Cotton is a prominent part of our everyday lives. We wear it, sleep in it, and dry ourselves off with it. It’s in the clothes we wear. It’s in our linens and other assorted white goods. Without it, something would be noticeably absent. Of course, cotton is just as important to hotels as it is to its guests. From bathrobes to luxurious sheets, hotels use cotton-made products to increase guest satisfaction at every turn. The problem is, while cotton may not be hard to come by, lately, it’s becoming more and more expensive to acquire.
This week, cotton prices hit $2 per pound. Cotton prices have nearly doubled over the past year to their highest levels since cotton pricing began being tracked as a commodity. Experts say there are several factors that have influenced the price surge, including severe weather patterns, trade restrictions, a global recession, and emerging markets. Those same experts predict that the rise in costs will have an impact on hotels.
“The risk here is a combination of increases in demand coupled with limited availability as a result of escalating prices,” says Brian Bensman, senior director of global production and purchasing at Cintas Corp., a manufacturer of apparel for hotels. “As an example, where we used to contract our fabric buys for upward of six months, a lot of our fabric sellers in the U.S. and overseas are now only willing to do it a quarter in advance because they don’t know what the prices are going to be three months later.”
Bensman says there are a number of causes of the escalating prices of cotton. One reason is the rebound of the recession. Another is an increase in demand, which is impacting the retail market and the uniform market. There is also an increase in pricing for polyester, wool, and other fabrics.
“When you look at that economic rebound through last year, it then became challenged by other factors relative to the market in China,” Bensman says. “China has historically used more cotton than it has grown, even though it’s the largest producer, the demand has exceeded its output so it had to pull that volume from other global suppliers.”
Demand has also grown in other large markets such as the United States, India, and Pakistan. “At the same time, those markets produced less cotton in the year prior due to the recession when demand was low,” Bensman points out. The recovery to produce more cotton has lagged relative to the global increase in demand as those countries emerge from the recession.
Further complicating matters are environmental factors. There has been impact on normal yields from factors such as flooding in China and Pakistan.
Given all of this, how will the price increase affect hotels? Hoteliers can expect to see price increases for many cotton-based items such as employee apparel programs and guest linens through the end of the year, experts say. Due to the uncertainty of market conditions and continued expectation for increased demand throughout emerging markets such as China and India, it’s projected that these price increases are here for at least a while. These increases will also impact the prices for consumer clothing such as jeans, T-shirts, socks, and other apparel.
Todd McKeown, vice president of hospitality at Cintas Corp., says hotels have already started to feel the impact. “I think they’re seeing it already in their linen,” he says. “A lot of the hotels we supply buy multi-fabric uniforms, but cotton is certainly a primary driver. It’s not only cotton, but also poly and wool and other fibers.”
When it comes to uniforms, Cintas executives say that they're working with its customers on alternatives to help circumvent the price increases. “People are already starting to look at other alternatives,” McKeown says.
McKeown says that the alternatives stretch beyond the fibers themselves. “We also have facility service programs, fire protection, and other service offerings,” he says. “We have the ability to look at the business as a whole and maybe offset some of these costs with other services.”
There are other options for offsetting textile increases as well. As an example, Cintas says that if the housekeeping department is due for an apparel makeover, postponing the purchase of another capital investment such as an auto-scrubber used to clean floors can be a viable solution. In addition, staggering orders over a specified timeframe can ensure that inventory levels stay consistent without absorbing the total price impact.
While supply and demand issues in economics often go up and down, Bensman says that the outlook for cotton prices is something that consumers and hoteliers will need to get used to. “Most of what I’m hearing is that we’re not going to see significant relief of stabilization with continuing escalation until possibly the third or fourth quarter of 2011,” he says. “However, that won’t translate to immediate reductions at the consumer level since manufacturers will need to work through their inventories.”
Due to the price escalation, many smaller supply companies haven’t been able to withstand the fluctuating market prices and have subsequently been forced out of business. According to Cintas, it’s a trend that is expected to continue as the market faces further uncertainty, which makes partnering with a financially stable supplier essential.