NH Hotel Group’s relations with its suppliers are based on communication and transparency in order to promote the development of innovative and sustainable solutions. These collaborations also build the way to comply with the Sustainable Development Goals set by the Group for the creation of decent work and economic growth (SDG 8) and for responsible consumption and production (SDG 12).
264.7M€*
ANNUAL PURCHASE VOLUME(OPEX + CAPEX) IN 2020
-59% compared to 2019
196M€
TOTAL OPEX VOLUME IN 2020
-42% compared to 2019
Strategic purchasing management has begun to move away from prioritising price negotiation efficiency alone over other factors. This crisis has led NH Hotel Group to carry out an analysis of current suppliers, checking the traceability of their products and components, and demanding production flexibility to assure supply, as well as the sustainability of their products.
All NH Hotel Group suppliers, both approved and non-approved, are required to comply with the exceptional anti-COVID-19 safety and disinfection measures for the delivery of goods and the provision of services in our hotels.
The economic consequences of the pandemic have forced NH Hotel Group to seek alternative suppliers and markets, even in different geographical areas, which is why the approval and certification of suppliers has decreased compared to 2019. This fall is due to two main reasons: on the one hand, the purchase of COVID-19-related services from non-approved suppliers due to the urgency in the need for such equipment (such as PPE); and on the other hand, the elimination of a considerable part of outsourced security and laundry suppliers due to the closure of our hotels.
PROCUREMENT POLICY
NH Hotel Group has a formal and mandatory Procurement Policy, which sets out the guidelines to be followed by the different departments, whether Corporate or of a Business Unit, in situations that affect or could affect the Company’s external contracting.
The Procurement Policy contributes to reinforcing:
- The commitment to ensure transparency, honesty and ethics in the procurement function.
- The need to carry out professional contracting processes to optimise results.
- The need for alignment with internal control guidelines, and proper and timely updating and communication to all Company employees.
As with the Code of Conduct for Coperama Suppliers, the NH Hotel Group Code of Conduct has been included in the approval contract of the Procurement department since 2012.
Failure to accept these ethical codes in the selection phase of suitable suppliers to participate in the next phases of a procurement process is a criterion for exclusion. The Procurement department includes an extensive approval questionnaire (RFI) in the supplier selection process which is assessed automatically according to suppliers’ commitment and their policies. As a relevant milestone in 2020, for the purpose of assuring a responsible operation and achieving long-term relationship with suppliers, NH Hotel Group has updated its RFI, extending the ESG criteria in its responsible procurement process, increasing the weighting of questions concerning Sustainability and prioritising suppliers who apply sustainable criteria. This questionnaire is part of the overall assessment for the validation process.
1,816
Suppliers that have signed up to the Code of Conduct
71
New suppliers signed up to the Ethical Code
In 2020, a total of 72 new suppliers globally have signed up to the NH Hotel Group Code of Conduct and the Coperama Code. Thus, in 2020 the number of Ethical Codes signed with active suppliers has reached a total of 1,816, down 3% compared to the 1,872 of last year.
SELECTION OF SUPPLIERS
Since 2010, the Company’s different procurement departments have progressively become the different Coperamas (companies wholly owned by NH Hotel Group). Their function consists of finding, rating and certifying suppliers and negotiating and contracting the necessary goods and services for the correct operation of the hotel activity. Each local Coperama provides service to the regions of the NH Hotel Group Business Units assigned to it. Coperama Holding provides service at corporate level to the Group in all its locations.
Although at present NH Hotel Group does not carry out social and environmental audits of its suppliers, it works continuously to align ESG criteria with sustainable management of the supply chain. To assure responsible supplying, the Company has developed a series of procedures that reinforce the commitment to the supply chain. These procedures are the supplier management procedures, the questionnaire for supplier approval (RFI), the Code of Conduct for Coperama Suppliers and the Company’s Code of Conduct, both of which must be accepted by all approved suppliers.
As indicated in the NH Hotel Group Procurement Policy, all services or products that come under categories suitable for being tendered by Coperama are part of the Procurement Perimeter. Within the total volume of OPEX purchases, the Procurement Perimeter represents 90% of the hotels in NH Hotel Group’s consolidated perimeter.
The Procurement Perimeter is reviewed periodically by NH Hotel Group and Coperama to ensure that it is adapted at all times to the Company’s needs.
In OPEX:
177M€
Total volume procurement perimeter
127M€
Volume of approved purchases of the procurement perimeter
71,7%
Approved procurement of the procurement perimeter
The decrease in compliance during this year is mainly due to the elimination of the Cleaning and Security service during the months in which the hotels were closed. In turn, as indicated above, when PPE was being sought for the hotels, it was purchased from non-approved suppliers for reasons of urgency and opportunity.
SUPPLIER APPROVAL PROCESS LIFE CYCLE IN NH HOTEL GROUP
The selection of suppliers and working relations with them, is based on transparency, honesty and ethics with the clear aim of being able to assure an excellent provision of services, efficiently and of high quality. Supplier management starts when a need is detected and continues until the service is finally provided:
Before the procurement process commences, an approval procedure takes place which means that a database can be generated of suppliers who have been assessed and have been found to meet the requisites of NH Hotel Group in economic, quality and ESG matters.
There are certain criteria which, if not accepted or implemented by suppliers, result in their automatic expulsion from the bidding process. One of these criteria is the requirement to sign both the Group’s Code of Conduct and the Coperama Code of Conduct, which sets out the environmental and labour commitments that govern NH Hotel Group.
Throughout the process, special attention is given to sustainability, to try to mitigate possible negative impacts on the environment, while reducing the inherent risks of the operations of our supply chain.
1,816
Approved suppliers
SUPPLIER MANAGEMENT
NH Hotel Group is focusing its efforts on achieving sustainable management throughout the entire supply chain. The supplier management Model seeks to have the best suppliers available through business procedures that guarantee transparency and equality of conditions for the different bidders. The Company offers a win-win model for all parties with a commitment to a long-term relationship. The supplier’s rating is the necessary requisite in order to participate in procurement processes and is obtained as a result of the approval process.
Accordingly, NH Hotel Group encourages approved procurement in most of its hotels, with the need for the required products being identified by each hotel. Coperama’s task is therefore to approve and authorize potential suppliers. In conjunction with our responsible supply goals, we will continue to identify high-quality products that are environmentally acceptable and socially responsible. These efforts will contribute to the development of responsible products in all geographical areas where we are present and in the future.
The hotels that consolidate have different monitoring indicators to control purchases from approved suppliers in the Procurement Perimeter.
In 2020, all the Business Units have failed to meet the targets because of the worldwide pandemic.
71.7%
Approved
procurement
91%
Approved procurement
target in 2020
94%
of the purchase volume in 2020
corresponds to local suppliers*
11,225
Total suppliers**
10,636
Local suppliers*
* For NH Hotel Group, a local supplier is defined as a supplier that sells in the same country where its tax headquarters are located while an international supplier is one that sells in a different country to its tax domicile.
** The sum of the number of suppliers differs from the total number of suppliers as the same supplier may serve more than one Business Unit.
RISK MANAGEMENT IN THE SUPLY CHAIN: CRITICAL SUPPLIERS
22%
Purchase volume from critical suppliers
390
Critical suppliers
identified
NH Hotel Group works to extend sustainability to a constantly improving supply chain, where innovation is always present, made up of the best partners and suppliers. The supply chain management process is based on an assessment of the intrinsic risk factors of outsourcing a service or the supply of a product.
For contract bidding management, NH Hotel Group uses its Electronic Negotiation Platform. This tool makes it possible, through the RFI (Request for Information) phase, to assess and analyse the legal, financial, environmental, operational and social and labour situation of suppliers who submit bids for contracts. This reduces the possible risks that suppliers could generate in future operations with the Company. In this part of the process, suppliers must accept both the Group’s Code of Conduct and the Code of Conduct for Suppliers of Coperama which includes environmental and labour commitments.
To carry out its management, NH Hotel Group has identified its critical suppliers as those that could affect the Company at a reputational level (or generate an operational and/or legal risk), either due to having a significant volume of billing or to having products that have been especially designed for the Company. According to this definition, critical categories for NH Hotel Group would be the outsourcing of cleaning services, security services, laundry, amenities and textiles, the latter belonging to Tier 2.
The selection of these suppliers must be carried out applying the highest quality standards, which will be established in the RFP document (Request for Proposal), with technical questions. For this initial assessment, specific documentation has to be submitted providing evidence of the veracity of the information provided. This preliminary assessment is complemented with a subsequent screening that is intrinsic to the contract award process, based on compliance with the technical requests shown in the RFP.
A new feature has been the creation in 2020 of a supplier self-assessment questionnaire. The main suppliers of NH Hotel Group will have to complete an annual questionnaire based on ESG criteria established by the Company. This self-assessment questionnaire will allow suppliers to provide additional information to be considered in relation to ESG criteria. Based on the results, the Company will implement the adjustments and improvements it considers necessary.
Due to the current health crisis, the questionnaires will be sent out in 2021, as a lack of resources has slowed the process.
Subsequently, as part of the approval contract, the SLA (Service Level Agreement) is applied which determines the service level parameters and penalises any deviation in the service offered by the supplier. Suppliers’ services are controlled by the hotels or departments that are the end users of such services. In the event of a complaint, Coperama is notified and, depending on the severity of the error, it demands immediate correction or directly rescinds the contract with the supplier. In 2020, no such case has arisen in any of the Business Units.