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Everything’s backordered: Supply chain delays hinder hotel openings

July 8 2022
5 min read
Hotel room entrance
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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.

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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

Hotel openings are getting pushed back due to supply chain disruptions. (Photo by Francois Nel/Getty Images)

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

(Photo by Melina Pizano/Getty Images)

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."

Featured photo by Getty Images
Editorial disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

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Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
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Rewards Rate

6X6x points at hotels participating in the Marriott Bonvoy® program.
4X4x points for purchases made at restaurants worldwide, at U.S. gas stations, on wireless telephone services purchased directly from U.S. service providers and on U.S. purchases for shipping.
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  • Intro Offer
    Limited Time Offer: Earn 100,000 Bonus Marriott Bonvoy Points after spending $4,000 in purchases on your new Card in your first 3 months of Card Membership. Offer expires 11/2/22.

    Limited Time Offer: Earn 100,000 points
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  • Annual Fee

    $125
  • Recommended 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.

    670-850
    Excellent/Good

Why We Chose It

The Marriott Bonvoy Business Amex is a stacked card with a rewards rate that will help you earn bonus points on everyday and business-related purchases. You'll earn 15 elite night credits each calendar year, and receive automatic Gold elite status. Finally, the free night award certificate with a redemption level of 35,000 points or less can get you hundreds of dollars in potential value each year.

Pros

  • 6x points on eligible purchases at hotels participating in the Marriott Bonvoy program
  • 4x points at restaurants worldwide, U.S. gas stations, wireless telephone services purchased directly from U.S. service providers and U.S. shipping
  • 2x points on all other eligible purchases
  • Earn a free-night award each card renewal month (up to 35,000 points)
  • Receive 15 elite night credits to jump-start status
  • Transfer Marriott points to 40+ airlines

Cons

  • Airline points transfer ratios are poor
  • Must spend $60,000 in a year for second free-night award
  • Limited Time Offer: Earn 100,000 Bonus Marriott Bonvoy Points after spending $4,000 in purchases on your new Card in your first 3 months of Card Membership. Offer expires 11/2/22.
  • 6x points at hotels participating in the Marriott Bonvoy® program.
  • 4x points for purchases made at restaurants worldwide, at U.S. gas stations, on wireless telephone services purchased directly from U.S. service providers and on U.S. purchases for shipping.
  • 2x points on all other eligible purchases.
  • Receive a 7% discount off standard rates for reservations of standard guest rooms at hotels that participate in the Marriott Bonvoy program when you book directly. Terms and Conditions Apply.
  • Receive 1 Free Night Award every year after your Card renewal month. Plus, earn an additional Free Night Award after you spend $60K in purchases on your Card in a calendar year. Awards can be used for one night (redemption level at or under 35,000 Marriott Bonvoy® points) at hotels participating in Marriott Bonvoy®. Certain hotels have resort fees.
  • Enjoy Complimentary Marriott Bonvoy Gold Elite Status with your Card.
  • Terms apply.
  • See Rates & Fees