It all starts with the build…

For hotels and other commercial property assets, procurement rarely begins when the asset opens.

It begins with the build.

Across our work, conversations with owners and operators repeatedly return to the same point: the decisions made during asset development, refurbishment and opening establish much of the commercial position that the operating business subsequently inherits.

A new hotel, mixed-use scheme or major refurbishment involves a concentrated period of capital expenditure and procurement activity. Materials, professional services, equipment, furniture, logistics, operating supplies and asset-management requirements all need to be brought together against a fixed programme and budget.

The resulting spend can dwarf the value of anything the asset subsequently requires in its first years of operation.

Yet this is often treated as a separate discipline from procurement in the operating business. In one sense, it is. Project procurement has a different set of objectives, stakeholders and pressures. In another, the distinction can be misleading. Project decisions set the standards, suppliers, specifications and commercial arrangements that the operating business will carry forward.

Project Procurement Is Different

Operating procurement is largely repeatable. A hotel buys food, linen, cleaning products, maintenance services and utilities continuously. Consumption is visible in the P&L. Pricing can be benchmarked, supplier performance reviewed and demand patterns analysed over time.

Project procurement is different. Spend is non-recurring, specifications are evolving, and requirements are often driven by architects, designers, contractors, project managers and operational teams at the same time. The immediate priority is naturally to protect programme, quality and delivery.

Those pressures are legitimate. But they can make it harder to distinguish between decisions that are genuinely required for the project and decisions that simply become accepted because they are the quickest route to completion.

This is why project procurement is often under-managed commercially. There is no established consumption pattern to review, no monthly P&L line showing whether a decision was right, and frequently no single owner responsible for the commercial consequences once the project is complete.

The Cost of Getting It Wrong

In a lower-cost capital environment, some of these inefficiencies can remain hidden.

A project completes, the asset opens, and management attention moves rapidly to revenue, occupancy, operations and delivery. The cost of an over-specified package, a weakly tested supplier market or an inherited supply arrangement can become just one part of the wider capital programme.

That is more difficult to justify where finance is expensive and returns are under closer scrutiny. The build cost is not simply a development number. It influences the capital required, the return on investment, the funding burden and the level of operating performance needed to justify the asset.

For contractors, the same issue applies from the other side. In a competitive tendering environment, margin can be determined long before work begins on site. Package strategy, supply-chain selection, material specifications, logistics and the treatment of risk all shape whether a project delivers the margin assumed at bid stage.

Project Efficiency and Horizontal Scale

The central procurement issue is how to balance two legitimate objectives.

The first is project efficiency. An individual project needs the right products and services, in the right sequence, at the right quality and at the right time. A procurement approach that ignores its particular technical, programme or operational requirements will create delay and risk.

The second is horizontal scale. Owners, operators, developers and contractors often carry purchasing power across multiple assets, projects, regions or business units. This can create opportunities to standardise appropriate specifications, develop preferred supplier relationships, improve terms, reduce duplicated effort and build better market intelligence.

Neither objective should dominate by default. An approach built entirely around project efficiency can lead to fragmented supplier bases, uncontrolled specification variation and repeated reinvention of the same commercial decisions. An approach built entirely around horizontal scale can impose standards or supplier arrangements that do not fit the practical requirements of an individual project.

Perhaps unsurprisingly, the right balance depends on the type of project and the specific phase of the build.

A hotel refurbishment, for example, may require tight phasing around a live operating environment, but may also lend itself to highly standardised and repeatable specifications depending on the brand position.

A new-build mixed-use development may offer far less opportunity to drive these same efficiencies on the exterior envelope, however a contractor delivering a technically complex package may still be able to use wider purchasing scale on structural materials and services.

The question is not whether procurement should be centralised or left to the project team. It is which decisions should be standardised, which should remain project-specific, and who is accountable for making that distinction.

The Implication

This is relevant to far more than asset owners. It matters to hotel operators seeking to avoid inheriting avoidable cost and complexity at opening. It matters to developers and investors seeking to protect capital returns. It matters to contractors trying to protect margin in an industry where competitive pressure is intense and delivery risk is high.

And yet the build phase is probably the one area where most procurement and supply chain levers remain unused.

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ABOUT ARGILLAN

Argillan works with owners, operators, developers and contractors to improve commercial outcomes through procurement.

We support project-led and operating procurement across construction, building materials and hospitality — helping clients determine where scale can be applied, where project requirements need to remain distinct, and how commercial decisions can improve both delivery and long-term performance.