An Energy Management Perspective

In a recently completed study, lodging industry experts contributed their views on smart grid technology adoption and its future as an energy management solution in the U.S. lodging industry. Smart grid technology was defined in the study as the application of digital technology to the electric power infrastructure. Such technologies can be found today in energy management systems, demand response systems, load balancing systems, renewable resource generation integration, and others.

There are several reasons why energy management is one of the most important challenges facing the lodging industry today. The Department of Energy has confirmed that demand for power in the U.S. is skyrocketing; demand is projected to increase by 30 percent between 2008 and 2035. This increase and “…chronic underinvestment in getting energy where it needs to go through transmission and distribution…” has led to a decline in the reliability of the country’s electrical grid. The largest percentage increase in demand (42 percent) will be from the commercial sector with the service industry leading the growth (U.S. Energy Information Administration, 2010). In addition, given that the bulk of the country’s electricity is produced with nonrenewable fuels and production costs are consistently increasing, the Department of Energy has projected that electricity prices will increase by 50 percent over the next seven years (U.S. Department of Energy, 2009).

Using the Delphi research method, U.S. lodging industry energy management experts answered questions about smart grid technology adoption and provided their opinions about critical issues. Some of the questions they answered included:


-What smart grid technologies have been adopted in the lodging industry?

-What are the perceived tangible benefits of adopted smart grid technologies in the lodging industry?

-What are the perceived challenges of adopted smart grid technologies in the lodging industry?

-What perceived challenges or barriers are associated with future smart grid technology adoption?

The experts on the study panel possess backgrounds in electrical engineering, energy technology design, energy technology procurement, energy technology consulting, and sustainability analysis. There was consensus that hotel energy management systems that control HVAC and lighting; technologies that provide load shedding; and technologies with demand response capabilities were the most common smart grid technologies currently adopted by hotels. Lower energy costs achieved through technology-related energy management measures was identified as the overwhelming benefit to smart grid technology adoption while corporate buy-in (or justification) for the investment was the major challenge to adopting smart grid technology today. Looking into the future, panel experts agreed that even though there is little doubt that adopting this technology will yield great economic benefits to the lodging industry, there appears to be inadequate knowledge about smart grid technology at the decision-making levels of the industry. Therefore, there is a need for lodging industry leaders and executives to be educated about the technology.

Another area of agreement by the experts was the misdirected and ill-advised focus on guestcentered strategies as the cornerstone of managing energy costs in the lodging industry. The U.S. lodging industry has looked to guests for “green” solutions for far too long. Focusing on altering guests’ energy consumption habits is myopic and misses the larger picture because hotels have the ability to control a large proportion of energy consumption in lodging properties through the use of smart technologies. It is more difficult to influence and evaluate guests’ environmental awareness and willingness to act upon their beliefs than it is to change the behaviors of hotel managers. Furthermore, claims that guests will pay more for “green” accommodations have not been substantiated; indeed, some research indicates that guests expect to pay less for their stay because of their “contributions” to reducing the hotel’s energy costs.

It is clear that while recent studies on guest psychometrics related to “green” lodging practices may be enlightening, they do not provide hoteliers with tangible, proven and responsible ways of preparing for the imminent increases in energy demand and energy prices. When a hotel becomes less profitable due to higher operating costs (energy costs represent the second largest operating expense) and economically unsustainable it provides no environmental benefits to the community in which it resides. Study panel experts agreed that:

-Better load management leads to lower energy costs

-Income received from utility company incentives for participation in peak load management incentive programs are a primary tangible benefit of smart grid technology adoption

-The ability to track and benchmark energy use lowers energy costs

The study also included a review of global energy management academic literature. Renewable generation; carbon emissions; energy and water use; environmental protection programs and conservation practices are the subjects of hotel energy management efforts in the European Union. In China, the focus is on combined cooling, heating and power systems; chiller systems in hotels; and creative financing through performance contracting. If the U.S. lodging industry is to remain competitive in a world with perpetually rising energy prices, we must learn to perceive our efforts in a context relative to our global colleagues. Focusing on guests to reduce our utility bills will not achieve the bottom line results that the industry needs to survive in a competitive global lodging market.

There is a bigger, better, picture. The frame is energy, the second largest operating expense for lodging properties; and the picture is one of practical solutions—successful adoption of energy management technologies that can, and do, increase the bottom line. The best way to get and, more importantly, keep guests is to provide for their needs in an exemplary fashion, in the most financially responsible and least intrusive way possible. There is value in the study of guest psychometrics, but a community engaged in such pursuits, to the exclusion of practical solutions is folly. While we spend time producing expensive ways to circumvent internationally recognized, credible, green certification programs that may, or may not, attract a minority of guests to industry properties, with no evidence that these efforts will result in tangible benefits, our global counterparts are leaving us in the dust. In the meantime, as energy prices rise, and the significant tangible cost of carbon emissions looms dangerously in our future, we are losing precious green academic and financial capital. It is definitely time for a new perspective.

Diane M. Vondrasek, M.S., is a graduate of Hospitality Information Management, Lerner College of Business and Economics, University of Delaware. Francis A. Kwansa, Ph.D., is associate chair and director of graduate studies in Hotel Restaurant & Institutional Management, Lerner College of Business and Economics, University of Delaware.