<B>Hotels Charge For Energy</B>
By Bruce Serlen
Following the lead of the airline industry, hotels this month began to add surcharges to room rates in response to the ongoing U.S. energy crisis. Faced with rapidly rising costs, Starwood Hotels & Resorts Worldwide and Marriott International both began adding special nightly charges at properties in states hardest hit by the present crisis.
Sensing the energy problem is greater than any stop-gap measure, however, different hotel companies have begun forging partnerships with energy providers that eventually will result in not only more cost-efficient sources of energy, but improved conservation techniques. Bass Hotels & Resorts announced such an agreement last month, while Starwood and Choice Hotels International announced strategic partnerships as far back as six months ago, when the current crisis was just gathering steam.
At Starwood, surcharges are in place at company-owned and managed hotels in California, Washington and Oregon. Marriott's charges are restricted to company-owned and managed hotels in California.
Nightly charges are typically $2.50. All Starwood brands, which include Four Points, Sheraton, St. Regis, W and Westin, are affected, as are Marriott's full-service brands, such as Marriott Hotels & Resorts, Renaissance and J.W. Marriott. Marriott, however, charges $1.50 per night at its midprice hotels, which include such brands as Courtyard, Fairfield Inn and SpringHill Suites. At franchised hotels, the companies can recommend policy on such matters , but cannot mandate it.
The surcharges are intended to be temporary, though neither company would indicate when they would be lifted. Nor would the companies comment on whether the fees would be extended to additional states, if the crisis worsened this summer, or if it might prove necessary to raise the fees further. Surcharges apply to negotiated corporate rates as well as other rates. Charges for group bookings are being negotiated on a case-by-case basis.
"While the surcharges will help defer some of the increased energy costs, whether they're for electricity or natural gas, they don't begin to compensate us for the added charges," said John Lembo, director of energy for Starwood North American hotel operations.
In developing strategic partnerships with energy providers, hotel companies are trying to take advantage of their size. "It's about economies of scale," Lembo said. "Given our size, it makes sense to leverage our strength in the marketplace." Lembo pointed out that, by definition, hotels are heavy users of energy, since they're 24-hour-a-day operations. "Ironically, with the increased occupancies we've experienced during the past few years has come increased energy consumption. Given the volatility of the market right now, the short-term objective is to stabilize this increased usage and then try to reduce it, while also increasing efficiency."
At Bass, the agreement signed last month was to provide natural gas, electric and risk management services. Bass' partner, Dallas-based TXU Energy Services, will develop energy-efficiency improvement projects and provide consolidated billing services. Involved are 118 U.S. Bass-owned or managed properties, which include the Crowne Plaza, Holiday Inn and Inter-Continental brands.
Richard Solomons, Bass COO of the Americas, said the deal "will allow us to control what we spend on energy, but, more importantly, to focus our capital dollars where they're needed most."
Similar to the Bass-TXU deal, one of the ways Houston-based Enron Energy Services has been assisting Starwood is as a consultant/general contractor. "First, they're helping us procure the most cost-effective electricity and natural gas we need," Lembo said. "Then they will start to identify measures that significantly reduce consumption. The company is putting a high priority on this and committing capital accordingly. Long term, we're aware that these infrastructure improvements will have a positive impact on the environment."
Starwood estimated that it will invest $50 million over the course of the 10-year Enron agreement, but expects to reduce energy costs at its hotels by approximately $200 million during that period. Regarding investments of this magnitude, Starwood COO Robert Cotter said that the money being spent contradicted the industry's traditional thinking. "While the conventional wisdom has always been that you don't invest dollars where the public won't see it, in this case the capital investment comes with a compelling financial return," he said.
As a franchiser of hotels, Choice, whose brands include Comfort, Quality and Clarion, is in a somewhat different position than the other companies. It teamed up with San Francisco-based Chevron Energy Solutions and Minneapolis-based Tharaldson Energy Group to work with its franchisees.
Dan Rothfeld, Choice senior vice president of e-commerce and emerging business opportunities, said Chevron performs an energy audit for a franchisee and then installs more efficient lighting, heating and cooling equipment, improving ventilation and developing better water conservation measures. Tharaldson, meanwhile, is an energy-purchasing consortium that will negotiate more cost-efficient contracts for franchisees in deregulated areas.
For travel managers who have grown accustomed to fuel surcharges in the airline industry, the idea of special charges for travel-related services is nothing new. Then, too, considering the relatively small amounts involved--compared with room rates overall--the surcharges seem mostly symbolic.
Fee amounts notwithstanding, energy surcharges are the latest in a trend of extra charges that hotels are adding to the folios of often-unsuspecting guests.
Particularly at the deluxe and upper upscale categories, the list of charges is growing, said Bjorn Hanson, head of the hospitality consulting practice at PricewaterhouseCoopers. Hanson's list already included new fees for early departures and cancellations, plus higher fees for such things as parking, use of the hotel business center and items from the mini-bar. It's a trend Hanson finds disturbing, given already high room rates, and it seems designed to boost hotel revenues even higher.