Energy Efficient Hotels: A Reality Or Myth?

Posted on March 21st, 2012 by
   

Sean O’Kane, the Director for Hotel Strategic Alliances at Schneider Electric discusses the results of a recent study commissioned by Schneider Electric and conducted by the University of Nevada, Las Vegas Harrah Hotel College. The study revealed that hoteliers are hesitant to invest in building automation and control systems due to misperceptions that energy management systems will  negatively impact guest experience and the upfront costs of efficiency technologies.

Full transcript:

 

Ben Lack: Why did Schneider Electric want to have this study conducted and why   partnered with you and UNLV to make this happen?
Sean O’Kane: Sure, but I think just a bit of personal history helps in answering that.I’m not an engineer.  I’m not the typical Schneider Electric employee.  I actually came from the hotel industry.  I had a 24 year career in hotels and as a general manager, ran 6 or 7 of them.  As a result, I have very vast, very extensive hands on experience in hotel operations and with that, I knew the challenges that I faced in managing energy.  Hoteliers are extremely adept at managing food, labor, beverage cost, etc., but when it comes to energy, the second largest expense in a hotel, that’s where we have the least knowledge and where we’re the least comfortable in how to manage that.I tried several different things in my hotel career, and I wish what’s available to hoteliers today had been available at that time I was in the business. I would have been even better at my job! Just instinctively and professionally knowing the challenges that face the hotel industry, with the survey we wanted to really drill down and validate and try to better understand the challenges hoteliers face, ROI expectations, and more importantly, validate what hoteliers don’t understand about energy management. I think that’s what the study really sheds some light on.There are a lot of misperceptions about automation and what its impact is perceived to have on guest satisfaction, and we know guest satisfaction scores are paramount to hoteliers. The study pretty convincingly represents the opinion that if anything negatively impacts the guest’s experience, hoteliers don’t want to have anything to do with it.  The fact of the matter is, there are so many solutions and technologies available through an automated approach that energy management is actually seamless to the guest, and can actually help enhance the guest experience.  That’s what we want to be able to take to the industry – you don’t have to be fearful of energy management.  I think fear is driven by lack of knowledge, and we want to help in correcting that.

With this study, and in understanding the lack of knowledge regarding certain energy management systems, we’ve made a very extensive curriculum from Schneider Electric called “Energy University” available to the American Hotel Lodging Association through their Educational Institute. Today, 58 online courses are also offered free to our customer base, and they cover all conceivable aspects and topics relating to energy management including energy audits, key considerations when engaging in an energy efficiency initiative, product-specific tutorials, and much more.  Again the survey is telling us that the industry is really suffering from the lack of knowledge – and this is why we feel it is so important to make these types of training resources available – and they’re free. We’ve also provided the training courses to the Educational Institute on a global basis for some of their recertification credits to hoteliers around the world.

Marriott International is using these courses in India with the expectation they’re going to expand that offering to their Asia Pacific region and have a couple other major chains that are looking at it with us right now. With this program, we can also help these chains track employee participation to ensure that their global workforce is being educated from a common platform to better understand the energy management opportunities that exist today.  The nice thing about these courses then is they’re offered in a corporate-neutral product-neutral format.  Certainly, we offer all of these solutions but other companies offer bits and pieces of those as well.  So, it’s really a very neutral, very in depth approach to educating.  That’s also my mission within Schneider Electric.

I head up the thought leadership initiative which is an opportunity to do this kind of work in understanding what hotels are looking for and what they need helping provide tools to help them overcome those obstacles.  We do a great deal of work with the Hotel School of Cornell University, UNLV and the American Hotel Lodging Association, which really puts a stamp on the fact we’re here to work with the industry.  We understand the industry and clearly, I do, having been in it for 24 years myself.

Ben Lack: Sean, the energy expenditure is the second largest expenditure that a hotelier will make.  Can you give us a range of what the overall percentage is for, you know, energy consumption both for typical property, obviously, properties of all different sizes? What does that look like at the end of the day? What are we really talking about?
Sean O’Kane: As you know there is nothing really typical in most hotels.  As a range, we’re looking anywhere from 3-8% of total revenue going to energy spent.
Ben Lack: Ok.
Sean O’Kane: An interesting challenge in the United States right now is we’re not seeing a significant number of new builds, particularly in the 4 and 5 star levels.  Most of the new builds are more commonly being done at the 2 and 3 star level, but my point being is that the existing base of hotels in this country offers a tremendous opportunity for energy efficiency.I think it’s fairly safe to say any building older that 5 or 6 years old is in some need of energy efficiency upgrade because the technologies have changed dramatically in that time frame.  Certainly going over than that time frame, the challenges become even more obvious.  We showed a hotel in New York City that in preliminary audit that we estimated they could save close to $400,000 a year in energy.
Ben Lack: Right.
Sean O’Kane: We’re saying, you can run that property in Times Square as efficiently for $400,000 less a year. As I pointed out to the general manager, it would take somewhere between $4 million to $4.5 million in incremental sales to generate that same kind of flow through.  What we’re saying is there’s a tremendous amount of waste. This could be due to several factors, including how energy is purchased up front, how it comes in the building and is distributed, or just because things run continuously and they’re not monitored and measured properly.
Ben Lack: Let’s talk about the survey.  I want to move to some of the findings.  Aside from the understanding that there are a lot of folks surveyed that really don’t have level of knowledge of what they need to be able to do.  That was an interesting finding.  What would you say is another surprise or interesting discovery that, you might have been thinking one way and resulted ended up showing something else?
Sean O’Kane: I think with the load shedding as an example, there are many cities, New York City being a great example, where you can predetermine what part of the hotel you could shut down in an energy pinch.  The perception in the industry is that is not something they want to do because it could have an adverse effect on the guest experience. Point of fact – through automation you can predetermine what areas of the hotel you can shut down without interfering with any guest services or experience, while still achieving objectives and receiving a very significant payback from the utility for your participation in that program.  This comes back into what I think is a lack of understanding of how some of these things can actually work.I truly think, besides the lack of understanding, it’s the almost defiant nature in which some hoteliers would say, “We’re not going to do anything to enhance our energy efficiency if we think it’s going to have a negative impact on the guest.”  To me, that’s a pretty telling statement because we know there are ways to easily work around that. I don’t know today where else you could realize the level of savings in a hotel that you can through smart energy efficiency initiatives.From the survey, we know we’ve got to go out and really be able to educate the hotelier much more effectively as to how this can work and how it will not impact that experience so they can achieve their energy reduction in terms of consumption and dollars.
Ben Lack: There’s a section in the study that talks about how hotels are very concerned about employing plug-in or hybrid or all electric vehicle technology in their hotels, you know, curious 35% if I remember correctly.  I was afraid that that number wasn’t higher because of the number of cars coming in.
Sean O’Kane: I’m not so certain it was because they’re opposed to it; I think it’s that they’re not really up to speed on what’s coming in terms of preparing for electric vehicle technology.  I think if you look at some hotel brands, like Element Hotels and Starwood, they have charging stations at their properties and we’re starting to see this type of adoption more. Again, I think it’s a lack of knowing what’s out there and I don’t know if hoteliers are hearing loudly enough from the guest that this is something they want just yet.  So while 35% are saying this is something worth looking into, I just think it’s more the others aren’t prepared to look at it now as being opposed to it.
Ben Lack: Give me a pleasant surprise that came out of the survey.
Sean O’Kane: People are going to be much more apt to engage with energy efficiency initiatives if they can identify low interest loans to help them get there.  There are federal and local dollars available through different channels – including efficiency through some state utilities.  So it’s out there, and with these incentives, and low interest loans, hoteliers do seem to be more willing to invest in efficiency, but if they don’t have these options, they are not as inclined to make these investments.To me, that’s striking, because what they’re saying is they recognize there’s a problem, they know it’s a significant concern, but will only attack the issue if they can find low interest money to do it. Otherwise, they’ll just let it sit and continue to pay the utility for wasted energy. So, while I wouldn’t call that a pleasant surprise, it’s significant to me that hotels would even consider giving up this kind of savings potential.
Ben Lack: Now that the survey is out, and the data has given you some better clarity about where the industry is taking and where the industry is, to a certain extent, going as far as practices are.  What’s the next step?
Sean O’Kane: Well, I think a lot of that lies now with the major hotel brands, or as we call them, “flags.”  It’s interesting that I’ve had calls from 3 major flags plus a group based in Vegas since this report was released – all wanting copies of the survey – because this is a first-of-its-kind document that really digs down to understand the state of hotels, their associated energy usage and knowledge.  I think a lot of this is now going to be up to the flags and we’re already seeing momentum being generated around energy efficiency by the group markets.  The large group consortiums/event planners are now indicating in their RFPs they want data on a hotel’s energy performance, sustainability plans, what ‘green’ awards, if any, they have won and what their plans are to do in the future because they’re taking carbon footprint of their event into serious consideration.I also think we’re going to hear more from the transient guests demanding data on these items as well in the future. If you look at what some of the major hotel brands are doing, most of these initiatives are being driven by the flags – putting more expectation on the hotel operators and GMs at the local level to start tackling this issue. They’re giving them the tools, the guidance and they’re bringing companies like Schneider Electric to the table to assist them in achieving results. Also, and I find this intriguing particularly from my hotel days, is that energy efficiency is now being viewed by many of the flags in a similar fashion as guest satisfaction scores.  Guest satisfaction scores are reviewed on a monthly basis, are compared to their competitors and then they are ranked.  Energy is now gaining that same level of attention which I think is an extremely positive step forward.  There are some hotel chains that want to tie energy performance into their quarterly financials for their stockholders because they want to put that much emphasis on it – ultimately, I think it’s these types of activity that will drive energy efficiency in these hotels.There’s a realization and an acknowledgement that electric prices are expected to double by the year 2030 from where they are today.  Demand is going to become greater.  Costs are naturally going to increase, and the flags are recognizing that this is a major concern and are being the most proactive I’ve ever seen them in my 24 years of being associated with the hotel industry.  It’s not well-managed, but it has to become more of a priority because it’s only going to continue to get worse.

 

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