High oil prices have little effect on U.S. hotels

Despite the price of fuel going up, the cost of running a hotel has stayed about the same, according to a report by PKF Hospitality Research, an affiliate of Atlanta-based PKF Consulting.

Hotel owners and operators had expected utility costs to spike as they did during the oil shortage in the 1970s. But R. Mark Woodworth, executive director of PKF Hospitality Research, said the situation is different this time.

During that period, he said, energy costs grew an average of 11% annually. By comparison, energy costs for hotels have only risen 6% in 2004 and 5.9% in 2003. Furthermore, hotel energy costs have been mitigated by strong hotel bookings.

The report noted that the near-term outlook for hotel revenue growth is 7.4%.

Strong revenue growth will mask the increase in operating expenses absorbed by hotels, Woodworth said.

PKF Hospitality Research estimates that, on average, the utility costs per hotel room are $1,691 per year.

Utility costs for hotels rose more in the South Atlantic region, up 9.2% from 2003 to 2004. Costs were up 7.3% in the South Central states.

By comparison, utility costs rose 5% in New England and the Mid-Atlantic, and 2% in the North Central region.

Apparently, running your air conditioner year-round was more costly than heating needed to keep the northern hotels warm during the winter, Woodworth speculated.

Overall, the report indicated that hotels might have to get use to higher utility costs. Assuming higher-than-usual fuel costs will remain a constant, the report projects utility expenses will continue to rise at roughly the long-term average of 6%.

With strong labor requirements and relatively fixed expenses like utilities, the lodging industry history has seen its costs of operations increase at a much greater pace than other industries, Woodworth said. You cannot automate most front-of-the-house functions, and you can only control your energy consumption to a certain degree.

To contact the reporter who wrote this article, send e-mail to [email protected].

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