Five energy challenges the hotel industry are experiencing
Finding affordable solutions to tackle rising energy prices in the hotel sector
Reducing rising energy costs was the key talking point among the many businesses we met at a recent Hotel Management Summit, which brought together leading UK hotel professionals to discuss important issues affecting the sector.
In a series of one-to-one business meetings and seminars, we learned more about the competitive pressures of the hotel and hospitality sector. Managers and owners say they need to continuously improve their services and facilities to meet higher customer expectations, while carefully managing costs to protect profit margins.
Five areas were common discussion topics with customers. If these topics also resonate with you Centrica Business Solutions have the expertise and experience with similar businesses to help support you.
1. Using less energy to combat rising costs
According to delegates, one of the biggest current cost pressures is rising energy costs. Hotels are being hit on two fronts: Wholesale energy prices are increasing, mainly driven by the soaring cost of oil, while non-commodity costs are also rising sharply. These 'third-party energy charges', which are largely fixed and non-negotiable, already account for more than half of a typical energy bill.
We heard how smarter energy purchasing is no longer enough to counter rising costs. This means it's critical to find affordable and innovative new ways of reducing energy consumption. The challenge is to achieve this without diverting capital spend that is earmarked for improving facilities and creating more attractive customer offerings.
As an energy intensive business sector, the hotel industry has been proactive in pursuing energy efficiency opportunities. A number of delegates reported that they had recovered energy savings from installing LED lighting, with some using combined heat and power (CHP) to produce low cost, low carbon heat and power. For example our customer, one of Britain’s largest bakeries, has installed a 1MWe CHP Unit using waste gas and water to power its new European plant (the largest in Europe), saving the company £400k and 1,084 tonnes of carbon emissions per year.
Hotels tend to use far more energy for lighting, heating and cooling than other sectors. As such, our initial site surveys tend to start with assessing the potential payback of lighting upgrades, checking control systems, and exploring the efficiency of boilers and air conditioning equipment. In this way, we ensure that the basic demand reduction measures are covered before exploring other solutions.
2. Informing energy saving
Delegates recognised that they need to take a more intelligent and informed approach to target energy efficiency improvements and take savings to a new level. This requires a better understanding of how, when and where they are consuming, or wasting energy.
One of the breakthrough technologies now available to enable this understanding is advanced energy analytics. This can monitor energy consuming assets, such as refrigerators, kitchen equipment, air conditioning systems, air handling units, lighting circuits and motors. It pinpoints where waste is occurring and where investment in energy efficient technologies can pay off. Our energy insights solution, Panoramic Power, is helping many organisations to discover hidden energy saving opportunities, while often uncovering opportunities to improve the performance of their energy assets. This technology is quick, simple and affordable to install and delivers the rapid return on investment hotels are seeking. For example, one company found a fault with an air compressor and chillers that meant they were running 24/7, after production stopped, saving the company £43,000 per year.
3. Strong interest in CHP
Gas fuelled CHP remains very popular as an energy efficient solution for the hotel sector and we discussed how the widening price gap between gas and electricity (spark spread) is improving the economic viability of this technology. Hotels are able to purchase the cheaper gas input fuel and offset higher grid electricity costs by generating their own power.
CHP provides an added cost benefit of providing 'free' heat to meet the big heating/cooling demand of hotels and optimise comfort for guests. The high efficiency of CHP means that it can reduce carbon emissions and environmental impact, while also increasing energy stability and security.
CHP will usually prove economically viable for hotels with more than 100 rooms, particularly where there is added heat demand from a pool/spa. There was strong interest from delegates in Centrica Business Solutions' Discount Energy Purchase (DEP) scheme. This requires no capital outlay by the customer or ongoing operational costs. The investment in equipment and lifetime servicing and maintenance is recovered through purchase of the generated electricity at a guaranteed discounted rate, with heat supplied free.
4. Energy efficiency in action
We have provided a funded and consolidated CHP package to many hotels. Among them is Alton Towers resort, which is using our technology and operational expertise to generate energy savings of 12% per annum. The cogeneration system recycles waste heat for use at the hotels, conference centre and water park – achieving 80% energy efficiency.
We've also partnered with a London hotel group to design, implement and operate an innovative CHP scheme, involving two large high efficiency units shared across four hotels. Funded under our DEP initiative, this project is achieving cost savings of £40,000 per year and reducing CO2 emissions by 800 tonnes per year.
5. Future energy saving
As new technology costs continue to reduce, there is future potential for hotels to combine battery storage with onsite generation – using solar and CHP. There's also scope to explore demand side response to earn revenue from spare power capacity. However, the immediate priority is to redouble energy efficiency efforts, which can deliver higher financial and carbon savings at minimum cost.