Why GPOs and Traditional Procurement Platforms Are Less Effective for Independent Hotels

In the previous articles, we outlined two structural realities. First, that procurement inefficiency can erode 6–16% of EBITDA in a typical hotel. Second, that independent hotels are more exposed to this issue due to a lack of structure, visibility, and integrated procurement models.

For many operators, the natural next step is to look towards Group Purchasing Organisations (GPOs) as a solution. At face value, this appears logical. However, in practice, these models are often less effective for independent hotels and portfolios than expected.

A key indicator of this lies in their origins. Most GPOs have emerged either as extensions of major hospitality brands or as service spin-offs from large catering companies.

While they can be effective partners in certain contexts, they often create structural challenges for independent hotels over the medium to long term.

What is a GPO?

A Group Purchasing Organisation (GPO) aggregates purchasing volume across multiple customers to negotiate improved pricing and supplier terms.

In hospitality, this typically means an offer that allos access to pre-negotiated agreements, centralised product catalogues, and rebate structures linked to spend. For large hotel groups, contract caterers, and multi-site operators—particularly those without a desire to build in-house procurement capability—this model can be highly effective.

In its simplest form, a GPO negotiates a discount with a supplier (often a food wholesaler) based on aggregated volume. This pricing is then offered to customers, typically at a new price with the GPO profiting from an embedded margin or rebate structure.

These models have become increasingly accessible to independent hotels. Some hotel brands have extended their procurement platforms beyond their franchise base, while others have emerged from large catering organisations as complementary revenue streams.

In most cases, GPOs are commercial, for-profit entities. Their model requires balancing two objectives: offering sufficiently attractive pricing to onboard and retain customers, while capturing enough margin to generate a return.

Given their low marginal cost of adding additional customers, these platforms can be highly profitable. Their effectiveness for individual hotels, however, is closely linked to the operating context—and to the extent to which pricing and supplier performance are actively challenged over time.

Designed for Scale, Not for Independence

GPOs and procurement platforms are fundamentally designed to serve large, structured organisations.

They perform best in environments where demand is standardised and predictable—where menus are consistent, SKUs are rationalised, and purchasing behaviour is controlled across multiple sites. In these conditions, aggregated buying power translates efficiently into cost advantage.

Independent hotels operate differently. Their F&B offers are often more varied, more locally driven, and less standardised. As a result, GPO catalogues can feel restrictive and are frequently less effective in areas such as specialised restaurant ranges or targeted guest promotions.

In addition, GPO models tend to favour national distribution networks. While efficient at scale, these can overlook regional suppliers who may offer better pricing, quality, or service at a local level.

The result is not a failure of the model, but a mismatch between what the platform delivers and the needs of the operator.

Priority, Service Levels and Margin Benefit

From a GPO’s perspective, independent hotels typically represent lower, more fragmented spend.

By contrast, large hotel groups and contract caterers offer scale, predictability, and centralised decision-making. In many cases, a major hotel group underpins the GPO’s presence within a given market. As a result, GPOs work far more closely with these organisations—adapting supplier frameworks, product ranges, and commercial terms to meet their specific operational requirements.

As lower priority customers, Independent hotels rarely receive this level of engagement. They are more typically served through standardised, “off-the-shelf” solutions, with limited flexibility to reflect the nuances of their operations. This distinction is structural, but often very noticeable.

The same dynamic applies commercially. Larger organisations, by virtue of their scale and negotiating leverage, benefit from tighter pricing and more favourable terms from both the GPO and underlying suppliers. Independent hotels, with lower volumes and less coordinated demand, are less able to exert this pressure—and often find themselves managing two supplier relationships where previously there was one.

Commercial Alignment and Supplier Bias

As a general rule, GPOs should not be considered neutral platforms. They are commercially structured organisations with their own incentives and priorities.

Many operate through a combination of preferred supplier frameworks, referral agreements, and embedded rebate structures. While these mechanisms underpin the model, they can also influence supplier selection and product recommendations.

In practice, this can result in hotels being guided towards existing supplier networks and pre-defined product ranges, rather than solutions tailored to their specific operation.

The distinction is subtle but important for an independent hotel: a GPO is incentivised to optimise within its own ecosystem, not necessarily to identify the best outcome for a hotel individually.

Margin Creep

In many cases, independent hotels benchmark pricing when joining a platform and assume competitiveness is maintained over time.

However, pricing dynamics evolve continuously. Supplier costs shift, product specifications change, and alternative options emerge.

In much the same way as when dealing directly with suppliers, margins and costs will drift over time if not actively managed. Without regular re-benchmarking and challenge, the initial advantages of using a GPO can erode significantly.

This can lead to a form of layered margin exposure, where cost is embedded both within underlying supplier pricing and within the commercial structure of the platform itself.

The underlying issue identified in Article 1—incremental, compounding cost drift—remains present, albeit in a different and more complicated form.

Where GPOs Do Work

GPOs are not inherently flawed. In the right context, they are highly effective.

They perform best where there is already a degree of procurement structure in place—particularly within larger portfolios that have central oversight, or operators entering new markets who require immediate access to supplier networks.

In these environments, GPOs act as an enabler of scale and speed, rather than a substitute for procurement capability. They can amplify existing capability—but they do not replace the need for ongoing procurement management.

Closing Perspective

For independent hotels, the challenge is not simply access to better pricing. It is the absence of structure, visibility, and ongoing commercial discipline within procurement.

GPOs can address part of this challenge, but they do not resolve it in full. Without active management, initial benefits often erode over time.

Without alignment between menu design, supply chain, and supplier strategy—and without ongoing commercial challenge—inefficiencies will persist. In many cases, independent hotels often find that the constraints of operating within a GPO’s predefined supply chain outweigh even the initial benefits.

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About Argillan

Argillan works with independent hotels and hospitality portfolios to bring structure, visibility, and commercial discipline to procurement.

We focus on identifying and delivering the most effective procurement solution for each client—driving margin improvement whilst maintain bespoke solutions.

Contact us to learn how we could help your organisation.