Pool Your Resources: Save Electricity

By Jim Poad Director of Client Solutions, Advantage IQ | October 28, 2008

When you consider the number of washers, dryers, vacuums, lighting fixtures, elevators, and other electronic devices needed to run a hotel, it's no wonder electric bills have become a towering expense for operators.

Indeed, the hotel industry uses 69 billion kilowatts of electricity a year, at a cost of $5.3 billion annually, according to the U.S. Energy Information Administration, making it one of the highest expenditures for hotel franchisees.

It's also one of the most overlooked expenses of running a hotel. Hotel operators are most concerned with buying amenities that ensure a pleasant stay for their customers, and increase return business. They excel at purchasing appliances, wall decor, furniture, carpeting, even restaurant equipment. But when tasked with finding the best rate for their electric needs, since it doesn't directly affect the customer experience, the job tends to fall to the wayside.

In fact most operators pay their bill, and don't even think about the price they're charged for electricity. As a result, a franchise might pay much more for electricity than necessary. While that may send shockwaves through the calculators of number-crunching operators, all hope is not lost. With a little creativity and planning, operators still have the power to drive electric costs down-without driving themselves crazy in the process.

However, here's one option that can help trim their electricity costs. One of the most simple and effective ways to cut costs in a deregulated market is aggregation, also known as buying electricity in bulk. In essence, operators in the same region can align with one another, shop around for the best rate from a third-party electricity supplier, and then form an agreement to buy electricity as a group.

Aggregation creates volume purchases, and the discounts are passed on to the entire group-often 10 percent above the savings reaped just by being in the market. A successful aggregation pool includes 10 or more hotel franchisees. Grouping franchises together in such a way makes smaller customers appear more attractive to third-party suppliers.

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Eco-Friendly Practices: Corporate Social Responsibility

The hotel industry has undertaken a long-term effort to build more responsible and socially conscious businesses. What began with small efforts to reduce waste - such as paperless checkouts and refillable soap dispensers - has evolved into an international movement toward implementing sustainable development practices. In addition to establishing themselves as good corporate citizens, adopting eco-friendly practices is sound business for hotels. According to a recent report from Deloitte, 95% of business travelers believe the hotel industry should be undertaking “green” initiatives, and Millennials are twice as likely to support brands with strong management of environmental and social issues. Given these conclusions, hotels are continuing to innovate in the areas of environmental sustainability. For example, one leading hotel chain has designed special elevators that collect kinetic energy from the moving lift and in the process, they have reduced their energy consumption by 50%  over conventional elevators. Also, they installed an advanced air conditioning system which employs a magnetic mechanical system that makes them more energy efficient. Other hotels are installing Intelligent Building Systems which monitor and control temperatures in rooms, common areas and swimming pools, as well as ventilation and cold water systems. Some hotels are installing Electric Vehicle charging stations, planting rooftop gardens, implementing stringent recycling programs, and insisting on the use of biodegradable materials. Another trend is the creation of Green Teams within a hotel's operation that are tasked to implement earth-friendly practices and manage budgets for green projects. Some hotels have even gone so far as to curtail or eliminate room service, believing that keeping the kitchen open 24/7 isn't terribly sustainable. The May issue of the Hotel Business Review will document what some hotels are doing to integrate sustainable practices into their operations and how they are benefiting from them.