How US Hotels Tackle Energy Costs with Smarter Procurement

Rising energy costs are putting increasing pressure on hotel operators in the US, with no signs of relief in sight.

The combination of higher electricity, gas and water bills is squeezing margins and pushing up customer prices, forcing hotels to rethink how they manage procurement, sourcing and operational budgets.

According to CBRE, the key to navigating these challenges lies in strategic procurement, energy efficiency and sustainability. 

The rising cost of utilities

Utility costs have been climbing steadily, with US electricity prices up 3.6% over the past year—outpacing general inflation. Gas and fuel costs have surged even higher at 8.4%, while water and sewage rates continue to rise due to ageing infrastructure and strained resources.

Robert Mandelbaum, Research Director at CBRE Hotels Research, and Alan Figot, Consulting Manager specialising in sustainability, note that these increases aren’t short-term fluctuations.

In their report, they write: “There is a persistent upward trajectory in utility prices, which makes it imperative for property managers to seek efficiency improvements proactively.”

While temporary declines in natural gas prices have provided some relief, forecasts suggest energy costs will continue to rise. The growing demand for electricity—fuelled by the rise of electric vehicles, expanding data centres and increased cooling needs due to higher temperatures—adds to the pressure.

Even as the shift towards renewable energy reduces generation costs, substantial investments in grid modernisation and expansion are needed, which will inevitably affect future utility bills.

Robert Bernard, CBRE’s Chief Sustainability Officer, sums it up clearly: “The bottom line: hotel operators need to take proactive steps to manage their utility costs. 

“Pandemic-induced market shocks, geopolitical tensions and extreme weather: these factors are driving utility costs upward and likely will be persistent.”

Procurement’s role in reducing energy costs

Procurement teams play a pivotal role in combating rising energy expenses. By sourcing energy-efficient technologies and negotiating favourable contracts, hotels can mitigate cost increases while advancing sustainability goals.

Vendor selection is key. Hotels are increasingly procuring energy-efficient equipment such as LED lighting, smart thermostats and high-efficiency HVAC systems. Some are investing in renewable energy solutions like solar panels, reducing their reliance on traditional power grids.

Negotiating energy contracts also helps. Procurement teams can secure long-term deals with utility providers or shift towards green energy suppliers, stabilising expenses despite market volatility.

Additionally, partnerships with sustainability-focused vendors—offering energy audits, retrofitting services or carbon-neutral certifications—enable hotels to identify inefficiencies and improve performance.

Robert and Alan's report highlights the importance of these measures: “Looking for resource conservation measures will enable operators to adeptly navigate the complexities of rising utility costs while enhancing overall operational performance.” 

The pressure mounts

Rising energy costs aren’t the only challenge. Hotels also face growing pressure from regulatory bodies and stakeholders demanding sustainability.

Many states and cities have introduced building performance standards, mandating energy efficiency and emissions reductions. Non-compliance can lead to financial penalties, adding another layer of risk.

The report states: “Recently, states and cities have enacted building performance standards that mandate energy performance and emissions reductions, as well as implementing benchmarking and transparency policies.”

This regulatory landscape makes it essential for hotels to prioritise energy efficiency—not just for cost savings but to avoid legal and financial repercussions.

Stakeholder expectations add further motivation. Investors, customers and employees increasingly expect businesses to demonstrate environmental responsibility.

As CBRE notes: “As hotel operators recognise that investing in energy efficiency can lower operational costs and enhance cash flow, momentum for sustainability continues to grow.” 

Finding a way forward

Many hotels have already made progress, adopting cost-saving technologies like LED lighting and occupancy sensors. However, the report identifies significant opportunities for further improvements:

• Upgrading equipment: Replacing outdated heating, cooling and cooking systems with more efficient electric alternatives.
• Water conservation: Implementing greywater reuse systems, smart irrigation and rainwater harvesting to reduce water costs.
• Energy load management: Moving beyond basic occupancy sensors to advanced energy management systems that adjust consumption in real-time.
• Battery storage: Integrating energy storage solutions to improve resilience and reduce peak demand charges.
• Green infrastructure: Installing green roofs and walls to improve insulation and reduce urban heat effects. 

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