Conservation, New Management Contracts Also a High Priority
Like other industries, Orange County hotels have been hit with a dramatic surge in the cost of power in the current crunch, but hoteliers are holding the line on room rates, at least for now.
However, that doesn’t mean travelers won’t be paying more for overnight stays in California.
Following the lead of the airline industry, which has added a separate “fuel surcharge” rather than raise advertised ticket prices in a highly competitive industry, some hoteliers have begun adding a flat-fee “power surcharge” to guests’ bills rather than raising room rates. Others are studying the option, waiting to gauge public reaction before adding the fee themselves.
“We’re looking at a $300,000 to $400,000 increase in energy costs (this year),” said Bill Allison, director of sales for the Westin South Coast Plaza Hotel in Costa Mesa, which has added the surcharge.
“We think people would rather see a separate charge so they know what it’s for,” he said.
The Westin brand is one of several,including Sheraton and St. Regis,owned by New York-based Starwood Hotels, which recently imposed a $2.50 per room per night surcharge at its hotels and resorts on the West Coast. Allison said the fee will add about 1.5% to what is called the “business assessment tax”,actually the transient occupancy tax, or bed tax,on customers’ bills, but will be listed separately.
But the Starwood fee isn’t mandatory for franchises, and the Sheraton Anaheim,a customer of Anaheim Public Utilities, which hasn’t had to raise rates so far,is holding off.
“We’re waiting for our next (electric) bill to decide if we’ll implement the surcharge,” said the hotel’s general manager, Jeffrey Morse. “If it’s four or five times normal, maybe we will add it. We’re just keeping our fingers crossed.”
Marriott Hotels, too, is expected to implement a surcharge as early as this week.
Steve Heitzner, regional vice president of sales and marketing for Marriott, said the surcharge plan is “under serious review,” but no final decision had been made on the amount or whether it would necessarily apply to franchises or to hotels in cities like Anaheim with their own utility companies. When implemented, it is not expected to be permanent.
Hotels that have added a surcharge say they will evaluate whether to impose it on existing group contracts on a case-by-case basis. Many hotels, including the Westin, break out taxes and surcharges on group contracts.
Particularly hard-hit have been hotels in Southern California Edison’s “interruptible” program, which offered lower rates in return for cutbacks during shortages, enforced by a punitive rate for continued heavy use in those periods. However, the hotels in that program,such as the Hilton Waterfront Resort in Huntington Beach,received some relief when state regulators ended it. And they may get more if legislation pending in Sacramento to waive the penalties passes.
But it isn’t just the direct cost of electricity that is driving up hotels’ costs.
At the Anaheim Marriott, general manager Doug Watson said companies in every industry are seeing increases and are passing the changes on to customers.
“Everyone along the food chain will get hit eventually,” he said.
Watson also said the cost of natural gas at the Anaheim Marriott has risen 200% to 300% in the past year, and the hotel is trying to renegotiate its contract.
Some hotels, however, are adamant about avoiding surcharges, relying instead on conservation measures to soften the blow.
“There are absolutely no surcharges under consideration,” said Mark Tamis, general manager of the Four Seasons Hotel in Newport Beach.
Though the Four Seasons’ energy bills are up 350% year-over-year, Tamis said the upscale target market of a Four Seasons colors the hotel’s decisions on how to control these costs.
“It’s very different in our market segment,” he said. “The expectation of consumers here is that they are in an upgraded product and they expect those costs to be included in the room rate.”
Tamis said the Four Seasons has an energy committee that has been working both internally and with energy consultants of property owner The Irvine Company for the past year on conservation.
As at other hotels, many of the energy-saving measures at the Four Seasons are “back-of-house”,things less visible to the visiting public,like rescheduling heavy use of washers, dryers and other equipment to off-peak hours and turning off non-essential lighting or computers in office areas.
Many hotels are switching to fluorescent lighting, using new types of bulbs that cast an incandescent-looking glow, as well as curtailing decorative lighting or removing non-essential light bulbs altogether.
Still, those measures are often not enough.
“The energy savings isn’t in changing the guest room light bulb,” the Anaheim Marriott’s Watson said. “Where you can conserve the most is in the air and heating system.”
The Anaheim Marriott has time and temperature sensors that help manage energy consumption internally, easing up on the heating or cooling of big spaces like meeting rooms when they’re not in use. Other hotels, including the Four Seasons, are looking at sensors to turn off lights and climate control when guest rooms are empty.
At a higher level, Marriott has created and filled a new management position,Western regional energy manager,to develop a system of “best practices” for energy management at the chain’s hotels. And Bass Hotels & Resorts, a subsidiary of Bass PLC, London, earlier this month signed a three-year energy management contract with Dallas-based TXU Energy Services to provide natural gas, electric and risk management services and develop energy-saving projects for 118 hotels in the U.S. and Canada, including its Crowne Plaza Irvine property.
In the near term, hoteliers say they will resist an increase in room rates as long as possible.
“A room-rate increase would be a last resort,” said Tamis of the Four Seasons. n
