From both cost savings and sustainability perspectives, energy management has long been a key initiative for hoteliers. But with the rise in utility prices last year, optimizing energy efficiency has become an even higher priority among owners and operators. According to CBRE’s monthly P&L survey, hoteliers’ utility expenses in December 2022 increased by 21.5 percent on a dollar per available room basis over December 2021, which is partly due to increased occupancy, but also to the rise in energy and water rates.
Justin Jabara, president, MJ Hotels, confirms this trend: “Energy costs have risen differently market to market, but we have seen instances of electricity and water going up as high as 30 percent. The hotel operating model is just not built to absorb any single line item going up 30 percent, and in some cases, more. And that’s exactly where we are.”
Exacerbating this challenge is a concurrent rise in other costs. “In addition, you’ve got insurance costs, which in many of our hotels have doubled over the last year, and then [rising costs in] other areas, such as food and wages,” Jabara explains. He notes that the peak in energy costs that his company experienced was in August 2022, but it’s not just the commodity price itself that is concerning. “The other trend that we saw was service fees going up at a pace that we’d never seen before,” he adds.
In response, many operators are adopting smarter energy purchasing strategies, more thorough conservation practices for staff, and the latest energy-saving technologies. Atrium Hospitality is a case in point. “Energy rate increases have escalated our exploration and implementation of additional innovative energy and water conservation projects across the Atrium-managed hotel portfolio of more than 80 properties,” confirms Michael Tyler, vice president, capital planning & facilities.
Partnering on the Project
Particularly during these challenging times, many hoteliers also find it helpful to partner with one or more energy management consultants. Tyler describes the starting point to these relationships: “Typically, the energy management partner selection process includes discussions with other hospitality companies, a thorough review of past performance, and an assessment of how the partner company can effectively assist Atrium Hospitality in achieving our environmental and business goals.”
MJ Hotels partners with Alpharetta, Georgia-based Burton Energy Group for a variety of services, including energy-usage tracking, reporting, and commodity purchasing. “They also support us on some of our conservation efforts,” Jabara says. “When we saw this trend [toward higher rates], we reached out to our partners at Burton and said, what are the things that we need to be focused on? And basically, they took a two-pronged approach: first, we need to ensure that we’re buying the energy correctly. And second, we need to use less of it.”
Regarding the first priority, Burton tracks utility cost trends in all the relevant markets and advises MJ Hotels on when it’s most favorable to lock in rates for a given market. As far as improving conservation, Burton conducts energy audits to supplement each property’s self-assessment. The results guide many conservation efforts that Jabara considers “low-hanging fruit,” such as fixing toilet leaks, replacing inefficient dryers, and changing lightbulbs to LEDs. In general, Jabara encourages hoteliers to pursue these partnerships. “In the hotel business, we tend to be jacks of many trades, but it’s a complicated business. It’s food & beverage, it’s marketing and sales—you name it. The utility area was just a specialty that we didn’t have; we just didn’t have the knowledge base. So, [partnering with an energy management specialist] is shining a light on our blind spot,” he explains.
Inculcating Awareness
While there are numerous energy-saving best practices for hotel staff, the fundamental “practice” is simply to keep energy efficiency top of mind during day-to-day operations. “Awareness is half the battle,” says Jabara, who recommends awareness training for staff, including housekeepers. “One of the best sets of eyes and ears has been the housekeepers’ because they’re in the rooms all the time. Between the whole team, they cover the hotel every day. So, make sure that they’re reporting any issues, so it can then be followed up upon.”
Some of the measures—such as changing lightbulbs, fixing the toilets, and thermostat setbacks—are like the ones that many employees take in their own homes, he points out, so they should extend that mindset to the workplace. Overall, Jabara stresses, “We have not found a silver bullet here. It’s an accumulation of activities that when deployed is giving us a nice success” in terms of conservation.
From this “frontline” of energy conservation the work passes to the engineering staff. “Having a sound maintenance program and a strong engineering team are integral to the energy efficiency of hotel operations,” says Tyler. “Whether equipment is new or old, it’s important to keep equipment and systems in peak operating condition.”
Getting “Smart” About Energy Savings
In addition to vigilance and maintenance, smart technology has become a major part of energy management, and its uses are many and varied. “Atrium Hospitality utilizes smart technology for optimum operations of thermostats, building automation systems (BAS), lighting, laundry reclaim, and kitchen hood controls,” says Tyler, advising, “The integration of systems can be a challenge if operating different vintage systems or brands.”
Bhavesh Gupta, director, engineering, Honeywell Building Technologies, notes that the company has seen increased demand for the company’s energy management system, INNCOM by Honeywell, since energy costs have risen—even among select-service hotels that have more limited budgets for capital expenditures. Of course, the cost savings estimate must consider the cost of the system itself. According to Ethan Gabany, senior project manager for CBRE, “Typically, we budget $150-$200/room to furnish and install an energy management system during the guestroom renovation.”
Tyler provides insight on the payback period for this sort of investment: “We rank projects by examining internal rate of return, net present value, and payback. On a typical energy management project, Atrium averages a three-year payback on our investment.” Gupta confirms that these solutions pay themselves back “within two to three years. We are hoping to bring [the payback period] further down for at least a mid-segment market, where we might remove some of the bells and whistles and [reduce] the cost of installation.” Another work in progress for Gupta’s team is to “build an overall suite for the hotel that can [manage energy for] not only guestrooms, but common areas as well,” he says. Such a solution would provide data on energy usage in various spaces across the property and allow adjustments to be made according to current occupancy, for example.
With such advances in technology on the horizon, as well as partnerships with energy management companies and the right staff protocols, hoteliers are well positioned to keep the energy line item reasonably under control. In addition, there may be a light at the end of the tunnel when it comes to rate increases. “We’ve actually seen, since August, a drop in natural gas by about 60 percent, which is considerable,” says Jabara. “Utility costs seem to be flattening out in 2023.”
Putting Hospitality First: Maintaining and Raising Guest Satisfaction While Reducing Energy Costs
With certain changes that hotel operators make on-property to save energy, preserving the guest experience becomes an important consideration. “We’re very mindful of maintaining exceptional guest experiences when selecting an energy-saving approach,” notes Michael Tyler, vice president, capital planning & facilities, Atrium Hospitality. For example, diminished lighting in a public space, while saving costs, can create inconveniences for guests or compromise their appreciation of the hotel’s interior architecture or decor. But the call to reduce energy expenses and the goal of enhancing the guest experience need not be opposed or even separate initiatives, as some energy management systems include functions that make the guestroom experience more convenient and welcoming through automation. For example, Bhavesh Gupta, director, engineering, Honeywell Building Technologies, explains, “With guestroom automation, one important thing is that apart from the energy conservation aspect, we would want to create a better experience for the guests.”
Thus, in addition to energy management functions for temperature control and lighting, the system can create a welcoming experience for the guest through various types of automations. For example, the system senses when the guest enters via integration with the electronic door lock and then turns up the lights, opens the curtains, etc. In addition, “modules like thermostats or switches light up to kind of let you know where they are so that you don’t have to look for them specifically; they announce themselves in a quiet way,” Gupta explains. “In a couple of hotels, we also have integrated with voice-control solutions like Alexa or Echo, and they would welcome you when you’re entering the room as well.”
In addition, many guests will appreciate the energy-saving tools they notice being implemented as part of a hotelier’s overall focus on sustainability. “Studies show that customers want to do business with companies that care about the environment, people, and their community,” Tyler says. “Atrium Hospitality supports the American Hotel & Lodging Association’s Responsible Stay environmental initiative, which complements Atrium’s commitment to preserving the planet’s natural resources and being efficient in the operations of the company’s properties nationwide.”
