34% last year.

Luckily for those that did lose their jobs, things may be now be looking up as 82% of our suppliers also declared that they are planning to recruit more staff in 2014, compared to only 68% who were recruiting in 2013.

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And recruit they should, as one thing our suppliers were more than happy to tell us was how much they enjoyed working in the hospitality market, with respondents stating that among the things they enjoy most about their jobs were “meeting new people”, “working with hotels all around the world” and the “satisfaction of getting a contract”.

While some suppliers were not so keen, stating that “unfair competition” and ‘unfair play, unfair demands and two-faced attitudes” were the things they disliked the most about the market, it is clear that Middle East hospitality suppliers are part of a market that is expanding rapidly, with companies growing their revenues annually and creating ample opportunities for personal and business growth.

Where exactly the market goes from here, and especially how it deals with the growing problems of bribery and corruption, are questions that must be addressed.

As the majority of our respondents admitted, bribery is having a negative effect on suppliers’ businesses and Hotelier Middle East will continue to pay close attention to the subject to see if this worrying trend continues into the rest of 2014.