For an industry under increasing pressure to decarbonise and to reduce operational costs, hospitality has a particularly uncomfortable problem: many hotels are not performing as efficiently as investors, developers and designers expected when they were built or refurbished.
Across Europe and the US, the so-called energy performance gap – the difference between predicted energy consumption at the design stage and actual operational performance once a hotel is open – has become one of the biggest headaches facing hotel owners seeking to meet net zero targets and, crucially, to reduce costs.
While a building may be designed around ambitious sustainability standards, in practice it may consume significantly more energy once guests, staff and operational realities enter the equation and for investors this gap is becoming a major financial challenge.
The issue is particularly acute in hotels because they are among the most operationally complex commercial buildings among asset classes. Unlike offices, which typically have defined operating hours and a single or small number of tenants, hotels run continuously, combine bedrooms, restaurants, kitchens, laundries, leisure facilities, conference spaces and extensive hot water and air conditioning demand.
Energy use is also dictated heavily by the guests and that means that a key issue is that energy models are often based on standardised assumptions. Hotels are dynamic environments and a property with high occupancy typically means that guests leave lights and air conditioning running, while busy restaurants and extensive conference activity can consume substantially more energy than a model based on average assumptions.
Measurement key to energy performance gap
NDY Associate Director Michael Karling says that for hotel operators to protect margins, operational costs through smart building integration, linked to the hotel’s booking system, could help to respond to actual rather than predicted energy demand.
“There’s a building performance gap and hotels have one of the largest, with many operating anywhere between 30% to 100% worse than expected from how they are commissioned and how they are operated. Hotels run 24/7, people leave the aircon on overnight, and so on, so it’s something that needs to be addressed by the industry,” he said.
Indeed, heating, ventilation and air conditioning (HVAC) systems are often responsible for a large share of hotel energy consumption, but controls may not be optimised after opening. Sensors may be incorrectly positioned, building management systems may operate with default settings and equipment may not communicate effectively.
The first step for improvements is better measurement. Many hotels still lack detailed energy data at asset level and installing sub-metering systems, monitoring equipment performance and analysing consumption patterns can reveal inefficiencies that would otherwise remain hidden from view.
“Asset managers looking to drive real impact must prioritise the implementation of robust data systems — from real-time energy monitoring to digitised waste tracking and water usage analytics,” according to JLL Vice President, Advisory & Asset Management Asia, Hotels & Hospitality Group Pierre Marechal. “With reliable data on hand, hotels can begin to shift from intent to action. The first step is to establish clear baselines. This clarifies where the property currently stands in terms of energy use, emissions, and resource efficiency. From there, realistic targets can be set, ideally aligned with science-based approaches.”
He believes that hotels that act sooner, rather than later, stand to benefit on multiple fronts, including from reduced operating costs, improved access to green financing, enhanced brand equity and lower exposure to regulatory and reputational risk.
“Far from abstract gains, these are already being realised by those who have embedded sustainability into the core of their asset strategy,” he stressed.
Involving operational teams
Another key opportunity is for operational teams to be involved from the beginning. Facilities managers should be engaged during design, not simply handed responsibility after completion, in order to ensure that in-hotel systems are being used as efficiently as possible.
Part of the solution may also be in simplification of the offer, especially at a time when the economics of running a hotel restaurant and facilities such as gyms have been called into question by many operators.
For example, Bob W Chief Development Officer Philip Grace said the Finnish company’s tech-led, no-frills operation has resonated with guests and allowed it to focus on the profitable elements of providing accommodation and a more predictable operating model around the cost base.
“We’re in an era where I would question why, as a hotel, you run [food and beverage] because at some point in the next 20 years, it will close. And why have a small gym when visitors can use a full gym five minutes’ walk away?” he contended, saying Bob W’s focus solely on rooms has also helped with revenue density by doing away with back-of-house space.
“We believe we have a model that works for the modern traveller and provides value for money," he said of the approach, which has been designed around improved operational efficiency.
That differential between hotels with complex offers and those with a simpler model was also revealed in a report on six Gran Canaria hotels, where researcher Dunia Santiago said that his analysis concluded that the energy demand largely depended on the RevPar, pool volume, number of diners and mean number of guests per occupied room.
“The energy demand depended on the services offered. Hotels with no air conditioning or F&B service were those with lower energy consumption per pax. Those with all-inclusive F&B reported higher energy demands,” Santiago concluded.
Simpler approach more efficient
That simpler approach chimes with the position taken by many newly-built hotels, where traditional full offers are being reconsidered, especially in urban locations when extensive F&B, gyms and other services may be available on the doorstep and better executed via collaborations with local providers.
But Europe’s hotel sector in particular contains a large stock of older properties, many built before modern energy standards existed or were at a far more rudimentary level. Improving these buildings will inevitably require investment in insulation, heat pumps, smart controls, efficient lighting and renewable energy systems, NDY’s Karling warned.
But with utility costs remaining stubbornly high and guest behaviour the one aspect of hotel use that is least under the control of hotel operators, the argument for capital investment now is growing stronger.