CBRE: How Can US Hotels Combat Soaring Energy Bills?

A continuing rise in electricity, gas and water bills is putting pressure on the hotel industry across the globe, including in the US.
While the Covid-19 and Ukraine conflict spikes have settled, US electricity prices have risen by 3.6% over the past year – faster than general inflation.
Demand for electricity will continue to escalate – driven by the rise in electric vehicles, explosion of data centres and growing cooling needs due to rising temperatures.
With utilities costs unlikely to drop in the foreseeable future, Dallas-based real estate company CBRE says sustainable practices are the most effective way to combat the trend.
The Rising Cost of Utilities
CBRE has released a report, written by Robert Mandelbaum, Research Director, CBRE Hotels Research, and Alan Figot, Consulting Manager CBRE, Specialising in Sustainability.
Writing on LinkedIn, Robert Bernard, Chief Sustainability Officer, CBRE, gave a succinct summary: “The bottom line: hotel operators need to take proactive steps to manage their utility costs.”
He added: “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 said there is a “persistent upward trajectory in utility prices”, which makes it “imperative for property managers to seek efficiency improvements proactively”.
Their 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, U.S. 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.”
They say that energy and water efficiency will be crucial for sustained business success as electricity demand escalates and water resources become strained.
The report goes on: “This is particularly relevant for hospitality operations, which run 24/7/365 businesses.
“Looking for resource conservation measures will enable operators to adeptly navigate the complexities of rising utility costs while enhancing overall operational performance.”
Pressure from energy-saving targets
Rising utilities bills are not the only factor, the report says.
WIth global climate and decarbonisation efforts heightening the demand for electrified and energy-efficient buildings, regulation has followed.
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.”
At the same time, utilities and third-party programme administrators have multi-year energy savings targets, “concentrating on initiatives like peak demand reductions”.
Stakeholder demand is another factor, with investors, consumers and employees increasingly expecting organisations to prioritise sustainability.
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 facing significant challenges in managing resource efficiency, “especially considering their unique position as one of the highest energy and water consumers per square foot”, the report says.
It adds: “With occupancy rates, extreme weather events and sociopolitical dynamics influencing consumption, hotels have to stay vigilant in managing energy and water use.”
It says the August 2024 edition of CBRE’s Hotel Horizons forecast report for the US lodging industry projects room revenue to increase at an average annual rate of 2.6% through to 2026.
“Given the modest forecast of revenue growth, the need to control expenses will continue.”
A way forward
Hotels have already reduced costs and boosted sustainability, using innovations including LED lighting and occupancy sensors.
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.
The report concludes: “By embracing a multifaceted approach to resource efficiency, hotel operators can navigate the complexities of rising utility costs.
“This strategy enhances guest comfort, supports sustainability initiatives and benefits the bottom line, positioning hotels as leaders in responsible and resilient hospitality.”
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