Hotels seek ways to pull down costs

THE rising price of fuel is having a detrimental impact on every industry as it escalates the costs of operations. In the hospitality sector, prices are increasing for transportation, food, energy and gas, and these have impacted overall operating costs. Inflation is also on the rise and this will affect travel patterns in Asia. To combat the trend, some hotels have begun seeking ways to pull down operational expenses and pass on the savings to their guests.

“Like any business we therefore have to manage our operational costs carefully. For example in food and beverage, which can contribute up to 60 percent of our hotel revenue in Asia Pacific, we are looking at reducing food waste and energy consumption and managing costs by sourcing local produce and tapping the seasonality of foods,” said Hilton Hotels president and CEO, Chris Nassetta,.

“Corporation operational expenses are continually under scrutiny. As a hotel company, we view the globalisation of the world economy and significant growth in developing markets as a very strong opportunity for the travel industry, and we expect in the long term that travel and tourism demand will increase,” Nassetta said.

There may be shifts in travel patterns such as more domestic travel in the leisure sector, where people may prefer to travel shorter distances or avoid air travel.

Businesses may reduce corporate travel and rely more on technology to communicate with colleagues around the world during an economic downturn. However, he said that there will always be a need for hotel accommodation.

“We have seen that some airlines are already discontinuing under-used routes in the US as a result. Hotels can be subjected to the same trends and cycles as the airline industry. So it’s possible that an impact may filter down to our business in terms of a change in demand and or pricing in the future. However, at this point we have not seen any real impact on our business. Hilton Hotels has a wide geographic presence and therefore a more diversified risk when it comes to tourism issues and travel cycles.”

It is still too early to establish any financial impact or change prices, though Hilton does use a demand based pricing system therefore the company adjust its prices throughout the year depending on the guest demand and current climate.

“In times of economic slowdown, we do look at ways in which we can manage costs optimally, ensure operational efficiency. It is also increasingly necessary to look at our sustainability efforts,” said Nasseta.

Recently Hilton Hotels Corporation has announced its corporate commitment to the environment and has set goals that include reduce energy consumption from direct operations, CO2 emissions, output of waste and water consumption.

Another major hotel group, Accor, stated that while it is difficult to forecast what will happen in the second half of 2008 with oil prices, it is monitoring the situation closely and working with its partners to improve operational efficiencies in its hotels and optimise overall business performance.