The Way US Hotels Can Slash Energy Bills, According to CBRE
Hotels across the US — and the globe — are grappling with the rise in prices for electricity, gas and water.
Even as the world recovers from the impacts of Covid-19 and the Ukraine conflict, US electricity costs have surged by 3.6% over the past year, outstripping the general rate of inflation.
The future looks set for even higher demand for electricity, spurred by an increase in EVs, a boom in data centre operations and heightened cooling requirements as global temperatures climb.
Given this scenario, the idea of utilities costs reducing seems unlikely anytime soon.
Rising utilities costs
According to CBRE, adopting sustainable practices is the most viable strategy for tackling these mounting utility costs.
Robert Bernard, CBRE's Chief Sustainability Officer, says: “The bottom line: hotel operators need to take proactive steps to manage their utility costs.
“Pandemic-induced market shocks, geopolitical tensions and extreme weather: these factors are driving utility costs upward and likely will be persistent.
“While this impacts all sectors, for hotel investors and operators this means energy efficiency and resource management are no longer optional — they are essential for long-term financial sustainability.”
He says the numbers tell a concerning story, including the following:
- Gas and fuel costs surging at 8.4%
- Electricity costs climbing at 4.2%
- Water and sewage rates continue to climb, driven by strained resources and ageing infrastructure.
“Pandemic-induced market shocks, geopolitical tensions and extreme weather: these factors are driving utility costs upward and likely will be persistent.
“While this impacts all sectors, for hotel investors and operators this means energy efficiency and resource management are no longer optional — they are essential for long-term financial sustainability.”
He says the numbers tell a concerning story, including the following:
- Gas and fuel costs surging at 8.4%
- Electricity costs climbing at 4.2%
- Water and sewage rates continue to climb, driven by strained resources and ageing infrastructure.
Setting the scene
Robert Mandelbaum and Alan Figot, the authors of the CBRE report, say there is a "persistent upward trajectory in utility prices" which makes it “imperative for property managers to seek efficiency improvements proactively”.
The report adds: “While recent declines in natural gas prices may offer some temporary relief, forecasts indicate that overall energy costs are expected to rise.
“For instance, US electricity prices have grown by 3.6% over the past year, outpacing general inflation.
“Although more reliance on renewable energy sources has helped reduce total generation costs, this transition requires substantial investments in grid modernisation and expansion, which will inevitably impact future utility bills.”
CBRE's experts argue that the future of the hospitality industry, which operates nonstop, hinges on energy and water efficiency.
Conservation measures will prove instrumental in navigating the complexities of rising utility costs, ultimately boosting operational performance.
"This is particularly relevant for hospitality operations, which run 24/7/365 businesses<" the report says.
“Looking for resource conservation measures will enable operators to adeptly navigate the complexities of rising utility costs while enhancing overall operational performance.”
Energy-saving target pressures
But rising utility bills are just part of the equation.
With global climate and decarbonisation efforts on the rise, there's an accelerated push towards electrified and energy-efficient buildings.
In response, various US states and cities are setting stringent building performance standards, focusing on energy performance and emissions reductions.
The report says: “Recently, states and cities have enacted building performance standards that mandate energy performance and emissions reductions, as well as implementing benchmarking and transparency policies.
“As a result, real estate operators must meet these standards to mitigate financial risks associated with non-compliance, further motivating them to enhance performance.”
This regulation complements multi-year energy-saving targets set by utilities and third-party program administrators, focusing on initiatives like peak demand reduction.
Moreover, stakeholders including investors, consumers and employees are increasingly demanding sustainable practices from organisations.
As part of their sustainability drive, CBRE points out that hotels are recognising the financial wisdom in investing in energy efficiency — reducing operational costs and enhancing cash flow.The CBRE report says: “As hotel operators recognise that investing in energy efficiency can lower operational costs and enhance cash flow, momentum for sustainability continues to grow.”
A warning
Hotel operators are uniquely vulnerable due to their position as one of the highest consumers of energy and water per square foot.
The report says: “With occupancy rates, extreme weather events and sociopolitical dynamics influencing consumption, hotels have to stay vigilant in managing energy and water use.”
According to CBRE’s August 2024 Hotel Horizons forecast report for the US lodging industry, room revenue is expected to grow at an average annual rate of 2.6% through 2026.
“Given the modest forecast of revenue growth, the need to control expenses will continue,” CBRE adds.
A way forward
Hotels are already harnessing innovations like LED lighting and occupancy sensors to reduce costs and boost sustainability.
However, “significant opportunities for further efficiency remain”, including:
- Upgrading to more efficient electric heating, cooling and cooking equipment
- Implementing water-saving measures like greywater reuse
- Energy load management, where hotels go beyond basic occupancy sensors to adopt automated energy management systems. They offer real-time monitoring and centralised control, adjusting heating and cooling based on room occupancy
- Water conservation: hotels are increasingly using smart irrigation systems, implementing rainwater harvesting and reusing greywater for irrigation
- Integrating battery storage systems to enhance energy resilience
- Green roofs and walls to mitigate the urban heat island effect and improve insulation.
Nevertheless, significant opportunities for further efficiencies remain. Strategies include upgrading to more energy-efficient heating, cooling, and cooking equipment; executing water-saving measures like greywater reuse; embracing advanced energy load management systems; installing smart irrigation systems, and integrating battery storage systems to enhance energy resilience.
CBRE concludes that by adopting a multifaceted approach to resource efficiency, hotel operators can adeptly manage the complexities of rising utility costs. This strategy not only improves guest comfort and supports sustainability efforts but also benefits the bottom line, positioning hotels as leaders in responsible and resilient hospitality.
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