Introduction
High operating costs have become the ‘new normal’ for many hospitality businesses, with the sector as a whole spending around £1.3 billion each year on energy costs alone.
In this guide we explore how rising energy prices affect hospitality businesses, and what businesses can do now to protect themselves and minimise the impact of rising costs.
Why Are Energy Costs Rising?
The energy market is constantly fluctuating and highly volatile, with prices shaped by a complex mix of supply and demand, geopolitical tensions, currency movements, and infrastructure constraints. In recent years, this volatility has become more pronounced, showing how sensitive global energy systems are to disruption.
Since the 2022 energy crisis, energy costs have remained high due to a combination of global and domestic factors. A key trigger was the Russian invasion of Ukraine, which significantly reduced gas supplies to Europe and drove wholesale prices sharply upward. Although prices have come down from their peak, they have not returned to pre-crisis levels, leaving many hospitality businesses with concerns over high costs.
More recently, ongoing tensions and conflict in the Middle East have added further uncertainty to global energy markets, with key oil and gas supply routes being closed.
More recently, ongoing tensions and conflict in the Middle East have added further uncertainty to global energy markets, with key oil and gas supply routes being disrupted or threatened. These disruptions contribute to volatility and rising energy prices in the UK, which in turn affects inflation and economic stability.
For the hospitality sector in particular, these rising costs come with serious challenges. Businesses face higher operating expenses for heating, lighting, staffing costs and increased costs in the food supply chain, often at the same time as broader inflation is affecting customer spending. As a result, hospitality energy management has never been more important.
How are hospitality sector businesses affected by rising energy costs?
Energy is one of the most significant operating expenses for hospitality businesses, often in the top three costs alongside labour and food expenses. However, unlike many other overheads, energy carries a much higher degree of risk and uncertainty, with prices shifting rapidly and being much more difficult to forecast and budget for.
Rising energy costs are especially challenging in hospitality because energy use is both intensive and constant. Hotels, restaurants, pubs, and leisure venues rely heavily on heating, cooling, lighting, refrigeration, and cooking equipment and often operate for long hours or around the clock with the site environment meaning that during periods of low occupancy a lot of energy use cannot be reduced. As a result, even small increases in unit energy prices can turn into substantial rises in overall expenditure.
Rising energy costs also put pressure on already tight profit margins. Many hospitality businesses operate in highly competitive markets where passing costs directly onto customers is not always viable. For example, increasing menu prices or room rates can risk reducing demand, particularly when consumers are already facing higher living costs. This makes hospitality energy management a careful balancing act between staying profitable and competitive.
Although improving energy efficiency is essential, simply ‘using less energy’ is not a sufficient strategy on its own. Many efficiency measures such as upgrading equipment, improving insulation, or installing smart energy management systems may require upfront investment or take time to deliver measurable savings. For smaller businesses, this can be a barrier, especially when cash flow is already under pressure.
As a result, businesses are increasingly needing to adopt a more strategic approach to managing hospitality energy costs. This includes efficiency improvements, smarter procurement, contract optimisation and where possible, investment in on-site generation such as solar power.
How can hospitality companies minimise the impact of rising energy costs in the UK?
Hospitality energy prices can have a significant impact on businesses, so having a robust strategy in place to mitigate risk and minimise this impact is essential.
Review your energy supplier
Not all energy contracts are built equal, so it is always worth re-examining your current contract and supplier to ensure it is still fit for purpose. This includes checking whether you are on the most competitive tariff, understanding if your rates are fixed or variable, and reviewing contract end dates to avoid being rolled onto higher out-of-contract rates. You may also want to explore alternative suppliers or negotiate better terms, such as longer-term fixed pricing to provide cost certainty, or more flexible agreements that better suit your business needs. What may appear as fixed is not always fixed or certain once the underlying terms are examined.
Examine your metering strategy
Metering is a key part of hospitality energy management, and ensuring your portfolio is accurately metered and consumption is properly monitored is essential. Without a reliable and up-to-date metering system in place, it can be difficult to gain a clear understanding of how and where energy is being used. This lack of visibility can limit opportunities to improve efficiency and can also impact the effectiveness of your energy purchasing strategy.
Recent regulatory changes in metering requirements now mean that consumers must comply with higher standards of metering accuracy and data reporting. This means it is now more important than ever for businesses to review their current setup and ensure they are staying compliant.
Submetering is a great way to break down energy usage by specific areas, departments, or equipment within a site or across multiple sites. This level of detail helps your hospitality businesses to identify inefficiencies, spot areas of high usage and create a focused energy saving strategy.
Address energy waste
Energy waste can often go unnoticed unless it is actively monitored with measures put in place to address it. In busy hospitality environments, inefficiencies can build up over time, particularly where older or poorly maintained buildings and equipment are in use. Faulty or outdated assets and appliances can significantly increase consumption, especially in key operational areas such as heating, cooling, lighting, kitchen equipment, and business insulation. Even small inefficiencies across multiple systems can quickly stack up into substantial costs.
Addressing hospitality energy waste starts with identifying where inefficiencies exist and taking a proactive approach to upgrades and maintenance. Investing in modern, equipment with high energy ratings and carrying out timely repairs and regular servicing, can make a measurable difference to your overall energy use.
Building controls and smart energy management systems also play an important role in reducing waste. These systems help ensure that heating, cooling, and lighting are only used when needed, which helps maintain guest comfort whilst preventing unnecessary energy use during quiet periods or out-of-hours.
Energy audits are one of the most effective ways to identify hidden energy waste and build a clear, actionable plan for improvement. Our sister division Consultus Sustainability offers a range of tailored audit services designed to suit different business needs, helping hospitality businesses uncover inefficiencies and introduce targeted strategies to reduce both consumption and costs.
Consider renewable energy
Reviewing your portfolio for potential on-site renewable generation opportunities is a great way to reduce your reliance on the grid and minimise the impact that rising energy costs can have on your hospitality business. Technologies such as solar PV, wind turbines and battery storage allow you to generate cleaner energy and improve long-term cost control and energy resilience.
Switching to renewable or green energy also has a range of benefits for your hospitality business including reduced carbon emissions, improved sustainability credentials, greater protection against market volatility, and improved brand reputation.
If your premises are not suitable for on-site renewable technologies, renewable PPAs offer a practical alternative. Through long-term agreements with renewable energy providers, businesses can access stable pricing and verified green energy, delivering both cost certainty and sustainability benefits without the need for physical installation.
Utilise available grants and schemes
Exploring the wide range of grants, funding schemes, and financial incentives available to the hospitality sector can be a valuable way to offset rising energy costs whilst also supporting longer-term sustainability goals. New initiatives are regularly introduced at both national and regional levels, so it’s important to stay informed and review what support your business may be eligible for.
Whilst capital investment in energy projects often delivers the greatest long-term returns, there are also many schemes available that require little to no upfront cost. These zero or low-capex options enable businesses to implement energy-saving measures without significant upfront investment helping to free up capital for other operational priorities.
In addition to reducing financial barriers, many of these schemes are designed to provide energy savings and immediate cost reductions, meanings businesses can benefit from improved efficiency and stronger return on investment.
Opportunities for hospitality businesses may include government-backed funding, local authority grants, supplier-led initiatives, and support for adopting technologies such as energy-efficient lighting, heating upgrades, or on-site renewables. Taking the time to assess and apply for relevant schemes can provide a practical route towards improving energy performance whilst easing the financial burden of rising energy costs.
How Can Consultus Support Hospitality Businesses with Energy Management?
Consultus are dedicated to working with our clients to deliver bespoke services and strategies to help hospitality businesses minimise the impact of rising energy costs and support long-term performance.
Fixed and flexible energy contracts – We support businesses in selecting and managing the most appropriate energy procurement strategy for their needs. Fixed contracts offer price certainty and protection against market volatility, whilst flexible purchasing strategies allow businesses to buy energy in tranches, taking advantage of favourable market conditions.
Risk management – Energy markets can be highly volatile, making risk management a critical component of any hospitality energy management strategy. Consultus provides expert guidance to help businesses understand market fluctuations and implement strategies to mitigate risk.
Market intelligence – Consultus provides our clients with access to world-class market intelligence through technical bulletins, reports and access to our bespoke online portal. This includes pricing trends, policy updates, and forward-looking analysis, enabling hospitality businesses to stay ahead of market movements and make strategic decisions.
Strategic guidance – Our teams already work closely with a number of hospitality clients and understand the sector intimately and as such we can align our services and strategic vision to the specific nuances of your organisation and the sector.
If you’re concerned about how rising energy costs could affect your hospitality business and would like to discuss how Consultus can support you, get in touch today.