Seeing Green: Energy Efficient Improvements Can Help Your Hotel’s Bottom Line
June 16, 2016
Green building projects are gaining popularity and becoming increasingly important for commercial properties of all kinds. For hotels, many of which have long given guests the option to eschew daily towel changes to support the environment, sustainable building practices are quickly becoming the standard. Not only does this fit with guests’ values, but it can also save money on operations.
According to the United States Green Building Council (USGBC), hotels in the United States collectively spend close to $4 billion in annual energy costs. Upgrading facilities, appliances, incorporating new sources of energy and changing hotel processes can be great for the environment and also good for your bottom line.
Interestingly, guests can now check websites like Trip Advisor for a hotel’s environmental impact. And, according to Energy Star, “a 10% reduction in hotel energy costs is equivalent to increasing revenue per available room night by more than $2 for full-service hotels.” So it only makes sense that reducing your hotel’s carbon footprint could be on your investment to-do list.
For instance, the Marina Bay Sands resort in Singapore recently invested $9.4 million in energy-efficiency projects such as syncing the hotel’s booking system to the hotel’s HVAC system. The HVAC systems of meeting rooms, conferences and event spaces automatically turn on one hour before the event and off one hour after the event. Marina Bay also invested in LED lights, occupancy sensors and upgraded pressure and temperature sensors. Since beginning this investment in 2012, the hotel has netted an 11% decrease in energy costs.
Many commercial projects also seek LEED® certification from the USGBC to increase patron favorability and grow property value. This is often achieved by steps such as:
Using sustainable building materials
Selecting Energy Star appliances
Building in recycling/composting/waste management options on site
Using low-flow plumbing fixtures
Installing a green roof or open grid pavement
Projects to improve energy efficiency at your hotel properties typically require a capital investment. Working with a banker who is familiar with the hospitality industry and sustainability upgrades can be a valuable resource. It’s also important that the bank you’re working with understands the seasonality of your business to help you coordinate financing options in line with your revenue stream.
A knowledgeable banker who is experienced in the hospitality industry can help you choose from the wide range of lending and credit solutions for your project. For example, equipment can be leased to have a lower monthly cost, or be purchased with a loan and wholly owned by your company once the loan is paid off. It’s possible to use your land, equipment, inventory and even accounts receivable as collateral for a secured business loan.
Upgrading physical assets can be considered an investment, potentially qualifying you for Capital Expenditure (CAPEX) lending – the bank will help you assess whether your proposed changes will significantly appreciate your property value. Another option, a Small Business Administration (SBA) loan, allows for a smaller down payment and can have attractive terms for the borrower. In some cases, down payments on SBA loans can be as low as 10% and have a repayment period on equipment of up to 10 years.
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