Mr. Poad

Procurement

Steps to Leveraging Utility Bill Data to Better Understand Your Energy Spend

By Jim Poad, Director of Client Solutions, Advantage IQ

There isn’t a single industry that has escaped this economic downturn. In the lodging sector, reduced business travel and cut backs on vacationing have made their mark on occupancy rates across the country. In December of 2009, Ray Cirz, chief executive of appraisal firm Integra Realty Resources, reported that the hotel occupancy rate in Manhattan fell to 75 percent for the first time since 2004. Room rates at the time were down 25 percent from the year before. It’s a scenario that’s been replicated in every market; with reservations down, slash rates to fill rooms. The danger of that practice? It still costs just as much to have a room occupied, unless you take steps to reduce operating expenses. So that’s what many are doing – finding ways to make filling a bed less expensive.

Without a doubt, the most significant line item under a hotel’s operating cost umbrella is energy. Lighting, cooling, heating, and supplying water to a hotel and its guests is pricey. Therefore, it’s the smartest place to look for savings. But it’s impossible to reduce energy spend without first understanding your consumption. That’s where the power of the utility bill comes into play.

Utility billing is a goldmine in terms of savings opportunities, especially for multi-site businesses with numerous locations to manage. The number of errors that can be made on the side of the utility provider is shocking. Whether they’re charging the wrong rates, misreading the meter, or billing past the shut-off date at vacant units, there are many ways that money can slip through the cracks without anyone ever noticing. The following are best practices for leveraging your utility bill information to better understand your energy spend.

Need a partner?

Many hotel operators enlist the help of a trained professional to find billing errors and recover lost cash. A utility bill audit, performed by an expert from an expense management firm, is a great way to put an end to needless spending. Expense managers with expertise in utility bill audits are a worthy investment, as they have the knowledge and experience to identify errors, and the resources to process the vast amount of data accrued during the bill payment process.

The reconnaissance mission

Typically, bill auditors will start by examining a 12-month usage history, which includes analyzing historical data to see what’s been spent and where managers can save. That means delving into utility consumption at every site in the portfolio. For businesses with hundreds, or even thousands of locations, you can see how this would be unmanagable internally, not only because there is so much information to collect, but because they may not have kept good records. An expense manager will do the dirty work for you to fill in any holes in your usage history.

Since it can be a tedious and time-consuming process, consultants can save managers the time and effort of compiling, processing, and comparing bills. Expense management consultants also have automated and sophisticated technology to guard against human error, and produce the most accurate expense assessments.

Make comparisons meaningful

Before you can compare the energy consumption performance of hotels in your portfolio, they must be grouped based on size, average occupancy, and heating and cooling requirements. This is another place where an expense management consultant can be helpful. Equipped with tools that automatically arrange facilities into like groups, they can easily wade through a mountain of data, and then put it to work.

Down to the nitty gritty

With a year’s worth of billing information collected, and your porfolio intelligently divided into groups of similar hotels, it’s time to take a closer look at the data. By comparing usage information billing period to billing period, an expert can find the site that is an outlier, in terms of utility consumption, compared to the other hotels in its group. If two hotels in Arizona with the same square footage and average occupancy have vastly different electricity spends one month, it’s cause to look for an explanation.

Find the chink in your armor

With your problem hotels identified, the ones that are adding more than their fair share of to overall energy spend, you can invest in further research into those particular facilities. It could be one of the common supply-side errors mentioned above, a misread meter or incorrect billing rate. In the case of a meter reading error, your expense management consultant can contact the utility, have the problem fixed and get a refund issued. Correcting this type of mistake can save you 0.5 percent to 1.5 percent of your annual energy spend.

If the facility is being billed on the wrong rate, say as a 9-5 office space rather than a hotel operating 24 hours a day, an expert consultant can work with the utilility to negotiate a new rate, and get your money back for all the months, or even years, that you were overpaying. This can save one to two percent per site.

Alternatively, it could be a demand-side issue. Maybe lights are being left on all night unnecessarily, air conditioning is set too low, heat is set too high, or doors and windows are leaking air in or out. The same expense management company that’s handling your bill audits can deploy another team of professionals who will figure out what facility upgrades can be made to make trouble sites more efficient. It’s these steps that a typical hotel would not have the time, or resources, to pursue internally.

Another benefit of utility bill analysis is the data that’s compiled in the process. Collecting that 12-month usage history is the first step toward a lifetime of smarter energy management and comprehensive energy budgeting. Comparing consumption by site and across the entire portfolio makes it possible to rate the performance of every location, stay abreast of problems that could be costing you, and see the progress you make by improving both your bill payment process and upgrading your facilities. Looking ahead, you can develop more accurate energy budgets off the prior year’s utility spend.

In a time when there is little room for errror in terms of operating costs, utility bill audits are a no-brainer. With the help of a professional, you’ll find savings that could be significant enough to eliminate the need for more painful cutbacks.

Jim Poad, a 30-year energy industry veteran, serves as Director of Client Solutions for expense and energy management firm, Advantage IQ. In this capacity, Mr. Poad is responsible for developing and directing the Company’s energy management programs on behalf of clients. He works with clients to develop and implement a customized strategy to better manage energy usage, reduce overall operational costs, and meet overriding corporate objectives. He has helped clients save millions of dollars through the implementation of supply-side and demand-side initiatives. Mr. Poad can be contacted at 608-755-1650 or jpoad@advantageiq.com. Extended Bio...

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