Skift Take

European natural gas prices are roughly ten times higher than a year ago. Hotel owners may struggle to pass on to guests added costs for heat and lights, given that they've already been charging higher than average rates.

Hotels in Europe have enjoyed months of strong bookings as travelers have sought to escape the cares of the world after a tough pandemic. Yet real-world pressures are intruding on the guest experience at hotels and other travel accommodations. The Ukraine war has led to a spike in energy costs that are squeezing hotels and other businesses across Europe.

In Scotland, the Crieff Hydro Family runs hotels situated in what it calls the “widescreen” beauty of the countryside. But the hotel group’s energy costs across a half-dozen of its boutique and family-friendly properties are soaring, rising from about $600,000 (£600,000) last year to about $1.6 million (£1.6 million) this year.

Nearly every hotelier across the Continent is planning for soaring energy costs. Russia has slashed the supply of natural gas — which is critical for generating electricity and heat for many European businesses. Energy prices are at historic highs as countries work to boost supply. While European lawmakers promise about $280 billion (€280 billion) in relief to businesses and consumers, the crisis appears to be outpacing the planned aid.

In Spain, the government has mandated that hotels, airports, stores, and other businesses must keep their thermostats at certain minimum levels. Beginning last month and lasting through October 2023, hotels can’t cool rooms below 80 degrees Fahrenheit (27 degrees Celsius) or heat rooms in winter above 66 degrees Fahrenheit (19 degrees Celsius). Inspectors will tour facilities to make sure air conditioning and heating systems are running efficiently.

Spain’s effort is notable because the country is not as dependent as many other European nations on generators that run on natural gas to produce electricity or heat.

“We have to show solidarity in Spain with our colleagues in central and northern Europe, just as they showed solidarity with us at the time of the pandemic,” said a spokesperson for Spain’s hotel and tourist accommodation federation CEHAT.

Across Europe, some larger hotel groups negotiated long-term energy contracts at lower rates before energy prices soared, giving them some near-term cushion.

In Germany, prices for energy have been spiking for another reason besides Russia’s energy blackmail. Droughts dried up rivers earlier this summer, disrupting deliveries of fuel to coal-fired plants — which are alternative sources of electricity generation.

Yet some hoteliers see a path through. The lifestyle hotel Sand on the Timmendorfer Strand by the Baltic Sea, open since 1995, uses geothermal energy for cooling and heating its 33 rooms. It plans to adopt enough solar power for energy self-sufficiency, said co-owner Marion Muller.

In the UK, 30 energy sellers have gone out of business, Reuters reported, and national regulators are now more frequently using the terms “emergency” and “shortages” to describe upcoming months, according to Bloomberg.

Pricing Discipline Is Critical

The energy crisis makes it paramount for hoteliers to watch rates like a hawk, said Panos Almyrantis, president of EHMA (European Hotel Managers Association) and general manager of the Grand Hyatt Athens. The extra revenue will help make rising costs more bearable.

“Being able to compete with your compset [competitor set] is of priority importance whilst reacting in real time with regular rate updates,” Almyrantis said. “Guests’ desire for value creation will skyrocket, and in order for a hotel to succeed, it has to reexamine fixed costs but at the same time ensure that the level of service remains high.”

Hotels that offer flexibility in booking terms and cancellation conditions will win business away from those that don’t, especially if they allow guests to change dates without incurring fees, Almyrantis said.

Long-Term Payoff From Energy Efficiency

In Scandinavia and the Baltics, Nordic Choice Hotels has recently been adding energy storage, rooftop solar, and software-based demand management systems to many of its properties.

“One example of this is our one-year-old Comfort Hotel Solna that also houses our headquarters in Sweden,” said Fredric Landell, chief project officer at Nordic Choice Hotels. “This is the first zero-energy hotel in the Scandinavian region and actually produces more energy than it consumes. The facade and the roof are covered in solar panels, and the elevators are charged when they go down and re-use that energy to go back up.”

Actions to reduce costs are to use technology that reduces energy use when no one is in a guest room and to inspect properties to make sure insulation is reducing heat loss as expected.

Bigger steps include installing automated lighting controls, such as occupancy or daylight sensors so that lighting only turns on when needed or installing key card-controlled electricity systems in rooms.

“Today we are able to connect the booking system with our hotel system and the property management systems to optimize and run the systems in the right way,” said Landell of Nordic Choice Hotels.

Some easy, low-cost actions hotels could take include replacing regular lightbulbs with LEDs, introducing a ‘switch off’ policy in staff areas except for safety lights, and installing draught excluders on doors and windows, according to the Sustainable Hospitality Alliance.

Reducing the use of energy-intensive services, such as laundering, by upgrading laundry equipment, incentivizing guests to opt out of some linen cleaning options, and reducing after-hours lighting unrelated to security needs can help, experts said.

Looking ahead, hotel franchise owners may become more interested in investing in a hotel’s on-site renewable power to boost control over supply costs.

There may be a small silver lining to all the efficiency measures. Some hoteliers, such as the owners of the Sand hotel in Germany, frame investments as a play on a likely long-term trend of increasing consumer interest in sustainable hospitality. Green Pearls is a Germany-headquartered marketing platform that promotes hotels and other hospitality providers that meet certain requirements for the reduction of carbon emissions.

For ordinary hotels, efficiency can keep costs relatively lower long term.

“We work to use energy when it’s most needed and to do it in the most efficient way possible,” Landell said. “By doing so, we can reduce our consumption and our costs, which will be a win-win-win for us, our property owners and our guests.”

CORRECTION: This story originally had an error with Panos Almyrantis’s name.

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Tags: energy crisis, europe, inflation

Photo credit: Nordic Choice Hotels plans to build a new hotel (rendering shown here) with a heavy use of wood in Bodø, Norway, by 2024. Source: Nordic Choice Hotels.

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