Energy Management Strategies Go Global
Individual properties have practiced outsourcing energy management programs for years. Starwood Hotels & Resorts takes the tactic to a new level.
By Joan Marsan, Technology Editor -- Hotels, 10/31/2000 11:00:00 PM
Outsourcing is key to the successful operation of many hotel departments, from housekeeping, to F&B, to technology. Increasingly, hotels look to service providers to handle their applications needs, relying on technology professionals to provide systems expertise while hoteliers concentrate on getting heads to beds. Energy management, a field that requires significant investment and expertise to maximize savings, has become a prime arena for outsourcing, and the potential for large-scale outsourcing agreements has grown with the consolidation of the industry’s giants. One of these major players has chosen to test the waters, outsourcing its North American energy management program to a company with experience in the global energy marketplace, making clear its intent to ultimately extend its strategy to properties around the world.
Company-Wide Outsourcing
Starwood Hotels & Resorts Worldwide, White Plains, New York, announced an agreement valued at more than US$1 billion with Enron Energy Services, Houston, Texas, in September, effectively outsourcing the Starwood energy management program to Enron. Through the agreement, Enron will procure and supply natural gas and electricity for all Starwood North America properties; select, purchase, and install energy management equipment for the properties; and lend expertise as Starwood employees develop and pursue on-property energy management initiatives. Starwood will invest US$50 million in energy management equipment within three years, and expects to see savings in excess of US$200 million over ten years as a result of the investment.
The massive commitment illustrated by the US$50 million investment on capital items such as electrical fixtures, multi-phase motors and chillers is a result of Starwood’s ownership role, says Glenn Tuckman, senior vice president, operations. Many companies can experience a disconnect between owners and managers on energy management issues. A controller and an owner may not see the logic of tearing out and replacing a fully functional chiller, simply because another one will pay for itself in six months and save property managers US$150,000 per year thereafter. Not so at Starwood.
“We’re owners of real estate, and these capital investments make sense,” Tuckman says. And while capital investments are often allocated to items that directly improve the guest experience, it is equally important to invest in the back of the house, Tuckman says, where cost-saving improvements will increase shareholder value. Energy-saving enhancements, such as a device that inserts ozone into a washing machine allowing it to wash clothes with cold water, see payoffs in less than a year, payoffs that get distributed to stockholders’ purses.
Now is the time to pursue these cost-cutting measures, Tuckman says, because they come with no negative affect on guest experience. Ten years ago, aggressive energy management entailed shutting off air-conditioning units and replacing incandescent bulbs with fluorescent lighting. These and similar measures were noticeable to guests and dimmed their impressions of the hotel. Now, however, energy management techniques are imperceptible to guests. And some energy management technology, such as computerized HVAC systems, may even improve the guest experience by guaranteeing more consistent temperatures and greater air quality while simultaneously reducing operating costs.
Property-Level Results
Individual properties have been outsourcing energy management for years, reaping the rewards. The 208-room Westin Resort Macau initiated an energy management strategy in 1995 after the property’s owner requested a complete energy audit. Relying on the oversight of Hong Kong-based Energy Resources Management (ERM), the hotel developed a new plan for allocating and analyzing energy costs. Energy is no longer viewed as an overhead. Rather, its costs are attributed to the departments using it. And the energy department is assessed weekly by ERM on the performance of plant operations compared to strict targets. With energy savings at this individual property reaching more than US$300,000 per year, the Westin Resort Macau has achieved a cumulative net savings surpassing US$1 million since the inception of their outsourced energy management program.
The Westin Macau’s remote automation equipment assists in the property’s efficient use of energy. A Bena 2000 Guestroom Control System allows the engineering department to monitor temperatures from a central location, and an Andover Infinity Building Management System enables handlers to automate start/stop times and set points for most air-handling units and many fancoil units and pumps. But technology alone cannot guarantee a property’s successful management of its resources. Staff competence and capability figures heavily into any property’s decision to outsource.
At the 3,036-suite Venetian, Las Vegas, a property ranking among the world’s largest (the entire complex measures more than six million square feet), a fully computer-operated Siemans building automation system and an automated power management system assure complete and precise control over every aspect of the hotel’s energy management program. Even so, Facilities Manager Kim Grange’s 200-person maintenance staff takes solace in the presence of 47 Sempra Energy employees, staff members of the company to which the Venetian has outsourced its energy management program.
“I’m in complete control,” Grange says, emphasizing that outsourcing energy management does not result in an abdication of responsibility on the part of the property owners and staff members. But it does allow the property to take advantage of expertise in selecting and purchasing the best equipment, in processing energy at the best prices, and in securing access to the most focused energy management professionals, without having to hire them directly.
At the Venetian, Sempra owns and is responsible for the development of the property’s energy infrastructure. But control is still in the hotelier’s hands, Grange reiterates, and he points out that an energy management company can only go so far if a property doesn’t demand and invest in the best equipment on the market and then pay the cost of maintaining it according to the manufacturer’s instructions. And employees must understand the importance of ascribing to energy-conscious philosophies and activities. “They have to share in that every day,” Grange says.
Counting On Teamwork
Robert Allender of the Westin Macau’s ERM agrees. “One key to optimally managed energy consumption is that responsibility lies with the managers whose departments use energy,” Allender says. “They also need to be given the tools and skills to do the job.”
Those cost-cutting tools and skills amount to some 80% of a property’s energy savings, says Tuckman. Simple things such as turning off lights, shutting off gas burners, fixing leaky faucets, and putting new gaskets on refrigeration units, account for the bulk of a property’s, and, therefore, a chain’s savings. Recognizing the importance of every employee’s participation in order to achieve these kinds of savings, Starwood is sponsoring a six-month competition, rewarding handsomely the property that shows the greatest dedication to conservation through establishing an active, effective management group comprised of members from all aspects of the property’s operations and achieving actual savings. “Property people are still responsible for energy management,” Tuckman says. “They’re still going to solve all the problems.”
Well, not quite all. While many hotels have experienced the benefits of outsourcing on a property-by-property basis, Starwood will rapidly realize a 20% decrease in expenses as Enron aggregates demand for natural gas and electricity on a national scale. And Starwood expects to enhance and multiply those gains as it expands its reach, outsourcing throughout North America and ultimately internationally. And as the scope of the program increases, Tuckman envisions the membership and distribution strategy evolving, as well.
“I think you could see the Enron program being offered through Zoho [Starwood’s e-procurement provider],” Tuckman says. And it would be offered at an attractive price, he adds. Since all fees are recovered as a percentage of savings, the cost to the property is virtually free.
Michael Kistner Talks Technology
Michael Kistner, vice president, information systems, Best Western International
Q: You’ve been in the industry for more than 20 years, most recently at Cendant as senior vice president, hotel information technology, and now at Best Western. You’ve witnessed major technological advances. What are going to be some of the most important effects stemming from these changes?
A: A lot of people have talked about disintermediation. You can be a huge conglomerate with all kinds of market reach, but on the Internet you look like a single property. You physically may be able to reach more people, but once I sit down at my screen, every hotel company, big or small, looks the same. In that environment, brand becomes far more important. The onus is back on the brands to continue to deliver on the promise we made, the quality we promise.
Advertising models have changed. All the dollars you spend for advertising on the Internet may not come back to you in the way the people who sold you the advertising promised. Things you maybe would have thought were throwaways—putting your URL on a paper document—people pick that up and remember it in a way they might not on the television, or in radio or Web advertising. Let's say you're an advertiser and you spend a million dollars to get your name on some portal. Well, I can't remember the last time I saw an ad on a portal because I click that box closed. People have trained themselves to get around it. It's a lot easier for me to ignore that kind of advertising. Instead, what I see is people are getting and remembering these URLs off of papers you might have thought were throwaways.
Q: Are there any changes you’ve seen in the past 20 years that no one talks about, but you feel have been particularly important?
A: I think there's come to be a tolerance for operating system and tool errors on the information systems development side. And there's no corresponding tolerance on the applications side. When something would go wrong with a computer application, you'd say, "The computer does it the same way every time, so we'll work around it." But with the complexity of programs now, that's not true anymore. We have to program more and more workarounds, reducing the portability of applications. To support that, you need better hardware. We as an industry have come to tolerate sloppy development. All of our sloppy development has been supported by increasingly sophisticated hardware. Corporations have paid for it by paying millions for hardware that wouldn't be necessary if they'd programmed better.
Q: What big initiatives will you tackle at Best Western?
A: We have an aggressive e-commerce strategy that we're rolling out. For years, Best Western was E-enabling things, but not recognizing that they were enabled. Until now, we didn't have a prevailing strategy. But we’ve put in place a strategy that addresses how we’re going to look, what image we want to present, and what tools we’re going to use from this point forward.
Q: How will your role at Best Western differ from your role at Cendant?
A: In terms of dealing with the membership versus dealing with the franchisees, I don't think my job is going to change. Some people in different incarnations of their careers may shift focus in terms of who they think they serve. I've primarily thought it was important to serve the franchisees or the members. Those are the people I need to keep happy. I understand there are guests. But the best way for me to make those guests happy is to give the franchisees the tools they need to do their jobs.
Tech Briefs
Making The Web Work
Instituting a new Web site design and online marketing strategy boosted the number of visits to the El Cid Resorts, Mazatlán, Mexico, site from 40 per day day to 900 per day within two years.
“We have limited airlift and get very reliant on wholesalers,” says Mark Glickman, director of marketing, El Cid Resorts. “We were looking for new reservations and a leads source beyond the normal flow of leads.”
A site redesign coupled with the use of a sophisticated site analysis tool and a search optimization program provided for a quarterly fee by e-site marketing, Washington, D.C., helped El Cid build up users and a database, allowing them to initiate an online direct marketing campaign. For a cost of US$5,000 to US$6,000, El Cid receives a 7% response rate to online coupon offers to site users, compared with a 1% response rate on direct mail offers that cost US$20,000 to US$30,000 to produce.
Additionally, the redesigned site now offers online reservations. “We weren’t even getting requests before,” Glickman says of the old, ineffectual design. “We get hundreds now. Everyone said the Internet doesn’t work in Mexico. It wasn’t that the Internet doesn’t work. It was the Web site. It was unlinked. That’s true of a lot of destinations.”
By linking his site and analyzing and studying where El Cid’s traffic comes from, Glickman has been able to build a powerful, efficient marketing tool that helps keep him ahead of his competition.
Phone First
The Hotel Inter-Continental London on Hyde Park Corner initiated a telephone check-in and check-out service in response to guest demands for speedier handling of this process. Guests may now register before they arrive and check out before they leave by direct dialing a hotel extension.
Upon receiving a check-in call, staff allocate a room to the caller and prepare a room key for the guest. Awaiting the customer upon arrival is a coded key and a a signature card. Telephone check-in particularly benefits early arrivals, as they are moved to the fore of the priority list for vacated rooms. Departing guests have the option of picking up a copy of their bill at the front desk, or requesting that it be mailed by post or e-mail, or faxed. “This service has been introduced in direct response to our guests' comments,” says Andrew Thomson, reception manager. “The majority of our guests are busy people with hectic schedules, and they want to check in and out as quickly as they can.”
Web Globalization
Total Internet users worldwide will reach 602 million in three years, with the percentage of U.S. users dropping from one-half in 1998 to one-third in 2003, analysts predict in a report issued by IDC, an e-business advisory firm. Internet customers are four times more likely to make purchases or reservations on sites published in their native language, IDC reports, suggesting that Web sites must quickly adapt to a multi-lingual audience, or risk losing their share of the non-U.S. market, expected to grow at more than double the U.S. rate, or 1,300% by 2003.
Supplyline
Southern Hospitality, Atlanta, will offer high-speed wireless Internet access by Austin, Texas-based Wayport at 17 Atlanta properties...ArabellaSheraton, owners and operators of 13 German properties, went live with the Delphi Multi-Property Edition sales & catering system by Newmarket International, Portsmouth, New Hampshire. Newmarket and PlanSoft, Cleveland, Ohio, formed an alliance, aligning PlanSoft’s e-RFP service with Newmarket’s MeetingBroker.com...The Rosen Centre Hotel, Orlando, Florida, and the Grupo Hotelero Briasa, Mexico, joined the Dallas-based Lexington Services global reservations system...Helmsley Hotels, New York, elected Phoenix-based Utell, operated by Pegasus Solutions, to provide marketing and reservations services for its five city properties. HotelView, Pompano Beach, Florida, will produce digital video tours of the Helmsley properties for their Web sites...Winstar Communications, New York, and Cyntergy, Rockville, Maryland, partnered to provide vertical ASP broadband solutions to the hospitality industry...MICROS, Columbia, Maryland, completed installation of the OPERA property management system at the Wyndham Dallas Market Center...Pittsburgh-based Aptech Computer Systems will provide enterprise accounting and financial reporting systems to Starwood Hotels & Resorts, White Plains, New York...Comtrol, Minneapolis, release Property Link Planner, an Internet tool for planning hotel systems integration.
Netline
Your Own Private Expedia Expedia.com (www.expedia.com) announced a new privacy policy in September upon successful completion of a privacy audit by Pricewaterhouse Coopers. The PricewaterhouseCoopers privacy audit entailed employee and customer service representative interviews, an examination of customer information databases and a general assessment of Expedia’s adherence to the privacy policy they planned to post. “When we do a privacy audit, we go deep into how a company handles customer information,” says Larry Ponemon, partner and global leader of privacy and compliance risk management, PricewaterhouseCoopers.
In January 2000 Expedia removed registration from the front page of its site, allowing travelers to shop for hotel availability without having to share personal information. The new policy guarantees that Expedia will not sell or rent personally identifiable information (PII), and that individuals will retain choice and control over the collection and use of their PII, as well as a means of updating, correcting or removing any PII stored in their customer profiles.
The move toward protecting user privacy will assist the site as it grows its following in European markets, where data protection regulations are more strict than those regulating Expedia on its home turf in Bellevue, Washington. And it sets the site in good stead with consumers, who are becoming increasingly concerned about the protection of their valuable personal information.
Online Or Off In an interesting twist, Travelocity.com has launched a Web site (www.travelocitymag.com) supporting its new print publication, Travelocity Magazine, and has hired Dallas-based hybrid to aid with the design and launch of the online version of the publication. Apparently, the Travelocity. com travel reservations provider sees the value in spreading its message by whetting travelers’ appetites through more traditional print means. But it simultaneously craves that synergistic Web connection. The magazine site, linked, of course, to Travelocity.com, offers summaries of the print publications’ content, links to advertisers and an opportunity to sign up for subscriptions.
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