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How a Gulf hotel owner can source furniture: four routes compared

· Bravo Furniture

Short answer

A hotel owner in the Gulf has four routes: buy direct from a factory, appoint a purchasing agent, let a fit-out contractor carry the furniture package, or buy from a maker inside the GCC. The choice mostly decides who answers when something goes wrong and who handles customs. Direct factory buying suits an owner with a project team and an importer already in place; without those, another route is usually the better one.

The four routes at a glance

Bravo Furniture is a factory in Turkey that sells direct, so read this as one option describing the others.

RouteWho is responsibleCost layerTypical trade-offFits when
Direct factoryThe factory for the goods; the owner for coordination and anything the contract's Incoterm leaves with the buyerFactory price, then freight, duty, VAT and installation, each priced separatelyFewest intermediaries, most work for the owner's teamYou have a project manager, an importer and time for a mock-up room
Purchasing agentThe agent for running the process; the vendors for their goodsAgent's fee on top of vendor pricesCompetitive quotes and tracking, for a feeSeveral vendors, a branded hotel, no in-house purchasing team
Fit-out contractorThe contractor, under one contract for the interiorContractor's overhead and markup inside the contract priceSimple coordination, usually higher cost, less say over the makerYou want one party answerable and the programme is tight
GCC makerThe maker for the goods, which are localMaker's price, with no customs duty if GCC origin is shownNo import stage; the range and capacity are that maker'sShort haul matters, or the buyer prefers local supply

Direct from the factory

The owner buys using the designer's schedule and deals with vendors directly [1]. Your contract's Incoterm sets who carries cost, risk and obligations on each leg of the journey [2]. Under DAP, for example, the seller does not unload the goods [2], so someone on site has to.

In Saudi Arabia the importer registers the product on SABER and receives a shipment certificate to send to customs [3]. Regulated products need a Product Certificate of Conformity, valid for one year, and a Shipment Certificate for each consignment [4]. So every direct purchase needs a named importer.

Goods from outside the GCC fall under the common customs tariff, and Saudi Arabia charges 15% VAT on the customs value plus duty [5]. Ask a customs broker for the current duty on your tariff lines before you compare quotes.

Ask for a model room before production. One US purchasing firm buys model rooms to check specifications before the rest of the order goes ahead [6], and a direct buyer can ask a factory for the same step.

What a mock-up room should prove

Through a purchasing agent

A purchasing agent is standard on hotels and larger commercial projects and takes on quotations, purchase orders, expediting, freight consolidation and warehousing for a percentage fee [1].

Ask how the agent is paid. Benjamin West describes itself as a fiduciary purchasing agent whose "disclosed fee is our sole source of compensation" [7]. Other firms may work differently, so get the basis in writing.

Check who carries a late or faulty delivery before you sign.

Through a fit-out contractor

The general contractor can supply furniture as part of the construction contract, which simplifies coordination and usually costs more, because the items pick up the contractor's overhead and markup [1].

Before you accept the package, ask which pieces the contractor makes itself, which it buys in, and from where. Ask too whether the mock-up room is included.

From a maker inside the GCC

Goods of GCC origin can enter Saudi Arabia without customs duty if they meet the origin rules, and a GCC Certificate of Origin is the proof [5]. VAT treatment still depends on the circumstances [5].

When a direct factory is the wrong choice

Buying direct from a factory such as Bravo Furniture is usually the wrong route if any of these apply. In those cases a contractor, an agent or a GCC maker will probably serve you better.

  • Nobody on your side can act as importer and handle SABER.
  • Nobody on your team can review shop drawings, approve samples and run the site.
  • You want one contract covering furniture, finishes and installation, with one party answerable.
  • Your opening date leaves no room for a mock-up room followed by sea freight.
  • Your project is state-linked and the tender rewards local content, which a factory abroad may not be able to show.

Related pages

Sources

  1. LearnArchitecture: FF&E meaning in interior design
  2. International Chamber of Commerce: Incoterms 2020
  3. US International Trade Administration: Saudi Arabia testing, inspection and certification
  4. Intertek: Saudi product safety programme (SALEEM, SABER)
  5. Commenda: Saudi Arabia import VAT
  6. Beyer Brown: FF&E procurement process
  7. Benjamin West: home page