The hospitality industry was among the sectors hit the hardest by Covid-19. The expected revenue per room (RevPar) declined by 37% resulting in an estimated decline in gross operating profits (GOP) of 71% for the year. In response, CFOs and energy teams are looking to adapt their practices to secure as much profit as possible during this downward trend.
Hotels, even those that are not at capacity, have unavoidable expenses. There must be staff to greet customers on arrival, clean the rooms, and address customer requests. Heating, Ventilating, and Air Conditioning (HVAC) systems need to maintain a comfortable climate, and the lights need to stay on.
An often-overlooked part of the operations budget is the utility spend (energy, gas, and water). Utilities are the third-largest expense of a business; therefore, they can have a massive impact on a hotel’s profit or lack of.
Before the COVID-19 pandemic ripped through the hotel industry, utility costs were growing at a rapid pace. According to Energy Star, energy is the hospitalities industry’s single fastest-growing operating cost, sneaking in on the bottom line unnoticed.
Why does this continue to go unaddressed?
All too often, utility costs are not adequately monitored or recorded. When they are tracked, with the right benchmarking and forecasting strategy in place, leadership can take control of their utility costs
Analytics have a significant role to play in the hotel and hospitality sector. The industry has lagged behind others such as retail and manufacturing in adopting an analytics-first philosophy.
Ideally, a hotel chain should compare their electricity and water usage to occupancy rate to learn the cost of utilities per occupied room. Once the utility cost per occupied room is known further analysis can be done to create accurate utility spending based on historical occupancy data throughout the year.
Utility data should also be tracked to measure the effectiveness of conservation campaigns. It’s now common practice for hotel rooms to have a sign in the bathrooms that reads, “Please help us conserve water, a towel hung up means I will use it again, and a towel on the floor means, please wash.” Measuring the effectiveness of these campaigns by assessing the cost of water is not enough to gauge success. Water prices are volatile – and leveraging the utility bill to track the actual volume of water consumed is the accurate way to measure return on investment for these initiatives.
Sustainability campaigns can go far beyond improving your brand. Harnessed utility billing data can help a company with their ESG reporting or provide metrics for corporate Net-Zero goals. Big data helps hospitality firms reframe critical questions about how they research, collect, and use the information. It gives them the ammunition to act confidently on metrics and real-time data.