According to reports, year-end incentives of top executives at InterContinental hotels in India have been linked to a new target-the cost of energy their hotels consume.
Energy bills at the hotels have risen to 15-16% of operational costs as compared to an average 7-8% in previous years. The managers have been given the daunting task to prune it by 8% over the next three years.
From installing solar panels to using piped gases for boilers instead of diesel, hotels have undertaken several initiatives to cut consumption of energy. Some of the hotel’s competitors have invested in windmills to generate cheaper renewable energy. Government subsidies are helping them cut down on the cost of power.
The timing is important. The hospitality sector is building up fast in India, to be prepared for a major boom 3-5 years down the line. And the industry is in the middle of an economic slowdown, when tourists and corporate clients first cut down on their travel and hotel budgets to mitigate cost escalations.
“Rising power bills are playing truant. We are working on reducing consumption as the prices are beyond our control,” said Rattan Keswani, president at the Trident Hotels, an Oberoi group company which runs 5-stars around the country.
“For most hotels in India, heating, lighting and power (HLP) costs have doubled over the last two years from about 7-8% to 14-15% of their revenues today, which is now starting to pinch them,” said Akshay Kulkarni, executive director at Cushman & Wakefield India. HLP costs are the second highest behind employee costs, which too have grown in the past few years.
Reasons for the increase in the energy bills are growing costs of both, grid power and diesel that is used for generators. The cost of electricity in Pune, for instance, has more than doubled from Rs 4 a unit to Rs10 a unit over the past three years.
The price of diesel, on the other hand, has gone up by over 30% in the past two and a half years. “A 100-room hotel, on an average, consumes between 3,000 and 4,000 units of electricity per day, depending on the kind of hotel it is,” said Rahul Pandit, chief operating officer of Lemon Tree Hotels.
Pandit runs mid-market and budget brands like Lemon Tree and Red Fox across the country. His energy bill has been rising by 17% year-onyear and is close to 12% of operating costs currently. It used to be about 9% about two years ago.
Conscious of the rising costs, companies are now investing in technologies that will reduce their energy consumption. Some hotel companies are installing solar and wind energy plants, while others are installing energy efficient lighting and air-conditioning equipment.
“Some of our developer partners have invested in windmills to generate captive power. With this, these hotels will also get a rebate from state power boards,” said Dilip Puri, managing director of Starwood Hotels, which runs the Westin, Sheraton and Le Meridien brands.