GSAIR 2023 34
Cost of living crisis
By Mark Harris Contributing Editor
The cost of living crisis , and soaring energy costs in particular , are already impacting corporates and operators .
For operators , despite the dramatic recovery of the UK ’ s hospitality sector , the cost of living is arguably the biggest challenge they have faced since the pandemic .
In our survey , we set out to establish the size of serviced apartment operators ’ energy increases so far , how they will impact rental rates and the degree to which operators are willing to mitigate the extra financial burden , or not .
Counting the cost
As Fig . 16 shows , 20.49 % of global operators say their energy costs have risen by 11-20 % over the last twelve months , with a further 15.57 % experiencing smaller rises of between 1 % and 10 %.
When set against the broader landscape , serviced apartments operators seem to have got off lightly compared to residential properties , although the reasons for this disparity are unclear .
In October 2022 , total utility costs for London hotels increased by 56 % and by 79 % for those in the regions , compared to the same month in 2019 . 16 In response , the UK government launched an energy bill relief scheme for businesses between October 2022 and March 2023 . 17
In comparison , household energy bills increased by 54 % in April 2022 and were due to increase by a further 80 % in October 2022 before The Energy Price Guarantee limited the increase to 27 %.
Fig . 17 shows 27.05 % of global operators are budgeting for increases of 11 – 20 % over the next 12 months , with a further 24.59 % budgeting for smaller increases .
Mitigating the impact
As Fig . 18 and Fig . 19 show , 50 % of corporates say they expect operators to make savings in other areas instead of passing on higher costs to the customer . 21.43 % expect suppliers to absorb the extra costs completely .
From our survey , 42.86 % of corporates expect suppliers to charge a higher nightly rate , with a further 7.14 % levying a surcharge above a monthly consumption cap .
As Fig . 20 shows , corporates can expect to be disappointed . With electricity accounting for roughly 15 % of a hotel room cost , the hospitality industry is predicted to increase prices by at least 25 %. 18
In our survey , three-quarters of operators ( 74.80 %) say they will mitigate additional energy costs by charging a higher nightly rate . Just 34.15 % intend to make savings in other areas , whilst just under a third ( 30.08 %) say they will absorb the extra costs .
Two-way street
As one travel manager points out , higher energy bills are just one part of the challenge to operators ’ margins .
“ They need to increase staff wages at a time when it ’ s hard to attract staff . Historically , we would share the pain with our partners to mitigate the impact .”
Overall , gas prices were up 129.4 % in the year and electricity prices up 66.7 % in the year to March 2023 .
16 . HotStats 17 . https :// www . ons . gov . uk / economy / inflationandpriceindices / articles / costoflivinginsights / energy 18 . https :// www . mews . com / en / blog / hotel-energy-costs