How Hotels Can Curb Their High Energy Use

Hospitality assets are the highest users of energy in commercial real estate, largely because these are spaces designed for consumption. However, there are profitable solutions to energy reduction, and in the wake of climate change, more and more owners are finding ways to create the same user experience in a more sustainable environment.

“As we all know, hotels are full of amenities and services that are designed for guest enjoyment and comfort despite the significant impact on energy use,” JJ Steeley, EVP at Carbon Lighthouse, tells GlobeSt.com. “Hoteliers are caught in a tension between a great guest experience at their property, cost and sustainability management in their operations. Fortunately, the latest advancements in technology equips hoteliers with the tools to resolve this tension in the back of the house.”

Carbon Lighthouse is focused on providing solutions to hotel and hospitality owners to cut energy use. “Carbon Lighthouse’s mission is to stop climate change. And our founders knew the world couldn’t rely on pending government regulations at the high level and washing towels at the property level to achieve the level of impact required to stop climate change in the timeframe we have,” says Steeley, who is also speaking on the topic at ALIS next week. “They built Carbon Lighthouse with the premise that if we delivered ‘profitable climate solutions’—energy savings solutions that not only lower carbon emissions but also delivered financial value, property owners would be more driven to invest in energy efficiency measures. In fact, efficiency can be a highly cost-effective approach for property owners and GMs to recoup some of those costs.”

One of the major solutions is to capture energy loss. “In totality, two-thirds of all energy generated is wasted and lost before it’s applied to the things we want to power. In a commercial building, the waste is closer to 50%,” says Steeley. “However, energy efficiency has the potential to make a big impact on this wasted energy. The cost of energy efficiency is a mere $0.025/kWh compared to $.20-.30 for a typical utility rate. It simply wouldn’t make business sense not to pursue it financially. Additionally, external costs on insurance are spiraling in light of weather-related and fire damages as are utility costs as they recover losses from ratepayers. Protecting financial viability is top of mind for hospitality owners and sustainability can serve as a differentiator.”

Using Carbon Lighthouse’s model, the energy savings has an impact on NOI. “Our model removed barriers to adoption by turning efficiency into a guaranteed delivery of NOI to overcome obstacles of reducing carbon,” says Steeley. “And if you can count on a stable increase to NOI through energy savings every year, you can cap it. So even though utility costs are relatively small relative to revenue and larger expenses like labor, $100,000 in utility cuts can mean at $1.5 million at disposition.”

The company has already made headway in the luxury hotel market. “Interestingly, Carbon Lighthouse’s “Energy Efficiency as a service” approach has been largely been adopted by 4 and 5 star hotels like Montage Beverly Hills, Westin Maui,” says Steeley. “Our client Royal Lahaina Resort is set to save more than $1 million in energy costs over the term of its engagement with us. Ultimately, the easier we make it for our clients to implement carbon-reducing energy efficiency measures, the sooner Carbon Lighthouse can achieve our mission to stop climate change.”