A necessary evil of sorts for any project, freight costs are an inescapable part of any project. The fact of the matter is that if you order anything -- from sugar packets and straws for the coffee bar in your lobby to brand new headboards and wardrobes for dozens of guest rooms -- they have to travel from the supplier to your door. And that costs money.
Lately, however, freight costs are again becoming problematic. The TLDR? They've gone up and are driving up project costs.
Why is this happening and is there a way to lessen the blow of increased shipping fees to your bottom line and hotel casegoods budget?
In this article, we'll look at the answers to both questions.
Shipping costs simply aren't what they used to be. They haven't been for some time. Consider these statistics (per Freightos):
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Compared to 1 Year Ago |
Freight costs have risen dramatically over the past year. For example, the cost of shipping a 40-foot container from Asia to the U.S. West Coast has increased by approximately 1.6%, reaching around $5,968 per FEU (40-foot equivalent unit). |
Compared to 5 Years Ago |
In 2019, shipping rates were much lower. For instance, the cost to ship a container from Asia to the U.S. West Coast was roughly half of what it is today. |
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Compared to 10 Years Ago |
A decade ago the average cost to ship a 40-foot container from Asia to the U.S. West Coast was around $1,800 to $2,000. Today, that same shipment's cost has more than doubled. |
Unfortunately, freight costs aren't expected to go down in the near future, either
Why?
There are a few big reasons for the surge in freight costs of late, particularly for overseas shipments.
It's a story we're all familiar with: the ill effects of the COVID-19 pandemic on commerce.
As countries went into lockdown at the onset of the pandemic, manufacturing slowed down or halted entirely, leading to a scarcity of goods. Ports were congested, and the availability of shipping containers plummeted, driving up prices.
Post-pandemic recovery did not go as smoothly -- or quickly -- as most of us would have liked. While demand for goods surged as economies reopened, supply chains struggled to keep pace and get back to their normal operating The ripple effects of the pandemic continue to affect global shipping, with backlogs and delays still prevalent in many regions.
While the pandemic remains in the rearview mirror, this year has brought on a variety of other logistical issues that have only compounded the strain on freight costs:
Container Shortages: Space in shipping containers is in short supply, particularly in Asia due to high demand from places like the U.S. and Europe. Thanks to the laws of supply and demand, this shortage means available containers are coming at a premium. This has driven up container rental prices and caused significant delays in shipments.
Fuel Price Hikes: In short, they've gone up, and the increases are being passed along to consumers.
Regional Factors Affecting Costs: Specific regional issues can also drive up costs. For instance, the congestion in major ports and labor shortages in the logistics sector have created bottlenecks, further inflating prices.
Geopolitical Issues: Geopolitical tensions and disruptions, such as those in the Red Sea and the Suez Canal, add another layer of complexity, causing delays.
Peak Season Surcharges: During peak shipping seasons, such as the period leading up to major holidays, surcharges are often applied. These additional costs can further strain budgets for businesses relying on timely deliveries.
So what does all this mean for your project?
It's certainly not a rosy picture.
To be direct: furniture freight shipping costs are likely to remain a burden for your project(s), and they're something you'll need to budget for carefully or find workarounds for.
It's no secret that for the better part of the last several decades, there was an allure to working with an offshore manufacturer or supplier for pretty much any product -- hotel FF&E (fixtures, furniture, & equipment) included.
There were purported savings for hotel furniture procurement in not only the time it took to fulfill an order, but also manufacturing costs all thanks to lower-cost labor and lower operating costs in overseas markets.
But now, with the supply chain and corresponding shipping chain throttled by a host of issues, talks of offshore savings for your hospitality casegoods furniture are effectively moot.
While a foreign manufacturer might be able to quote a casegoods project for a lower cost, as soon as shipping fees enter the picture, any savings are almost substantially negated. Another way: with shipping costs as they are, the playing field is a lot more level between foreign and domestic hotel casegoods suppliers & manufacturers.
Return and Repair Costs: If there is an issue with the received goods, the costs to ship them back for repairs or replacements can be prohibitive. This is especially true for large or bulky items that require significant handling and logistics arrangements.
Time Delays: Delays in shipping can occur due to a variety of factors, including:
Weather
Port congestion
Logistical oversights
Each delay not only pushes back your project timeline but also creates additional costs you'll have to deal with, whether it's labor, storage, or simply time.
Offshoring Complications: Beyond the obvious costs, offshoring can introduce other issues such as communication barriers, quality control challenges, and regulatory differences.
Hidden Costs: There are often hidden FF&E procurement fees associated with international shipping that aren't realized until it's too late. This can include tariffs, duties, and customs fees, which vary depending on the destination country’s regulations. Additionally, there might be insurance costs to protect against loss or damage during transit.
Unless your hotel is located within the facility where its new casegoods are being manufactured, there is going to be an element of travel to get your order to its final destination. In other words, there's no way to escape shipping costs.
There is, however, a way to reduce the impact of furniture freight shipping expenses on your budget: work with a hotel casegoods manufacturer in the USA.
Without an ocean in between your casegood supplier and you, your project simply doesn't face the same freight costs as it would with a foreign partner. Even if your project is in San Diego and your hospitality casegoods manufacturer is in Bangor, Maine, you still avoid the complexities and costs associated with international shipping.
What's more, domestic shipping also tends to be more predictable and less susceptible to delays that can plague international logistics, such as port congestion or geopolitical issues. It also reduces your order's exposure to fluctuating exchange rates, tariffs, and complex import regulations -- all things that can increase
But perhaps the combination of these perks leads to the most important one: enhanced control over your project and its costs.
By working with a domestic casegoods manufacturer, you have the opportunity to be more involved throughout the production and shipping process, ensuring that everything goes smoothly and stops you from having to tap your reserve budget. You can easily visit the manufacturing site, conduct quality checks, and ensure that the specifications are being met. This proximity allows for better communication, quicker turnaround times for any necessary adjustments, and overall smoother project management.
While furniture freight shipping costs are an unavoidable part of the hotel FF&E procurement process, working with a domestic hotel casegoods manufacturer can significantly mitigate these expenses. Additionally, the benefits of enhanced project control, faster delivery times, and simplified logistics make the domestic option the better choice for reducing the cost to ship freight on your project budget.
Speak with a member of our team today!