When was the last time you thought about procurement as more than a cost center? For many hotels, procurement lives quietly in the shadows, ensuring the linen arrives, the seafood is fresh, and the P&L stays balanced. But what if your procurement department could actually generate revenue instead of just facilitating expenses?
According to recent BirchStreet research, only 14% of hotel decision-makers view procurement as a profit center. That’s a staggeringly low number given the potential this function has to add value. And while 18% disagree, it’s worth noting that more than half of all responding hoteliers were unsure or didn’t respond at all. The translation? The opportunity for growth is crystal clear, if not still vastly misunderstood. Hotels that shift their mindset from a purely operational view to one grounded in procurement strategy unlock new streams of profitability, improved vendor relationships, and, honestly, a lot fewer headaches. Curious how? Strap in. We’re about to explore why modernizing procurement is the secret sauce for bottom-line success.
Procurement’s Reputation Problem (And Why It Needs Rethinking)
Traditionally, procurement has been seen as a necessary evil for hotels. It gets the job done but rarely gets celebrated for it. Procurement teams are responsible for balancing quality, cost, and timeliness in a sea of vendors, suppliers, and departments with competing interests. Their goal? Save money and never run out of the essentials.
But here’s the kicker. While focusing on cost control is critical, it’s time to recognize that procurement can also be a strategic lever for profitability. A well-orchestrated procurement process doesn’t just minimize spending; it optimizes every dollar spent for maximum return. It turns internal procurement functions into measurable financial wins for the entire property.
Here’s the Challenge
Hotels often lack the tools and visibility needed to flip procurement into a revenue driver. Take paper-based procurement as an example. It’s riddled with inefficiencies, prone to errors, and notoriously hard to scale. But what if you digitized everything, automated repetitive tasks, and got real-time insights into your spend? Suddenly, you’re empowered to strategically manage your resources, leverage incentives, and boost your operating performance.
The Key to Profitability = Leveraging Technology
For those 14% of hotels already treating procurement as a profit center, the common thread is clear – they’ve embraced the power of third-party platforms like BirchStreet Systems.
Automation That Reduces Cost Per Transaction
Procurement’s profitability problem is often tied up in inefficiencies. Whether it’s figuring out invoice discrepancies, manually managing purchase orders, or reconciling accounts, every delay eats up time, labor, and money.
Here’s where automation comes to the rescue. By digitizing procure-to-pay processes, platforms like BirchStreet provide an unmatched level of operational efficiency and compliance. Manual entry and approval workflows become automated, invoices seamlessly get matched, and employees suddenly have time to focus on strategy instead of squinting at spreadsheets.
Imagine processing 100 vendor invoices with just a few clicks rather than dedicating hours (or days) to administrative legwork. The time saved is astronomical, especially for larger operations juggling massive supplier networks.
Real-Time Data for Smarter Decisions
The survey highlighted that many hoteliers struggle with achieving visibility into their procurement processes. When you don’t know where the money’s going, it’s impossible to make informed decisions.
BirchStreet’s dashboards change that. Real-time insights allow procurement teams to track transactions and spending trends, maintain budget accuracy, and uncover inefficiencies before they snowball. Instead of playing catch-up at the end of each quarter, hotels can strategically manage their spend in the moment.
Consider a scenario where a group of properties identifies redundant vendor services or overpriced suppliers. Thanks to transparent procurement data, these inefficiencies can be addressed and renegotiated, funneling cost savings right back into the bottom line.
Strategic Sourcing and Vendor Relationships
Procurement isn’t just about keeping costs down; it’s about building value-packed vendor relationships. And, those value-packed vendor relationships are often facilitated by having visibility into end-to-end processes. Hotels that treat procurement as a profit center understand the importance of procurement automation.
Instead of settling for the first deal that meets their criteria, they leverage technology to compare vendors, analyze contract terms, and track performance. For instance, BirchStreet enables supplier compliance monitoring, ensuring that contracts are being honored and expectations are exceeded. This creates goodwill, reduces lost revenue, and increases the reliability of your supply chain.
Proactive Supplier Negotiation
With actionable data from platforms like BirchStreet, you’re in the driver’s seat during negotiations. Maybe it’s renegotiating bulk discounts for perishables or adjusting extended payment terms for luxury furniture orders. Either way, data-driven procurement teams secure better terms because they approach every conversation with clarity and insight.
The Procurement Glow-Up
If you’re still treating procurement as a cost center, there’s no better time to rethink that strategy. The opportunity for profit is knocking, and technology is the key to unlocking it.
Three Steps to Begin
1. Invest in Technology. Platforms like BirchStreet are purpose-built to bridge the gap between functional procurement and profitable procurement. Automating everything from procurement to payment can completely overhaul the way your properties handle spend.
2. Track Everything. From vendor contracts to negotiated pricing, tracking spend will give you the visibility needed to make smarter financial decisions.
3. Redefine Success Metrics. Don’t just measure procurement by cost-cutting. Evaluate its profitability potential by assessing how well it captures incentives, improves vendor terms, and minimizes inefficiencies.
Your Hotel’s New MVP
Procurement doesn’t have to be a backend mystery or a list of unavoidable expenses. With the right tools, it’s a proven profit center waiting to happen. From capturing unexpected cash flow to preventing cost leakage to slashing operational inefficiencies with automation, the data speaks for itself.
Are you ready to stop thinking of procurement as just a cost? BirchStreet Systems is already helping hotels around the globe flip the script, turning procurement into a powerhouse. It’s time to turn those everyday processes into extraordinary results. Profitably yours.
Want to see how companies like BirchStreet are taking procurement teams from cost centers to strategic revenue generators? Request a demo burada.