Are you a supplier company with a product or service that you think is ideal for the hotel industry? Are you keeping up with the trends in the hospitality industry? There is no doubt that new technologies, sustainable and wellness minded items, innovation, and revenue boosting products are valuable and desired in the hotel industry.
If you are a company trying to break into the hospitality industry, then you have experienced the complex hotel procurement process, and may even asked yourself, “what is a GPO?” We get it. We really do. At iDEAL Hospitality Partners Group, the most asked question is – “what does GPO mean?” It is estimated that 80% of hotels are contracted with a GPO through one or some channel.
Hospitality Group Purchasing Organizations exist to leverage buying power of products and services and contract at the distributor, manufacturer, and sometimes even the raw material level to obtain favorable wholesale pricing for hoteliers. The hotelier customers of group purchasing organizations are management companies, owners, hotels, and brands. Other benefits GPOs provide their customers are quality assurance programs, auditing of pricing, specification recommendations, eProcurement options, supply chain fill rate compliance measurements and more.
Winning a GPO contract for a supplier is highly desirable for good reason. However, the majority of suppliers believe that once a contract is signed with a hospitality group purchasing organization, the flood gates will open and orders will start flying in!
Nothing could be further than the truth.
Here are four (4) key steps for suppliers who want to get a GPO contract:
- Properly Size the Hospitality Market. If you are new to hospitality and believe your product or service will be a hit with hotels, then be sure you can prove it first before full-on going after a hospitality group purchasing organization contract. Hospitality GPO’s are keen to have contracts for products that can be utilized by the masses and want to see you have done your homework on market sizing. Start with a proper evaluation of the hospitality ecosystem to determine which class of hotel, sector, brand(s), geographies, and types of hotels will be the ideal target. Be educated on the needs and desires of guests that stay in hotels. To properly evaluate and size the hospitality market, a supplier company must understand the type of guests hotels attract and serve.
- Understand Your Competition. What are the unique key differentiators and does your product, technology or service compete with a hotel brand standard in any way? Is it too niche, or just perfect for the guests of today? Are you solving an industry-wide problem? Understanding your competitors and how they present and market their offering to the hotel industry is an important step so that you can be well-prepared for answering questions about this topic the group purchasing organization team member will surely ask. Hospitality GPO’s prefer to contract with one or only a few suppliers to create highly-leveraged buying power and obtain the best discount pricing. It is important to demonstrate how your product and service stacks up to the competition.
- Solve the Chicken/Egg. A group purchasing organization will be most interested in contracting with your company if you already have a sales history and track record with some hotels, with testimonials and references. Keep in mind, some hotels will tell suppliers, “Sorry, I cannot buy your product if it is not contracted with my GPO”. (There are so many bigger points to discuss about this topic, but we will save that for another blog.) Many suppliers have approached a group purchasing organization first before first going to hotels, management companies, brands and owners. It really is a chicken and the egg dilemma. What comes first? Suppliers will have much better results getting a GPO contract if they have some happy customers buying their product in the hospitality industry.
- Be Prepared for Direct Sales Efforts and GPO Management. Congratulations! You have a hospitality GPO contract! That is a big deal, and you are excited and ready for sales to boost in a big way. You may have just built a more solid hospitality division of sales through the foundation of a group purchasing organization and now, sales efforts and GPO management will need to also have a boost so that you can optimize the GPO contract to the fullest. Unfortunately, associates at the GPO’s will not be the sales team on your behalf. Most GPO’s contract with 1000+ suppliers and keeping your product or service front and center to hoteliers will be YOUR primary responsibility. The GPO contract will give you the green light, but you will need to do the driving. The after-the-sale account management activities will be of key importance, too. The hospitality industry expects to work with suppliers that check in on them in a proactive manner and is in touch to ensure a wonderful experience all the way through. That’s how relationships and a trusted advisor status as a supplier is built.
Jill Dean Rigsbee, CEO and Founder of iDEAL Hospitality Partners Group says, “I worked for a major hospitality group purchasing organization for 16 years and my job was to sell an entire procurement program that offered savings to management companies. We did not ‘sell’ individual suppliers, but it was always helpful to me if I could properly explain their product or service, and the value to my customers. The procurement program always worked best when suppliers were reaching out for sales directly to our customers, showing the benefits and value they offer. It was a win-win-win strategy, helping hotel customers, the supplier and the GPO”.
Overall, if you’re a supplier who wants to successfully earn a hospitality group purchasing organization agreement, it’s important to have a great product, but also to have a well-thought-out sales strategy and plan for working with the GPO company. If you need help, contact us and fill out our supplier inquiry form. We know all about GPO’s and how best to work with them.