Mr. Poad

Eco-Friendly Practices

Tracking Your Utility Expenditure Back to 'Heads to Beds' for Benchmarking

By Jim Poad, Director of Client Solutions, Advantage IQ

Many hotel operators calculate their energy usage in a vacuum.

The singular focus on achieving the highest possible 'heads-to-beds' rate leaves little time for tracking energy usage. Some hotel managers commit to tracking this data but without the thorough understanding of how these usage rates vary across multiple site locations.

Others have no idea how their rates compare to those of competitors in the hotel marketplace. This offers little insight into what their organization is doing well, or, more importantly, where they can improve.

The result: Exorbitant energy costs negatively offset the profits from strong heads-to-beds rates, leaving operators to wonder where they went wrong. And if they don't figure it out soon, their business-and their bottom line-will pay. Literally.

Benchmarking Best Practices

But this situation can be reversed with proper benchmarking and tracking techniques. That's the key to correctly determining an organization's energy effectiveness, and identifying high-return capital improvements and energy-efficient investment opportunities.

I touched on this topic in my February article, Compiling Utility Data to Make Capital Spending Decisions, but its far-reaching applications deserve more drilling.

The obvious benchmarking technique is compiling all information relevant to hotel sites' energy usage on a daily basis. At the outset, calculate the number of occupied and available rooms to differentiate cost usage in each type. It's important to measure occupied and available rooms, because sometimes rooms are taken out of operation for different reasons, such as maintenance. So if you include those "out-of-operation" rooms, your results will be skewed incorrectly.

Other factors affecting energy usage include weather patterns, heating and cooling degree measurements, and square footage of each room. Operators can also examine usage by service type, such as water or electricity, the two largest expenses.

These numbers are then used to establish a usage baseline. This way, hotels can measure their energy use and identify problem areas upfront. For example, they might be paying to air-condition or light unoccupied rooms, which can be corrected by behavioral changes.

Hotels with multiple sites in similar locations can go a step further, and create a comp set, or a group of hotels that have a like set of characteristics. This includes grouping the locations together to generate energy usage and cost averages, which provides the opportunity to analyze and identify which hotels are outliers and might need attention.

For example, a hotel may be able to see that they are spending capital dollars on cooling unoccupied rooms because the maids forget to turn down the air conditioning and shut off the lights after cleaning.

Whether from a corporate division or regional area perspective, usage tracking helps operators examine usage per occupied room versus usage per available room. It also allows hotel operators to calculate load factors, percent of variance, monthly figures, quarterly figures, and year-to-date figures.

Ultimately, hotels dictate how often they benchmark, be it daily, monthly, or yearly. Quarterly evaluations are recommended if sites are actively managing their energy.

That said, active energy management can be difficult for hotel operators busy with keeping rooms booked and tending to customer, employee and building issues. Hotel managers often do not have the time or the staff to gather, evaluate, and address such exhaustive data.

Operators can consider contracting with an outside energy management or procurement consultant who has the capability and expertise to research and track data quickly and frequently for benchmarking purposes.

The way outside consulting firms typically benchmark involves a huge set of databases, coupled with an automatic interface to customers' businesses. This retrieves the information, or units of work, directly from the client. All parties can then aggregate and slice the data as needed.

If the client has any questions or concerns outside of the normal benchmark periods, they can simply access these databases and look up the answer.

Energy-Efficient Results

Once they have this valuable information in hand, hotel operators can begin to better identify and track high-return capital improvements, and capitalize on opportunities that lower the supply cost of the energy they use.

First, operators can address various outliers in their sets, and take the appropriate corrective action. For example, they can invest in a new HVAC system or change the wall switches to ones that operate only when the hotel card is left in.

And when they've initiated a plan to change the usage profile of a given hotel, they can use benchmarking as a tool to verify that the savings actually did take place. For example, one of our clients purchased a new toilet flush mechanism for its rooms, which was supposed to drive the water bills way down. However, it drove the hotel's water costs way up and right away. It was nice to have all that information right at their fingertips to prove that it was in deed the new flush mechanism negatively impacting the water costs.

Hotels can also begin to optimize their energy costs by checking to see if they are in a regulated or deregulated market. For hotel sites located in a deregulated energy market, hotel owners have the option of purchasing energy through a third-party energy supplier that may offer a better rate over the local utility.

For hotel owners in a deregulated market, another option is to aggregate for a better rate.

Aggregation means forming an agreement with other hotels in deregulated markets to buy electricity as a group through either an association or franchise organization. By increasing their buying power, they increase their negotiating power. This tactic works well for smaller hotels or franchises that often have a difficult time negotiating a good electric rate as a stand alone. An outside energy consultant might able to combine electricity loads with other utility customers in your deregulated market to procure a lower rate. It is an effective way to cut electricity expenditures without limiting services.

Businesses in a regulated market, on the other hand, are tied to the rate the local utility sets. While it is not possible for hotel operators in these markets to pool their resources, they can still reduce their utility costs in other ways, such as conducting a rate analysis, to help power down electricity costs.

A rate analysis looks at a year's worth of utility bills to measure if the current rate is in line with the usage. There is often a number of different rate options available from a single utility. For example, a commercial building that operates 24/7-such as a hotel-could qualify for a more cost-effective rate than a business that is open just eight to five.

Moreover, hotels can access wider marketplace comparisons through an energy management consultant, who should interface directly with the Environmental Protection Agency (EPA) for Energy Star. This gives operators a chance to benchmark their sites against all hotels the government has data for across the country.

In the end, benchmarking on your own helps determine what your target electric usage typically is, which is helpful in making energy-efficient changes. But benchmarking with a consultant opens up a new world of verifiable savings.

Better yet, it gives any hotel, no matter the size, the opportunity to track and compare its usage, pool resources for greater bargaining power, navigate the challenges of managing disparate locations, and conduct comparative analysis. And those are benefits any hotelier can take straight to the bank.

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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