Are You Ready For $3.50 Gasoline?
I hate to rain on anyone's parade, but as you read this the price of gasoline at the pump may have passed the $3.50-a-gallon level. Even before Hurricane Katrina, gas prices topped $3 a gallon on the Hawaiian island of Maui, and it jumped quickly elsewhere in the days after the Gulf Coast disaster.
Earlier in the year, a lot of pundits (including me) discounted the effect rising gas prices would have on the travel industry. Business travelers were beginning to hit the road in earnest, and nothing seemed to be in the way of Americans taking their road-trip vacations this summer. I did, driving 650 miles and back to the Outer Banks of North Carolina for a week of R&R. The thinking back in April and May was that people would gripe about rising pump prices but wouldn't change travel patterns until gasoline topped three bucks a gallon.
Well, it's here and a number of questions remain: Will Americans and the rest of world continue to travel like there's no tomorrow, even though it now costs $50 or $60 or perhaps $100 to fill the gas tank? How will the nation's precarious airline industry be able to handle steep increases in fuel prices? How will hotel owners be able to maintain their profit margins in the face of higher energy costs and potentially softening levels of business?
I don't have answers to any of these questions, but it seems as though no one else does either. That's the sad reality: Neither the federal government nor the average consumer has a viable short- or long-term plan to cope with what many believe is an impending energy crisis unlike any we've seen in the past. The extent to which the situation cripples the economy and threatens political stability around the world is up to each of us on a personal level.
It's not my place to advocate that you replace your gas-guzzling monster SUV in favor of smaller, more efficient transportation. Or God forbid, that people do as I do and walk and take the bus to get to work. However, as business people and hotel owners and operators, it's imperative that you prepare for any possible scenario that may have an effect on your business, including one in which most decisions are governed by the price and availability of energy.
The thing you have most control over at your hotel or group of properties is energy consumption. According to PKF Hospitality Research, energy costs at U.S. hotels increased six percent last year and 5.9 percent in 2003. While those jumps don't match the 11-percent annual increases in energy expenditures during the mid-1970s, they're still significant enough to grab your attention.
There's a vast array of mechanical and computer-based energy management devices and systems on the market that can help you monitor and reduce energy usage. And as oil prices push past $70 a barrel, the payback periods for these systems get shorter and shorter. You're derelict if you haven't fully explored the available options.
The other strategy you can pursue is the classic lemonade from lemons scenario. Back in the mid-‘70s gas crisis, Days Inn scored a coup by allowing its guests to fill up at the gas pumps in front of every Days property. The service ensured that travelers would have consistent access to gasoline — as long as they stayed at Days Inn hotels. It was pure genius.
Today, few if any hotels have their own gas pumps as the original Days properties did, but some creative marketing can both help travelers ease their energy pains and direct some business your way. For example, the Sheraton Yankee Trader and Clipper Hotels in Fort Lauderdale offered $15 gas vouchers to Florida residents who stayed at one of the hotels during July, August or September.
It's likely that energy concerns will dominate our lives for years and decades to come. Hoteliers need to plan today to achieve long-term prosperity during these trying times.
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