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The Economics of Off-Premise Laundry

The Economics of Off-Premise Laundry

One factor that hotel operators may be considering as they manage expenses is whether to operate on-premise laundry facilities or to outsource laundry through an off-premise service. While operating an on-premise laundry facility has its benefits, off-site facilities give hotel operators the option of maximizing the physical space in their property and their capital expenditure budget on items that add value or produce revenue, such as work-out facilities, yoga studios, cafes, or other retail.

Consider these four factors regarding the economics of operating OPLs.

Cost reduction
Outsourcing laundry enables hotel operators to reduce costs and focus on their core mission – serving guests. Because OPLs often lack the volume to run highly efficient equipment, they can be more labor intensive and likely to consume larger quantities of resources, including natural gas, water, and electricity.

To understand the true costs of processing a pound of linen, hotel operators should consider expenses related to maintenance and repairs, chemicals, production supplies, insurance, workers compensation, taxes, wastewater management services, licenses, permits, and equipment.

Outside of lowering expenses, outsourcing laundry may benefit hotels by reducing linen inventory and eliminating the need for in-house management to oversee a non-core business.

Pay as you go
Many costs associated with an OPL remain constant even through a decline in occupancy level. As a result, the cost to process a pound of linen would increase significantly in low-occupancy periods. Textile service provider programs replace this fixed-cost structure with a variable-cost model where hotels “pay as they go.”

Floor space
Not having an on-premise laundry facility allows hotels to utilize more space on the property for revenue-generating purposes.

Capital expenditures
Investments in laundry and material handling equipment can add up. Using a textile service provider allows hotels to redirect capital to other areas and improvement projects.

For some hotels, using an external provider for laundry services may ultimately help operators avoid the economic stress that comes with managing their own laundry operations.

About the Author
Joseph Ricci is president and CEO of TRSA.

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