Preamble –

Hotels enter contracts for a variety of services and procurement. A well structured and defined Contract is therefore essential to ensure smooth operations. Vendor Management on the other hand is so critical that one cannot exist without the other.

Need for Contract and Vendor Management – A hotel cannot hope to carry out all the activities by itself.  It must essentially depend on outside parties to help it procure materials and services. Once a hotel enters a contract for supply of materials or services, I can concentrate on running the operations efficiently with customer focus being its core area.  Simultaneously, attention must be given on Vendor Management including vendor assessment on regular basis. Vendor rating and performance helps in taking quick action to replace a vendor if required or ensure that a vendor takes corrective steps to improve his services.

Areas where Contract is required-

Procurement –

Most important from operational and cost point of view. Encompasses procurement of –

• Perishables
• Groceries
• Meat
• Beverages
• Guest Amenities and linen. 
• Capital Goods
• Services – Equally important from operational view point. Includes-

• Pest Control Services.
• Laundry Services.
• Hiring of Audio visual equipments
• Hiring of Cutlery & Crockery
• Hiring of event managers
• Hiring of Security agencies
• Hiring of  Cab services
• Annual Maintenance contracts
• Running of loyalty programs
• Garbage Contracts. 

Right Contract & Right Vendor Management –

As can be seen from the list, it is clear that almost the entire operations of the hotel depends on efficient management of contracts and vendors. By efficient, we mean uninterrupted supply of goods and services at the contracted rates including emergency requirements.  Hence it is f critical importance that due care and caution is exercised while selecting a vendor and executing the contract. Following guide lines must help in achieving this-

• Constitution of Purchase Committee is a siaquanon. No compromise on this. Committee is vested with the responsibility of ensuing that only contractors/ suppliers with right credentials and with good standing in the market are given the responsibility. It is also the committee’s responsibility to ensure that well rounded quotation and assessment policy is in place for each area and the proposal by procurement manager is discussed and scrutinized threadbare before signing off on a proposal. It is essential that the Committee consists of Procurement Head, CFO. GM, senior operations Manager. Other stakeholders are part of the proceedings concerning their department alone. 
• Contract must be well drafted containing all clauses explicitly including legal clauses so that dispute resolution is easy. 
• Efficient performance monitoring system covering all parameters is necessary. Data analysis can become a vital tool here where the vendor is assessed on all parameters. 
• Compromise cannot be resorted to since even a small misstep can have serious consequences leading to disruption and loss of valuable time. 

About the author – A Fellow of the Institute of Chartered Accountants of India with over 15 years of experience in hospitality industry at senior level. Has over 40 years of experience in total.