COVID-19’s Disruption to the Supply Chain
What Does This Mean for Your Renovation or New Build?
In April 2020, the COVID-19 pandemic was in full force, resulting in a 12% reduction of global trade. During this time, ocean carriers significantly reduced sailings due to low demand, and shipping containers around the world sat dormant while factories closed.
In July 2020, trade started to ramp back up, and by late summer, a disruption in the global supply chain started to take form. Ocean carriers struggled to bring vessels online as demand increased, and containers sat at shippers that were still closed or just coming back, which created a container shortage affecting all countries around the world. This disruption continues to compound, leaving the industry with higher prices, longer shipping times from Asia, and no end in sight in the near future.
In July 2020, trade started to ramp back up, and by late summer, a disruption in the global supply chain started to take form. Ocean carriers struggled to bring vessels online as demand increased, and containers sat at shippers that were still closed or just coming back, which created a container shortage affecting all countries around the world. This disruption continues to compound, leaving the industry with higher prices, longer shipping times from Asia, and no end in sight in the near future.
Ongoing Port Challenges: China and US
The Yantian Port is considered part of the Shenzhen port in China, qualified as the third busiest in China and fourth in the world in 2019 (Long Beach/Los Angeles is the 16th largest and about one-third the volume). This region, near Guandong and Shenzhen, is where a majority of FF&E (furniture, fixtures and equipment) is manufactured for the hospitality industry.
In June 2021, due to an increase of COVID-19 cases in the region, the Yantian Port began operating extremely slowly, implemented significant restrictions, and shut down one-third of the facility. This partial closure leaves a significant amount of ships anchored in the waters just outside the ports, unable to unload and pick up cargo.
These conditions are causing about a 14-day delay on ocean vessel schedules, which is anticipated to worsen in the weeks ahead. On June 11, 2021, 36 vessels were at anchor waiting to unload — 33 of which are cargo ships. Each day this continues, it increases the backlog of cargo; and FF&E (furniture, fixtures and equipment) manufacturers are left helpless with no other shipping options.
In the U.S., the Los Angeles and Long Beach ports are reporting record import volumes that are 30% to 40% higher than in 2019. Vessels remain at anchor outside the ports for an average of 7 to 10 days before they are able to berth (dock and unload). The number of vessels anchored daily is between 22 and 28.
In addition to these challenges, the average cost to ship a container from Asia to the U.S. has increased dramatically. Pre-COVID, the average container cost from Asian to Long Beach/Los Angeles area was $3,000. As of June 2021, this same container now costs $8,000 to $11,000 to ship, and in some instances, slightly higher. In addition to higher container prices, shippers are also being ask to pay upcharges to have their containers considered “priority” or “guaranteed bookings.” These additional charges are averaging about $1,500 per container on top of the increase.
Once goods arrive in the U.S., much of it is being transported via domestic trucking out of California, which has increased. As a result, trucking rates from this area have increased by about 20% from 2019. These costs are not anticipated to go down until the surge of imports decreases, and the trend of rising fuel prices around the U.S. is raising concerns of additional cost increases.
Shipping delays and the disruption in the supply chain may not correct itself until sometime in 2022. Usually starting late in the third quarter, the amount of imports surge as U.S. retailers prepare for the holiday season, making the fourth quarter generally the busiest time of the year. Currently, the ports are recording record volumes in what is generally a slower time of the year — causing real concern for what will happen as the peak season begins.
So what does this mean for hotels planning to receive new FF&E (furniture, fixtures and equipment) for either a new opening or renovation?
Project teams should anticipate adding, at a minimum, an additional two to four weeks in lead time for FF&E (furniture, fixtures and equipment) coming from Asia, including casegoods, lighting and stone.
The surcharges on containers are often not being absorbed by the manufacturers, but instead are being passed along to the owner. The surcharge of $3,000 to $7,000 per container should now be included in the FF&E (furniture, fixtures and equipment) budget as an additional cost. A casegoods order for a 150-room hotel may ship in 20 containers, for which owners could anticipate an additional $60,000 to $140,000 in costs.
Domestic trucking prices are on the rise, especially out of California. Owners should plan on budgeting an additional 2% to 3% at a minimum on their freight budget.
Historically prices always rise faster than they go down. Unfortunately, the challenges the supply chain is facing after the global pandemic don’t show signs of being a short-term issue, but instead lasting well into the middle of 2022 if not longer.
Bestar Hospitality is a leading hospitality FF&E vendor offering a complete range of hotel furniture FF&E solutions in China,including casegoods,seating, artwork & mirrors, lighting,drapery,stone countertops,bathroom fixtures & vanities,carpets,and tiles.
In June 2021, due to an increase of COVID-19 cases in the region, the Yantian Port began operating extremely slowly, implemented significant restrictions, and shut down one-third of the facility. This partial closure leaves a significant amount of ships anchored in the waters just outside the ports, unable to unload and pick up cargo.
These conditions are causing about a 14-day delay on ocean vessel schedules, which is anticipated to worsen in the weeks ahead. On June 11, 2021, 36 vessels were at anchor waiting to unload — 33 of which are cargo ships. Each day this continues, it increases the backlog of cargo; and FF&E (furniture, fixtures and equipment) manufacturers are left helpless with no other shipping options.
In the U.S., the Los Angeles and Long Beach ports are reporting record import volumes that are 30% to 40% higher than in 2019. Vessels remain at anchor outside the ports for an average of 7 to 10 days before they are able to berth (dock and unload). The number of vessels anchored daily is between 22 and 28.
In addition to these challenges, the average cost to ship a container from Asia to the U.S. has increased dramatically. Pre-COVID, the average container cost from Asian to Long Beach/Los Angeles area was $3,000. As of June 2021, this same container now costs $8,000 to $11,000 to ship, and in some instances, slightly higher. In addition to higher container prices, shippers are also being ask to pay upcharges to have their containers considered “priority” or “guaranteed bookings.” These additional charges are averaging about $1,500 per container on top of the increase.
Once goods arrive in the U.S., much of it is being transported via domestic trucking out of California, which has increased. As a result, trucking rates from this area have increased by about 20% from 2019. These costs are not anticipated to go down until the surge of imports decreases, and the trend of rising fuel prices around the U.S. is raising concerns of additional cost increases.
Shipping delays and the disruption in the supply chain may not correct itself until sometime in 2022. Usually starting late in the third quarter, the amount of imports surge as U.S. retailers prepare for the holiday season, making the fourth quarter generally the busiest time of the year. Currently, the ports are recording record volumes in what is generally a slower time of the year — causing real concern for what will happen as the peak season begins.
So what does this mean for hotels planning to receive new FF&E (furniture, fixtures and equipment) for either a new opening or renovation?
Project teams should anticipate adding, at a minimum, an additional two to four weeks in lead time for FF&E (furniture, fixtures and equipment) coming from Asia, including casegoods, lighting and stone.
The surcharges on containers are often not being absorbed by the manufacturers, but instead are being passed along to the owner. The surcharge of $3,000 to $7,000 per container should now be included in the FF&E (furniture, fixtures and equipment) budget as an additional cost. A casegoods order for a 150-room hotel may ship in 20 containers, for which owners could anticipate an additional $60,000 to $140,000 in costs.
Domestic trucking prices are on the rise, especially out of California. Owners should plan on budgeting an additional 2% to 3% at a minimum on their freight budget.
Historically prices always rise faster than they go down. Unfortunately, the challenges the supply chain is facing after the global pandemic don’t show signs of being a short-term issue, but instead lasting well into the middle of 2022 if not longer.
Bestar Hospitality is a leading hospitality FF&E vendor offering a complete range of hotel furniture FF&E solutions in China,including casegoods,seating, artwork & mirrors, lighting,drapery,stone countertops,bathroom fixtures & vanities,carpets,and tiles.