Why Energy Costs Are a Growing Concern for the U.S. Hospitality Sector

The U.S. hospitality sector – encompassing hotels, resorts, restaurants, and entertainment venues – is an energy-intensive industry. From keeping guests comfortable with heating and air conditioning to powering massive kitchens, laundry facilities, and 24/7 lighting, energy consumption is both a necessity and a major operational expense.

Rising Energy Prices: A Pressure Point for Profit Margins

Over the past few years, energy prices in the U.S. have experienced significant volatility. According to the U.S. Energy Information Administration (EIA), commercial electricity rates rose by more than 10% between 2021 and 2023, with natural gas prices fluctuating due to supply constraints, geopolitical instability, and extreme weather events. For hospitality businesses already operating on tight margins, these increases can be crippling.

Hotels typically spend around 6% of their operating costs on energy – and for luxury properties or resorts with extensive amenities, that number can climb even higher. Restaurants and event venues face similar challenges, especially during peak usage periods.

Where Is the Energy Going?

In a typical hotel, the breakdown of energy consumption looks something like this:

• Heating, ventilation, and air conditioning (HVAC): ~40-50%
• Lighting: ~20-25%
• Water heating and laundry: ~15%
• Kitchen and refrigeration: ~10%
• Electronics and plug loads: ~5-10%

While newer buildings may feature more efficient designs, many properties still rely on older infrastructure – compounding waste and driving up costs.

The Hidden Impact: Guest Experience and Brand Reputation

High energy costs don’t just affect the bottom line. They also have implications for customer experience and brand perception. Guests increasingly expect sustainable practices from the brands they support. Properties that ignore energy efficiency risk falling behind competitors who embrace green initiatives and promote their environmental efforts.

Opportunities to Reduce Costs

The good news is there are proven strategies for hospitality businesses to reduce energy costs without sacrificing guest comfort:

1. Energy Procurement Optimization: Many properties are overpaying for electricity and natural gas. Partnering with energy procurement experts can help businesses negotiate better rates and secure favorable contracts.
2. Smart Building Technology: Automation and smart controls for HVAC, lighting, and energy monitoring can significantly reduce waste and improve operational efficiency.
3. LED Lighting Retrofits: Swapping out incandescent and fluorescent lighting for LEDs can cut lighting costs by up to 80%.
4. On-Site Renewable Energy: Solar installations and battery storage solutions are becoming increasingly affordable and can shield properties from future energy price spikes.
5. Benchmarking and Monitoring: Energy analytics tools allow facility managers to track usage in real-time, identify inefficiencies, and take corrective action before problems grow.

Policy Incentives and ESG Pressures

There’s a growing number of federal and state incentives available to help offset the cost of energy upgrades, including rebates for high-efficiency equipment and tax credits for renewable installations. Simultaneously, Environmental, Social, and Governance (ESG) reporting standards are pushing hospitality brands to disclose – and improve – their sustainability performance.

The Bottom Line

Energy is no longer just a cost of doing business – it’s a strategic lever for the hospitality industry. Forward-thinking operators are using energy management not only to protect margins but also to elevate their brand and meet the expectations of today’s eco-conscious travelers.

For those in the hospitality space, now is the time to take a fresh look at energy usage. The potential savings are real – and so is the competitive advantage.