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Impact of rising energy costs on extended stay accommodation sector

77% of all extended stay accommodation operators replying to a Situ survey say they are putting in place awareness programmes to encourage guests to be mindful and efficient with energy usage as energy prices continue to rise.

Based on recent research with accommodation partners across their global supply chain, the serviced accommodation agency Situ has released a white paper on the impact of rising energy costs on the extended stay accommodation sector.

In response to a survey, 75% of accommodation partners who replied stated that they are at risk of having to increase rates, with the estimated rise being between 10% and 25%. Rate increases are the preferred method for 70% rather than a possible energy surcharge.

In terms of mitigating costs, 77% of all respondents said they would be putting awareness programmes in place to encourage guests to be mindful and efficient with their energy usage. Ideas ranged from friendly reminders at check in through to signage within the accommodation and controlled energy systems such as air conditioning and heating.

When asked about creative and collaborative ways to tackle the challenge, suggestions included the collective negotiation of rates with energy providers; seeking support from the government in terms of VAT reductions; tax breaks; energy caps for businesses of all sizes; and overall clarity on the way forward.

Phil Stapleton, Managing Director of Situ, says, “We felt it was essential that we conduct this research, given the ongoing impact on our sector of the energy crisis. It’s important that we help to manage our clients’ expectations and continue to be transparent in terms of rates and charges. We will of course, continue to negotiate the best rates possible for all our customers.” 

Although the urgent drive to reduce energy usage by is being powered by monetary pressures rather than environmental concerns, operational change is, of necessity, going to happen. The extended stay sector now has a valuable opportunity to introduce technologies to reduce and track energy usage and to engage in conversations about sustainable sources of energy – as well as aligning operational efficiencies with strategies around Environmental, Social, and Governance (ESG) programmes.

Situ welcomes and will actively support the conversations the sector will be having together over the coming months. The industry has a unique chance to come together to make change at this time, finding ways to address the current crisis while looking forward to a more stable and sustainable future.

Phil Stapleton goes on to say, “Although increased accommodation costs are a possibility in 2023, Situ is furthering our commitment to our operations both through sustainable & cost-controlled programmes throughout this year and into the future.  An example of this is our planned investment in solar panels and battery technology this year which will power Situ HQ in both its current footprint and in our soon-to-be-announced expansion.”

The survey also revealed other impacts that accommodation operators are currently dealing with in addition to increased energy costs. Top of the list was lack of labour and resources, as cited by 50% of respondents; while 32% said that assisting staff with the cost of living was affecting their business. The value of the pound versus the dollar was given as an issue by 25% of those who replied. ‘Other’ impacts were cited by 40% of accommodation partners. These were as follows: cash flow; inflation; legislation (around short-term lets); interest rates; lack of inventory (due to law changes); and lack of demand due to rate increases. The answers given show that the increased cost of energy is playing into some of these additional impacts and is being affected by them in turn. However, a raft of different problems apart from high energy prices do exist on the global stage and are creating a complex picture the world over.

*The survey was made up of eight questions. It was sent to over 500 accommodation partners globally in November 2022, which included both national and international partners who operate a range of types of buildings from aparthotels to residential buildings, as well as vacation lets.

In addition, discussion with some forty delegates to the World Travel Market conducted by Seth Hanson, Situ’s Head of Global Supply Chain, provided further insights into the situation worldwide.