CEO Advocates Hybrid Distribution Model
Larry Korman, CEO of luxury residence brand AKA, advised a hybrid approach to hospitality distribution in a recent podcast. He suggested operators should know when to centralize for efficiency and when to empower local teams for agility. Korman cited a Caribbean-specific example: creating a regional hub for dry goods while relying on local sourcing for perishables to ensure freshness and resilience.
- Logistics costs in the Caribbean are a significant operational hurdle, accounting for 16-26% of a product's final price, compared to about 9% in OECD economies. This is compounded by shipping rates that can be three times higher than those for crossing the Pacific. - Many logistics providers in the Caribbean utilize a "hub-and-spoke" model, relying on primary trans-shipment hubs in locations like Kingston, Jamaica, and Freeport, Bahamas, to feed smaller vessels serving other islands. This system creates a dependency on the reliability of connections between mainline and feeder vessels to avoid costly container storage charges at the hub port. - A major challenge for any distribution model in the region is the one-way flow of commercial goods; ships often travel south to the islands full but return north empty, making northbound freight prohibitively expensive. - Multi-property hotel management systems (MPPMS) are a key technology for executing a hybrid strategy, offering a centralized interface to manage inventory, track room status, and consolidate reporting across multiple locations, which over 64% of hotel groups with three or more properties now use. - The centralized distribution aspect of a hybrid model can lower facility and storage costs and simplify warehouse management. However, it can also lead to higher downstream shipping costs and longer delivery times to more distant properties. - A decentralized approach, empowering local teams, improves resilience against disruptions like hurricanes—a major risk from June to November—which can cause sudden port closures and vessel rerouting. A committed supply chain partner with a disaster preparedness protocol is crucial for recovery. - The business strategy of AKA, the brand led by CEO Larry Korman, often involves acquiring and repositioning iconic but distressed properties in major global cities, which informs his perspective on balancing central oversight with localized adaptation. - Regional bodies like CARICOM are focused on improving inter-island connectivity by harmonizing customs regulations and investing in shared logistics hubs to reduce the significant delays and costs associated with varied import/export rules on each island.
