Hospitality Businesses Can Not Afford Rising Energy Costs
Rising energy costs are putting a huge strain on the hospitality businesses. With the price of gas and electricity rising, it can be difficult for hotels and restaurants to stay open. Rising costs of food and energy are not helping either. This is a crisis that requires government intervention. Fortunately, there are a number of steps that the Government can take to help the Hotel industry.
Hotel utilities have a direct impact on profit, and rising costs of utilities are a major factor that hoteliers cannot afford to ignore. In fact, Energy Star says that energy is the lodging industry's fastest growing operating cost. As a result, many hoteliers are unwittingly flushing cash down the drain. Fortunately, using the right benchmarking strategy to manage utility costs can turn the tide.
PKF-HR's analysis shows that hotel utility costs are increasing by 6.0 percent compared to the long-term average, while revenues are expected to grow by 7.4 percent. This strong revenue growth masks the increases in operating expenses. However, the lodging industry is not immune to rising energy costs because of its relatively high labour requirements and fixed expenses. Additionally, hotels are unable to automate most front-of-house functions, which adds to the growing cost of energy.
To cut the cost of energy, hotel managers should invest in energy-efficient technology that helps them save money. Using on-site renewable energy sources is a great way to reduce the energy cost. Although it can be difficult for a hotel to make the switch, technological advancements have made it possible to reduce energy costs.
Rising energy costs are putting businesses out of business and many are calling on the government to intervene. However, these calls go unanswered. The government has very little influence over energy prices in the UK. Instead, it relies on energy suppliers such as EDF Energy UK, which is owned by the French public utility.
There is currently no cap on business energy bills, so they can continue to rise and hit businesses hard. Some businesses have reported an increase of more than five times the price they paid last year. This is a problem because rising prices have a staggered impact on businesses. Currently, the prices are increasing more rapidly than the rate of inflation, which is causing many to go out of business.
Thankfully, there are energy-efficiency innovations available for hospitality businesses to use. One example is the Claridges hotel, which installed an intelligent ventilation system that saved the hotel 30% on energy costs. The system moderated its output based on the kitchen's temperature and condition. This system saved the hotel PS10,000 a year and paid for itself in 1.8 years. Quintex has clients such as the Radisson Blu Edwardian hotel and CentreParcs.
Rising energy costs have put many hospitality businesses on the brink of collapse. A recent report from the CGA and UKHospitality shows that 93% of UK hospitality businesses have seen their costs rise by more than three times over the past year. As a result, some operators are seriously considering closure.
The rise in energy costs has been blamed partly on the government's procrastination. In August, business leaders across the pub sector signed an open letter to the government warning that without action, small businesses will have to close. In response, the Prime Minister, Liz Truss, promised a PS150bn package to help consumers and businesses. The package, however, does not come without caveats.
While the new Prime Minister, Liz Truss, has set out plans to address the energy crisis, these plans have not yet been finalised. There are plans to introduce energy price caps and a special relief package targeting vulnerable industries. Although these measures have not been finalised yet, they are likely to include hospitality as one of the targets.
Rising energy costs are a major problem for hospitality businesses. As the price of gas increases, it is difficult for these businesses to keep up with their bills. Nevertheless, they can take steps to help themselves. Among these steps is freezing energy prices, which would shift the burden from consumers to businesses. Furthermore, businesses must close the loophole allowing them to avoid paying the energy profits levy.
Rising energy costs are putting the hospitality sector to the brink, with leading trade bodies in the United Kingdom calling for government action. In addition, rising utility costs are impacting domestic residents, resulting in a decrease in discretionary income. The recent increase in energy prices by the Office of Gas & Electricity Markets (Ofgem), a statutory body set up by Parliament, will result in higher energy prices for domestic customers. The increased energy costs will affect around 22 million consumers in the UK alone.
Energy providers have become more competitive in the UK market, but the rising costs of fuel and electricity continue to put a strain on hospitality businesses. There are new ideas to help them deal with the pressure, but it is essential to check their affordability and viability before spending money.