Hotel Investment Today talked to operators and owners
in the United States and Europe about the costs and implications of operating
hotels in a summer with record heat.
GLOBAL REPORT – For the managing director of one of Phoenix’s top luxury
resorts, negotiating record triple-digit heat successfully comes down to
decisions made years ago.
“Invest in the infrastructure of your facility, and do it
well,” Michael Hoffmann, managing director of the Arizona Biltmore, said when
asked for advice in dealing with record heat. “Picture your work with the
partners and market, be it your energy suppliers or your HVAC vendors, and get
them to give you advice on how to get the very best out of your systems. And do
it now – look at what you need to do before it comes around.”
Phoenix recently had 31 straight days of at least 110-degree
heat from June 30 to July 30 – breaking its previous record of 18 straight days
in 1974.
Hoffmann said despite that heat, electricity costs are only
up slightly year-over-year.
“The success of this hotel this year is the result of smart
investment in infrastructure and sustainable energy resources across the
board,” he said.
Hotel Investment Today talked to hotel operators and owners
in the United States and Europe about the costs and implications of operating
luxury hotels in a summer when crippling, record heat has taken its toll on
much of the globe.
They told us that, despite the record-high temperatures,
energy efficiency work they have done in the past decade - as part of capital
improvements - has allowed them to keep cost increases to a minimum.
Still, the heat, as well as the continuing challenges of
inflation, have created a great deal of challenges for the industry. Here are
five case studies.
Arizona Biltmore: Sustainable adjustments
Hoffmann said energy conservation for the Biltmore comes down
to adjusting daily based on the rooms and space it is using.
“We have a centralized function here. So, the director of
property operations on his computer can go in and adjust the temperature in any
guest room, any public space, and any meeting space very quickly, remotely,” he
said.
The Arizona Biltmore, a Waldorf Astoria resort, completed
sustainability efforts that save 3 million gallons of water annually and have
reduced its carbon footprint. Hoffman said that has added up to substantial
savings.
“Surprisingly, the cost of electricity year-over-year, has
only increased 1 percent,” he said. “So far this summer, with the capital
improvements for LED lighting, network thermostats, we've been able to reduce
our energy by about 5.3 million kilowatts, about $636,000, year-over-year.”
Hoffmann said operations changes, like reducing the load on
housekeeping, and opening its main outdoor bar later, have also helped.
That includes the resort making adjustments to offset the
lack of group business as well.
“We’ve led the market in transient on a RevPAR basis … We’ve
done it with volume, and maintaining a certain rate. There are other resorts
that have not been as flexible from a pricing perspective. And as a result,
(they) haven’t had the rate.”
Being flexible and adapting to the ever-changing environment is so critical, now more than ever, so don't be afraid to use technology to help support the challenges we face.
Paul Harnedy
Hoffmann said the biggest challenge of the heat is how much
it wears you down.
“So if it wears me down, it's probably wearing down some of
the team, right? … So it's really staying close to the core of the business. ..
We have an obligation to our customer. We have an obligation to our own. We've
got an obligation to our staff, to make sure they're looked after. And the only
way you're going to know for sure that they're being looked after is if you
check on them.”
He said when it comes to managing staff during this heat
wave, they have definitely made adjustments.
“We're not just one building, we're seven buildings. And
people have to get from A to B. So for instance, in housekeeping, we've reduced
the load,” Hoffmann said. “We also have our security team patrolling with a
cooler brigade. Basically, they're out and about and making sure that people
are hydrated. We've got more supervisory staff, making sure that the staff that
is here is hydrating. And if anybody's not okay, we do have cooling rooms,
where people can retreat to and recover before they fall ill and or are
affected by the heat that they're exposed to.”
Falkensteiner Hotels & Residence: Reduced consumption
paying dividends
Till Schäfer, managing director of finance for Vienna-based
Falkensteiner Hotels & Residences, with about 30 hotels, residences and
camping sites in different European countries including Croatia and Italy, said
despite the heat wave in Europe, the company’s energy costs haven’t been
negatively impacted.
Because of high inflation rates, Schäfer said in 2022 the
company implemented measures to become more efficient and reduce electricity
consumption across its portfolio. The measures have resulted in more than a 10%
reduction and, so far, it has been able to maintain those savings. “I believe this has helped us gain a deep
understanding of utility consumption in our hotels and continually and
sustainably reduce our energy costs at different levels within the
organization,” he said.
Schäfer said the main consumer of electricity in its hotels
is not the air conditioning but the distribution of fresh air through its
ventilation system (35% of total electricity consumption in its ‘summer
properties’). He said the company strives to find savings that don’t lower the
guest experience.
“This (ventilation) is the area where we have achieved most
of the savings,” he said. “What we can observe from a guest perspective is (no
matter of 4 or 5 star), that the guests are not willing to compromise on
quality or service offering. An example would be the pool temperature. Rather
than reducing the temperature of heated pools, it seems recommendable to reduce
opening hours and, this way reduces heating consumption. Our guests seem to be
more sympathetic for that.”
Schäfer said the emphasis for the company is to find ways to
invest in a sustainable way.
“While we could, of course, invest in expanding our air
conditioning capacity, that would inevitably lead to an increase in our carbon
footprint. … Instead, our focus is on finding (new) ways to regulate building
temperature in a carbon-neutral manner (e.g., through green roofs, innovative
insulation materials, increased shading on terraces, sun protection and
reflection systems for windows, natural cooling and ventilation, etc.)."
Cedar Capital Partners: ‘Don’t be afraid to use technology’
Paul Harnedy, executive vice president of London-based Cedar
Capital Partners, which owns a collection of lifestyle and luxury hotels and
resorts in the U.S. and Europe, said the company has been focused on smarter
energy usage for some time.
“Being flexible and adapting to the ever-changing
environment is so critical, now more than ever, so don't be afraid to use
technology to help support the challenges we face,” he said.
Harnedy said Cedar Capital partners with an energy reduction
company to use artificial intelligence to further reduce consumption, resulting
in year-on-year reductions in energy consumption.
He said another key is offering a greater flexibility of
services and products based on unpredictable weather and “ensuring the hotel,
and resort teams are empowered to react to the individual situation is crucial,
this can differ dramatically between beach resort, urban properties and golf
resorts. Be creative.”
Mission Hill Hospitality: Supply chain lessons from COVID
Sam Makani, vice president of Strategic Operations at
Denver-based Mission Hill Hospitality, said managing through the heat wave in
Palm Springs, where he oversees operations for the Homewood Suites by Hilton
Cathedral City Palm Springs, also creates other problems not related to keeping
rooms cool.
“We’ve also found that cable infrastructure can overheat
from extreme heat, where the cable can be out for as long as a couple of days
at times,” Makani said. “Sometimes it’s due to an area-wide outage and
unpredictable challenges in infrastructure where the hotel wasn’t the only
customer affected. It’s important to reinforce guidance from front desk agents
on the impact weather is having, and guests have been understanding that
sometimes these things are out of the hotel’s control.”
He said overall cost impacts have been manageable and mostly
related to equipment repairs and replacements.
From an occupancy standpoint, no projects that we are involved with have seen a drop in occupancy due to heat. At the same time, booking pace and ADRs remain strong.
Christian Bunte
Makani said guests being reluctant to leave the hotel
because of the heat presents challenges (increased trash impacting housekeeping
costs) and opportunities (better opportunities for the hotel to increase
capture of food and beverage.)
He said lessons from the pandemic have helped maximize
efficiency with air conditioning systems as well.
“Increasing the number of backup units stored on-site from
2.5% to 5% of room supply helps cope with demand during heat waves,” Makani
said. “One thing we learned during COVID is the significant impact of long lead
times on operations due to supply chain bottlenecks, and so we have emphasized
the importance of maintaining appropriate attic stock for our managers.”
Avingstone: Little short-term impact on luxe market
Christian Bunte, managing director of London-based
Avingstone, a development and operational asset management firm in the luxury
hospitality space, said the extreme heat has had little short-term impact on
the ultra-luxury hotel market.
“From an occupancy standpoint, no projects that we are
involved with have seen a drop in occupancy due to heat,” Bunte said. “At the same
time, booking pace and ADRs remain strong.
“We have seen some data that appears to show that properties
lower on the chain-scale, such as 3-star hotels, have been more impacted, with
travelers choosing to visit destinations less impacted by these heat waves.”