Teams should identify roles and responsibilities of purchasing in three basic categories: designed/specified by; purchased by; and received and installed by.
Daniel Englender, Bill Cheung and Darlene Henke contributed to this series.
We are often asked about how different, or how similar, handling the furniture, fixtures and equipment needs of hospitality projects are around the world. Quick answer: The ONLY thing in common is that a hotel needs FF&E and that through a process, the FF&E is shipped and installed. This series addresses the differences we encounter around the world.
The scope of the project and roles and responsibilities vary greatly by region of the world. What is “normal and customary” for a particular
For example, carpet may be designed by the interior design firm, purchased by the purchasing agent (using a quantity provided by the contractor or in some countries, the QS, or “quantity surveyor”) and then installed by the contractor. The lobby tile may be specified by the architect, purchased by the contractor, and installed by the contractor. Given a typical hospitality project, there are as many as 2,000 different line items to be reviewed and analyzed. Also, note that FF&E and operating supplies and equipment vary not only by country, but by brand in that county. A major, top 5 global brand puts televisions and beds in the OS&E category, while many other brands consider these exact items to be in the FF&E category. Therefore, another benefit of the differentiation document is to help the owner determine what budget an item is carried in, and to make sure there are no items counted twice, as well as no items forgotten, including brand and management company-supplied items, pre-opening items, and even the shuttle van.
As the roles of the various consultants on a project vary greatly, so do their fees and “return on time.” When a large, global ownership group our firm is working for around the world hired us to handle their hotels in Europe (after handling more than 100 projects for them in the U.S.), they gave us the goal of furnishing the same brand hotel in Europe for only double the FF&E cost. The group’s estimates were actually coming in three times the cost of the same brand in the U.S. For example, what was being handled at a cost of about US$15,000 per key in the United States was being budgeted at about US$45,000 per in Europe, with currency, room size and brand all being consistent. Part of this is the different “star level” because most all brand hotels in Europe and Asia and the Middle East are a full notch or two above their U.S. counterparts. But another large reason is roles. We completed complex, US$10 million renovations of large hotels with vast public spaces for this owner in the U.S., with all of three or four trips by our staff to the project. In Europe, for handling a single floor of guestrooms, less than US$500,000 of work, a project 1/20 the size, our staff had 27 on-site meetings.
Overall, be very aware that costs of doing business in each country can have massive, 200-percent to 300-percent swings for certain areas, and in the same project, some can be higher and some can be lower, all based on that specific project in that specific country. Also, note that in Europe and the Middle East, it is common to renovate the rooms down to the bare building structure, and this “complete” renovation scope further increases costs. As a result of these increased costs, many European and Middle Eastern hotels often only renovate a floor or section of the hotel at a time, unlike in the U.S., where it is common to renovate all guestrooms at once.
Know the roles
Note also the terms “project manager,” “construction manager” and “contractor” all have different meanings in different countries, and the general contractor in the United States typically is called the main contractor outside the United States. The decorator can be the person handling the specifications, typically called the interior designer, or can also be the paint and wall covering contractor. As in the differentiation document, one must define each role and who does what for each project. Who is copied on e-mails, and the order of their names, can also have different meanings in different cultures. What is called “respect” in the U.S. is often called “face” in Asia, and it is important to understand the hierarchy of each company on each project.
Be aware that in Asia, the expectation of an Asian developer often includes for the purchasing agent to be at the factory when they load the products into the container and to provide staff to be on site when the products are delivered.
One other key area to cover under scope is what are the laws and jurisdiction that govern not only each consultant’s contract, but also each purchase order to each vendor. The purchase order is the contract between the owner and the vendor, and many different local laws apply to each aspect of the FF&E process. Do not assume that the Uniform Commercial Code or “UCC” in the U.S. will apply to each vendor, even if you have done business with that vendor many times before. Also, some vendors have completely different business entities set up by country and region, so know with whom you are actually contracting with on each purchase order.
E-mail is great to document and confirm understandings, but phone calls, and most importantly, face-to face meetings are still, by far, the most essential form of communication for any issues of consequence. All projects rely on communication, and in person, we receive the benefit of all verbal and non-verbal communication.
Read the first article in this series “CapEx and the FF&E process around the world.”
About this series: This is the second article of a four-part series that will examine how all aspects of the capital expenditure and FF&E process can differ around the world. Brands, owners and consultants operating for the first time in a foreign area will find useful guidance about regional customs and business practices.
Coming next week: Terms of the trade differ across the globe, and it can be helpful to know some of frequently used terms by region. The International Commercial Terms also will be discussed.
Daniel Englender (firstname.lastname@example.org), a member of the ISHC, is managing director of Benjamin West London.
Darlene Henke (email@example.com) is president of Audit Logistics LLC in Louisville, Colorado.
Bill Cheung (firstname.lastname@example.org) is managing director of Benjamin West Hong Kong.
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