Energy Costs Hurting Bahamas Hotel Competitiveness

Speaking to Tribune Business after the Inter-American Development Bank (IDB) revealed the Bahamas’ participation in the $5.145 million Caribbean Hotel Renewable Energy and Energy Efficiency Action – Advanced Programme (CHENACT-AP) initiative, Vincent Vanderpool-Wallace said reducing the hotel industry’s per room energy costs was “critically important” to its long-term competitiveness.

The Bahamian government itself has committed a portion of the $3.145 million in counterpart financing for the project, the IDB itself suggesting that hotels in this nation – and throughout the Caribbean – could reduce water consumption by 50 per cent, and total energy consumption by between 30-50 per cent, through a combination of efficiency and renewable technologies.

“We got involved in it because we think it’s critically important,” Mr Vanderpool-Wallace told Tribune Business of the Bahamas’ participation in CHENACT-AP. “If you look at the cost of energy per room in the Bahamas, compared to other destinations, we have some way to go.

“We are asking our visitors in the Bahamas to pay considerably more per day than any of the large destinations we compete with, and a large component of that is energy costs. What we ask visitors to pay per day for food and beverages, rooms, activities, we are in a league by ourselves.”

Acknowledging that the Bahamas did not want “to harm what we pay people in the tourism sector”, meaning that relatively high labour costs and associated issues such as low productivity and the ‘mandatory 15 per cent gratuity’ are likely to be tackled, Mr Vanderpool-Wallace said the only alternative was to tackle the ‘next largest’ problem – hotel energy costs.

“We need to reduce the cost of energy per room to make ourselves much more competitive,” the minister told Tribune Business. “We find ourselves among the highest.”

Mr Vanderpool-Wallace added that any reduction in hotel energy costs would, apart from enhancing resort profitability, also lead to a “redeployment” of where stopover visitors spent their money from room costs to other areas such as activities, helping to spread the wealth.

The four-year CHENACT-AP project will finance energy audits of hotels in the Bahamas and other Caribbean countries in a bid to help them become more energy efficient. Lighting, water use and air conditioning have been identified as the major areas in which to achieve cost savings.

In e-mailed replies to this newspaper’s questions, Stuart Bowe, the Bahamas Hotel Association’s (BHA) president, said the organisation expected that “significantly more” than the 17 Bahamian hotels that participated in the last energy audit exercise two years ago would be involved this time.

That exercise was undertaken by the German consultants, Fichtner, as part of another IDB-funded study. Their report, seen by Tribune Business, found that “the largest electricity saving potentials” in the resort sector lay with small hotels, which had the ability to cut current energy consumption by 63 per cent.

While medium-sized Bahamian resorts had the lowest savings potential, this still amounted to about 50 per cent of existing power demand.

“Overall, an energy saving potential of 53 per cent can be expected for all existing hotels in the Bahamas,” Fichtner concluded. “This potential amounts to 226 Kilowatt hours, equivalent to 10 per cent of total Bahamian power demand in 2009.”

Drawing upon this finding, Mr Bowe said average energy savings of 53 per cent could be achieved by Bahamian hotels implementing both short and long-term measures.

“While some of the short-term measures are fairly easy and low-cost to implement, the capital investment and payback period for implementing more costly long-term measures is difficult for many hotels during these difficult economic times,” the BHA president told Tribune Business.

And he added: “The high cost of energy is one of the major contributors to the high cost of hotel operations in the Bahamas. We believe there is much more that can be done by and for the industry to help contain and reduce those costs.

“By doing this, we would hope that properties could better manage their pricing. Also, today’s consumer is increasingly conscious about waste and environmental matters. Our beautiful environment is a primary reason why visitors are attracted to the Bahamas. We need to be viewed as good caretakers.”

Mr Bowe also indicated that the BHA was working with Ocean Thermal Energy Corporation (OTE), the partner the Bahamas Electricity Corporation (BEC) has signed a Memorandum of Understanding (MoU) with to build and finance two ocean thermal energy plants in the Bahamas, on an initiative to benefit the hotel industry.

While no details were provided, it is likely the initiative involves using OTEC technology to provide air conditioning services, much as the $2.6 billion Baha Mar project is doing.

Meanwhile, Mr Bowe said air conditioning and hot water production provided the areas of greatest opportunity for both energy conservation and the application of renewable energy technologies.

He added that solar energy “provides the best opportunity for hot water productsion, particularly for small hotels in our Family Islands”.

The CHENACT-AP project will also help fund “demonstration projects which will serve as examples to hotels of real cost savings accrued by putting in place recommendations from the audits. The lessons learned with the hotels will have applicability to many other businesses in the Bahamas”.

And the CHENACT-AP project will also initiate a scheme to enable hotels to generate revenue from selling carbon credits in the international market. While transaction costs were prohibitive for individual properties, the idea is to ‘bundle’ their emission reductions – resulting from energy efficiency and renewable technologies – together on a country or regional level to help them access these markets, and offset the costs of energy-related investments.

Mr Bowe, though, said the revenue potential of carbon credits “remains to be seen”.

The Tribune
Published On:Wednesday, October 19, 2011