Managing the rising cost of hotel recovery

BHN speaks to a procurement partner, an energy management company, a hotel association, and an architecture and design practice to hear thoughts and advice on how to deal with rising cost pressures.

• What practical steps can hoteliers take to minimise the impact of increased energy prices?

Emmanuel Poignant, VP procurement for Accor northern Europe, Astore: “The current market is at its highest for a decade, with many experts forecasting this trend to remain for several years. Astore is recommending its members to forward purchase their energy as far as possible on the energy market where prices are still at an acceptable level.

“We can also propose an energy efficiency audit which will help you identify and drive action to help you reduce your energy consumption. Astore procurement is offering its partners fixed terms contracts as well as flexible long-term contracts to suit most partner’s strategies.”

Frazer Durris, CEO and founder, Businesswise Solutions: “There are some things that a hotelier can do to impact the wholesale price of energy, but only if they have contracts that allow them to unlock volume and benefit from market rates if and when they fall. They may have the ability to impact some elements of their contracted rates and will have the option to change how they approach energy usage and waste.

“Many businesses aren’t aware of where all their energy is being consumed, and these hidden kilowatt-hours are costing businesses thousands. The root cause of hidden kilowatts could be a number of things from inefficient time controls, powering heating and cooling systems simultaneously, or even poorly performing equipment, to name a few. Effective monitoring solutions can help a hotelier to understand where to focus their attention.

“Behavioural changes — such as switching appliances off in unoccupied rooms; leaving a single light on rather than having multiple lights turned on, setting the AC to 21°C and then switching it off, might seem like small insignificant changes, but they will add up and eliminate valuable energy waste.

“Effective energy procurement strategies can optimise unit rates, and understanding your contract type is the first place to look. A fully fixed contract will offer no ability to impact unit rates, so it might be worth checking contract end dates and engaging with an expert ASAP. The longer a business has its future contracted rates under management, the better the outcomes.

“Hoteliers with flexible energy contracts right now have the ability to unlock un-required hedge (future energy consumption), essentially selling back that volume at the current high rates, bringing the average price for that season down.

“Ultimately tying all of this together under an energy management strategy will give you the very best chance of mitigating the current situation regarding high gas and electricity prices.”

Raphael Herzog, chair of the Bristol Hoteliers Association: “Energy is a massive challenge, and the only way we can effectively deal with soaring energy prices is through a combination of reducing our consumption and, sadly, increasing our own prices. Emphasis on saving energy is already in place as most hotels are trying to go as green as possible; a lot of us are looking at bigger projects to reduce energy consumptions as part of becoming net carbon zero.

“We are however urging the government to extend the reduced rate of VAT at least until the end of the summer in order to give us a proper chance of sustaining our businesses. Ideally, we would like the reduced rate to be made permanent.

“It is extremely hard operating a hospitality business in the current climate, with more money going out than ever, and that’s before the energy price rises hit us, as well as big rises in the minimum wage and living wage. We need the support of local companies, as much as we need help from the government, if we are able to realistically get our businesses fully onto the road to recovery.”

Nicholas Hickson and Manuela Mannino, co-founders, THDP: “Hotels have always sought to minimise their energy use, being early adopters of LED fittings, room heating management systems controllable at reception, and lighting control systems to switch off lights and TV when the room is not occupied.

“Front of house areas too have sophisticated heating and cooling systems, and sustainable and economic building management systems are built into the project from first principles. Hotel chains are also looking at maximising their room stock use by creating hybrid hotels — that being a cross between accommodation and workspaces, where rooms are used not just at night but during the day.”

• Do you have any advice for managing the cost pressures of other overheads, such as supply chains and labour?

Emmanuel Poignant, VP procurement for Accor northern Europe, Astore: “With a large number of procurement specialists across Europe working with over 500 suppliers including direct manufacturers, Accor’s Astore team work with hotels to manage inflation through contract negotiations, as well as menu engineering support to review the product mix whilst ensuring quality and guest experience remains at the forefront of business.

“Astore also works with hotels to explore labour saving products and meal suggestions to support hotel teams. Subscribing to various market intelligence technology, as Astore does, gives hotels the best possible guidance on inflation to help secure longer time pricing on volatile commodities.

“During the current climate where supply chains are challenging we are working with our customers and suppliers to optimise the deliveries including consolidating delivery days, reviewing local alternatives.”

Raphael Herzog, chair of the Bristol Hoteliers Association: “There are significant price rises facing us; some food and beverage suppliers have increased their charges by 20 per cent, we’ve got increased wage bills and demands to cater for, and all with very little money coming in.

“Most hotels have very good relationships with suppliers due to loyalty, though unfortunately most businesses will have to put prices up to absorb some of the cost increases we are facing. My advice would be to work with suppliers to help to get the best deal for hotels.”

“I think the biggest opportunity is about staff retention in order to reduce turnover and therefore reduce costs of initial training and team onboarding. Many hotels are really working hard to offer a much better work life balance than other industries as well as very competitive wages with bonuses and incentives. We hope this will encourage more people to choose to start their careers in hospitality, which is a vibrant and enjoyable sector which offers so many exciting career opportunities.”

Nicholas Hickson and Manuela Mannino, co-founders, THDP: “Finding labour right now is tough, and whilst this answer may not be an economic one, it’s interesting that many hotels are focusing more time and budget to the back of house areas, making them interesting places to work and be.

“Hoteliers are becoming far more aware that looking after their team equates to their team looking after their guests — so restaurants, offices and changing areas are gradually becoming part of the ‘workspace’ design instigated by the interior designer — with the sole intent of creating an amazing hotel not just to stay in, but to work in.”

This story was originally posted on February 25, 2022 on boutiquehotelnews.com

Subscribe here to our bi-weekly e-newsletters for all the latest news, trends, insight and comment from the global boutique, luxury and lifestyle hotel market