Pool Your Resources: Save Electricity
By Jim Poad Director of Client Solutions, Advantage IQ | October 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.