Businesses have taken a huge hit over the past 18 months; none more so than the hospitality industry. The elimination of gatherings, dining out and public events hit at the very heart of what makes hospitality a successful industry and it didn’t take long for locations to shutter their doors, some of them permanently. Pre-COVID-19, hotels/motels averaged an occupancy rate of 66%. 2020 numbers showed an average occupancy rate of 44% which easily extrapolates to a breakeven line between 44-66% since many of these locations have shut down. For a 50 room motel, that makes 10 rooms the difference between life and death. The 2018 post by David Lund shows a mini P&L budget sheet for a 295 room hotel. Clearly, the line of profitability is extremely thin and that’s for a large facility prior to the pandemic. A smaller motel would have even less margin to work with as it would have less rooms to help subsidize the monthly operating costs. A very large operating cost for these locations is electricity. The hall lights, parking lot lights, air conditioning, lobby lights, security, laundry machines...they are all on regardless of whether or not the rooms are booked. The lower the number of rooms available the more impactful the electric bill is. In the northeast, it is not uncommon for a 10K square foot, 60 room facility to find itself facing a $3,000 electric bill every month. At $79 a night per room, that means 40 rooms are required to be booked, every month, just to pay the electric bill. If the motel is at 55% occupancy, that equates to 4% of booked rooms required to meet the facility’s electricity needs. A solar solution will help mitigate the costs and add a fixed cost to the P&L. Even better, it will allow the owner to forecast costs and determine what the budget would look like 5, 10 and even 20 years down the road. The short term result is a fixed electricity cost for a few years. This helps avoid the annual increase in electricity rates most businesses face. The long term goal, usually after about five years, is a significantly higher level of profitability and, as far as electricity is concerned, the ability to remain at this level for the following twenty years. The margin rates for the hospitality industry are thin enough that it’s in the best interest of the facility to at least explore the option and determine if a solar solution would help lower electricity costs.
Solar Will Help The Hospitality Industry
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