Everything’s backordered: Supply chain delays hinder hotel openings
Nothing in travel seems to run on schedule these days. Flights are delayed (and often canceled). Highways are congested. Cruise ship debuts are repeatedly stalled.
Even hotel openings are getting pushed back in light of – what else? — supply chain disruptions. Warehouse shutdowns during pandemic lockdowns in China and other difficulties in procuring all the equipment needed to make a hotel run mean properties can’t open on time.
Think it’s annoying when West Elm has your couch on backorder for eight months? Try putting in a couch order for a 450-room hotel.
Hotel executives throughout the spring and into the summer noted that opening timelines kept getting bumped out thanks to these procurement issues.
Builds and openings stalled
New construction for Hilton-branded hotels is expected to be flat or slightly down this year thanks to a combination of labor shortages, higher costs of materials and greater difficulty to obtain financing, the company’s chief financial officer said on an investor call earlier this year.
The much-anticipated Raffles Boston Back Bay Hotel and Residences, originally slated to open this August, is now likely to open its doors next spring.
“The [furniture, fixtures and equipment procurement] has caused some delays. We don't like to tout this too much, but we were expecting that we were going to be open in that hotel in August of this year, and now we’re April-ish, probably,” Mark Purcell, senior vice president of development for North and Central America at Accor, said of the Raffles project in Boston.
“That is nothing other than those types of delays that have caused that have caused that.”
The Raffles Boston project isn’t the only one to see delays.
Sources told TPG that projects ranging from small inns on Nantucket to sprawling luxury hotel projects in major cities keep getting pushed back in light of issues tied to delayed furniture and equipment deliveries and even building materials.
Even hotels that are open struggle to order everything from guest room bedding to utensils and liquor for restaurants.
It's a backorder brouhaha.
Marriott CEO Anthony Capuano acknowledged “construction timelines having lengthened a bit so far this year due to supply chain disruptions and labor shortages” on a company earnings call earlier this year.
Hyatt CEO Mark Hoplamazian admitted during an investor call this year that “macro factors such as supply chain issues or COVID-related restrictions present a degree of uncertainty.”
Others say financing still isn’t back to pre-pandemic levels, despite demand for hotel rooms roaring back to life and even exceeding 2019 levels in recent months.
“Yes, we have seen average construction timelines lengthen a few months. Now, that is for two reasons,” Leeny Oberg, Marriott International’s chief financial officer, told TPG earlier this year following the company’s first-quarter earnings call.
“Part of it is supply chain issues that you referenced, and the other is also financing.”
“Availability and financing availability has improved and is definitely better, but it is still not as easy and attractive as it was pre-pandemic,” Oberg added. “So, we're not seeing projects drop out of the pipeline, but we have seen that construction starts are still lower than they were in 2019. Now, they're a lot better than they were last year, but they are still lower than 2019 levels.”
A problem that won’t solve itself
There is a reason for the hotel industry to be worried if the supply chain issue doesn’t shake out soon enough.
Hotel companies relaxed brand standards during the pandemic to provide a financial life raft to individual property owners while demand levels were at historic lows.
However, there is widespread expectation major hotel companies will start reinforcing these standards — which range from signage to what kind of food is served in restaurants — this year amid the broader travel recovery.
That means there will be a rush of orders to get hotels back into pristine condition, especially as returning travelers give feedback on where hotels are coming up short.
"Supply chains are still challenging, specifically on the freight and container booking side. Everything keeps changing on a week-to-week basis,” said Dan Ryan, co-founder of Agency 967, a firm that sells furniture to hotels.
“I really hope the freight and logistics marketplace starts working itself out soon.”
However, a ravaged supply chain means hotels aren’t likely to improve overnight. Delivery bottlenecks and repositioning shipping containers around the world are difficult obstacles to overcome in the near term.
Onshoring, a much-discussed solution that moves manufacturing facilities back to the U.S. instead of relying on warehouses overseas, is a popular topic often discussed to overcome the delivery instability seen over the last two years.
New construction of U.S. manufacturing facilities was up 116% over the last year, according to data from the Dodge Construction Network.
That theoretically is good news for the hotel industry if their suppliers are part of that mix. These facilities don’t open overnight, though. That's not exactly great news for an industry that's facing a customer base that is running out of patience.
Guests expect service levels and property conditions to match the extraordinarily high daily rates getting charged this summer.
“There has been so much deferred capital expenditures in hotels over the past three years,” Ryan said. “Guests are paying very high rates for hotels, and, while I think travelers have been okay with shoddy rooms, I believe that this summer guests will become more discerning and demand room product that's commensurate with the high rates they are paying for rooms."
TPG featured card
Rewards
| 4X | Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 4X | Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 3X | Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com. |
| 2X | Earn 2X Membership Rewards® points per dollar spent on prepaid hotels and other eligible purchases booked on AmexTravel.com. |
| 1X | Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases. |
Intro offer
Annual Fee
Recommended Credit
Why We Chose It
There’s a lot to love about the Amex Gold. It’s a fan favorite thanks to its fantastic bonus-earning rates at restaurants worldwide and at U.S. supermarkets. If you’re hitting the skies soon, you’ll also earn bonus Membership Rewards points on travel. Paired with up to $120 in Uber Cash annually (for U.S. Uber rides or Uber Eats orders, card must be added to Uber app and you can redeem with any Amex card), up to $120 in annual dining statement credits to be used with eligible partners, an up to $84 Dunkin’ credit each year at U.S. Dunkin Donuts and an up to $100 Resy credit annually, there’s no reason that foodies shouldn’t add the Amex Gold to their wallet. These benefits alone are worth more than $400, which offsets the $325 annual fee on the Amex Gold card. Enrollment is required for select benefits. (Partner offer)Pros
- 4 points per dollar spent on dining at restaurants worldwide and U.S. supermarkets (on the first $50,000 in purchases per calendar year; then 1 point per dollar spent thereafter and $25,000 in purchases per calendar year; then 1 point per dollar spent thereafter, respectively)
- 3 points per dollar spent on flights booked directly with the airline or with amextravel.com
- Packed with credits foodies will enjoy
- Solid welcome bonus
Cons
- Not as useful for those living outside the U.S.
- Some may have trouble using Uber and other dining credits
- You may be eligible for as high as 100,000 Membership Rewards® Points after you spend $6,000 in eligible purchases on your new Card in your first 6 months of Card Membership. Welcome offers vary and you may not be eligible for an offer. Apply to know if you’re approved and find out your exact welcome offer amount – all with no credit score impact. If you’re approved and choose to accept the Card, your score may be impacted.
- Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com.
- Earn 2X Membership Rewards® points per dollar spent on prepaid hotels and other eligible purchases booked on AmexTravel.com.
- Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases.
- $120 Uber Cash on Gold: Add your Gold Card to your Uber account and get $10 in Uber Cash each month to use on orders and rides in the U.S. when you select an American Express Card for your transaction. That’s up to $120 Uber Cash annually. Plus, after using your Uber Cash, use your Card to earn 4X Membership Rewards® points for Uber Eats purchases made with restaurants or U.S. supermarkets. Point caps and terms apply.
- $84 Dunkin' Credit: With the $84 Dunkin' Credit, you can earn up to $7 in monthly statement credits after you enroll and pay with the American Express® Gold Card at U.S. Dunkin' locations. Enrollment is required to receive this benefit.
- $100 Resy Credit: Get up to $100 in statement credits each calendar year after you pay with the American Express® Gold Card to dine at U.S. Resy restaurants or make other eligible Resy purchases. That's up to $50 in statement credits semi-annually. Enrollment required.
- $120 Dining Credit: Satisfy your cravings, sweet or savory, with the $120 Dining Credit. Earn up to $10 in statement credits monthly when you pay with the American Express® Gold Card at Grubhub, The Cheesecake Factory, Goldbelly, Wine.com, and Five Guys. Enrollment required.
- Explore over 1,000 upscale hotels worldwide with The Hotel Collection and receive a $100 credit towards eligible charges* with every booking of two nights or more through AmexTravel.com. *Eligible charges vary by property.
- No Foreign Transaction Fees.
- Annual Fee is $325.
- Terms Apply.
Rewards Rate
| 4X | Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 4X | Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 3X | Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com. |
| 2X | Earn 2X Membership Rewards® points per dollar spent on prepaid hotels and other eligible purchases booked on AmexTravel.com. |
| 1X | Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases. |
Intro Offer
You may be eligible for as high as 100,000 Membership Rewards® Points after spending $6,000 in eligible purchases on your new Card in your first 6 months of Membership. Welcome offers vary and you may not be eligible for an offer.As High As 100,000 points. Find Out Your Offer.Annual Fee
$325Recommended Credit
Credit ranges are a variation of FICO® Score 8, one of many types of credit scores lenders may use when considering your credit card application.Excellent to Good
Why We Chose It
There’s a lot to love about the Amex Gold. It’s a fan favorite thanks to its fantastic bonus-earning rates at restaurants worldwide and at U.S. supermarkets. If you’re hitting the skies soon, you’ll also earn bonus Membership Rewards points on travel. Paired with up to $120 in Uber Cash annually (for U.S. Uber rides or Uber Eats orders, card must be added to Uber app and you can redeem with any Amex card), up to $120 in annual dining statement credits to be used with eligible partners, an up to $84 Dunkin’ credit each year at U.S. Dunkin Donuts and an up to $100 Resy credit annually, there’s no reason that foodies shouldn’t add the Amex Gold to their wallet. These benefits alone are worth more than $400, which offsets the $325 annual fee on the Amex Gold card. Enrollment is required for select benefits. (Partner offer)Pros
- 4 points per dollar spent on dining at restaurants worldwide and U.S. supermarkets (on the first $50,000 in purchases per calendar year; then 1 point per dollar spent thereafter and $25,000 in purchases per calendar year; then 1 point per dollar spent thereafter, respectively)
- 3 points per dollar spent on flights booked directly with the airline or with amextravel.com
- Packed with credits foodies will enjoy
- Solid welcome bonus
Cons
- Not as useful for those living outside the U.S.
- Some may have trouble using Uber and other dining credits
- You may be eligible for as high as 100,000 Membership Rewards® Points after you spend $6,000 in eligible purchases on your new Card in your first 6 months of Card Membership. Welcome offers vary and you may not be eligible for an offer. Apply to know if you’re approved and find out your exact welcome offer amount – all with no credit score impact. If you’re approved and choose to accept the Card, your score may be impacted.
- Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com.
- Earn 2X Membership Rewards® points per dollar spent on prepaid hotels and other eligible purchases booked on AmexTravel.com.
- Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases.
- $120 Uber Cash on Gold: Add your Gold Card to your Uber account and get $10 in Uber Cash each month to use on orders and rides in the U.S. when you select an American Express Card for your transaction. That’s up to $120 Uber Cash annually. Plus, after using your Uber Cash, use your Card to earn 4X Membership Rewards® points for Uber Eats purchases made with restaurants or U.S. supermarkets. Point caps and terms apply.
- $84 Dunkin' Credit: With the $84 Dunkin' Credit, you can earn up to $7 in monthly statement credits after you enroll and pay with the American Express® Gold Card at U.S. Dunkin' locations. Enrollment is required to receive this benefit.
- $100 Resy Credit: Get up to $100 in statement credits each calendar year after you pay with the American Express® Gold Card to dine at U.S. Resy restaurants or make other eligible Resy purchases. That's up to $50 in statement credits semi-annually. Enrollment required.
- $120 Dining Credit: Satisfy your cravings, sweet or savory, with the $120 Dining Credit. Earn up to $10 in statement credits monthly when you pay with the American Express® Gold Card at Grubhub, The Cheesecake Factory, Goldbelly, Wine.com, and Five Guys. Enrollment required.
- Explore over 1,000 upscale hotels worldwide with The Hotel Collection and receive a $100 credit towards eligible charges* with every booking of two nights or more through AmexTravel.com. *Eligible charges vary by property.
- No Foreign Transaction Fees.
- Annual Fee is $325.
- Terms Apply.