Few areas of business are more competitive than the hotel trade so instances of collaborative purchasing are rare, even though the advantages of aggregated spend are obvious.

For some years intermediaries have capitalised on the commercial antipathy between hotel groups by selling aggregated deals into the sector. The hotel chain benefits from a better deal than it could negotiate on its own, while the aggregator retains a margin of profit.

Now, however, another model is emerging as a number of hotel groups put aside their commercial differences to work together in procurement, without the aid of a middleman. 


Background to MBG 

"All purchasing directors are obliged to get the best value but anyone who says he has the best price available is an idiot, there's always someone out there with a better deal," says Quentin Neville, purchasing director of Guoman Hotels (formerly Thistle Hotels). Tired of haggling for better deals on his own, in 2006 Neville began working with his opposite number at Queens Moat House, Cindy Walters.

"It proved very successful. The increased volumes meant we got much better deals than we could manage on our own," he says.

The two companies signed individual contracts with the supplier but benefited from their combined clout during the negotiation stage.

Realising they were on to a good thing, Neville and Walters decided that what two could achieve an even larger group could only improve on. However, expanding on their arrangement was not without risks: "With two partners who know each other it's easy but if we were to get any larger we realised we needed to initially bring in an independent third party to manage issues such as confidentiality."

The remaining founding members soon joined the group seizing the opportunity to create more value from their purchasing spends.

Who are members of the Mayfair Buying Group and why join

Cindy Walters, Director of Procurement QMH UK Limited, “With larger volumes meaning lower cost purchase prices, the arrangement has enabled everyone to deal with the decreased budgets we have recently had to work with – enabling us to make them stretch much further than would be possible if the procurement was not part of a collaborative tender.”

Mayfair Buying Group offers suppliers far more potential guaranteed volumes compared to the larger mainly US based Hotel groups.                                             In terms of consortiums claiming large number of member hotels, MBG can and does offer suppliers real business not a marketing opportunity.

Which areas of spend are included?

While economies of scale can save money, Mayfair members are aware that for their "size matters" approach to bear dividends it has to be applied in the right context. Neville says: "The categories we work with need to be generic areas where our requirements are very similar otherwise you can't consolidate on them. I don't think this approach would work with marketing services or anything that threatens commercial confidentiality."

Ray Shannon Doyle Hotels agrees some categories need to be ring-fenced for individual attention: "A group's branded printing requirements is one area I don't think we'll be looking at in the immediate future, also service and maintenance contracts would be very difficult to purchase across a broad range."

The need for each individual business to hold on to a competitive advantage is also a factor that could undermine this arrangement. Purchasing alliances between hotel groups are not unknown but in the past these have been small scale and short-lived.

The incestuous nature of the market means companies have had to fight to grab their corner of the business: "We are all operating in each other's back yard and traditionally our industry has been very reticent to share information," says Shannon. "This stems from our business being 'live' and, like the airline industry, we compete every day against each other on rates, etc."

Mayfair members don't deny this competition but they nurture a spirit of camaraderie that means rivalry in purchasing is directed only at those outside of the group: "We're not a charity but nor are we out to make money from each other," insists Neville. "We are each of us in the business of selling bedrooms; do we really want to compete on buying frozen peas as well?"

Process / Management

In 2009, Mayfair decided that it was mature enough and both in terms of operations and relationships to take over full running itself without external support.  Since such time it as become faster and leaner in terms of delivery (being operational delivery focused and less formal in its ways of working).  Several successful projects later and the group is stronger and more focused than ever before.

Structure

Mayfair is not a limited company, but it has a board of three rotating members.  Much emphasis is placed on the relative informality of the arrangement and maintaining good relations is essential when purchasing decisions are effectively made by committee.
"It's a consensus-oriented group, we don't force anybody to do anything," says Ray Shannon current Chairman of MBG . "But because we are all in the same market, what's good for one group tends to be good for all.

Cost of  Membership

We do not use external consultants, hence we have no costs,therefore there are no fees or ongoing costs.

Members only commit their time and to try to work together to create more value for their own businesses.Each member devotes time and effort when required to assist in delivering the agreed projects.