Nelson Hotels & Inns, an award-winning collection of family-run hotels, inns, and restaurants across Cheshire, has recently revealed it will potentially see an overall annual increase of 135% in energy costs. The group is behind well-known venues such as the Grosvenor Pulford Hotel & Spa in-between Chester and Wrexham, The Pheasant Inn at Burwardsley, The Fishpool Inn at Delamere and The Bear’s Paw in Warmingham.
Managing Director, Andrew Nelson, comments below on the rising trend of switching to flexible contracts as inflation continues to strike the hospitality industry, as well as the decisions they’re having to make as the group sets to launch its fifth addition to the collection, The Manor, at Greasby on the Wirral this winter.
What steps are you taking to manage these rising costs?
We immediately sought out prices to renew our energy contracts with suppliers and find a solution that works in our favour. Ahead of the announcement of the Energy Bill Relief Scheme, some companies were refusing to offer an indicative price due to the ongoing situation. Even when the governments support package towards utilities was announced, it was unclear how much this would reduce the fixed price contracts, as suppliers were reluctant to advise what proportion of their pricing consisted of the wholesale cost. Furthermore, there was no guarantee we wouldn’t be hit with the full extortionate rates if the government aid was not continued after 6 months.
However, we ultimately found that by switching strategies, from a fixed price fixed-term contract to one that is flexible, we are currently able to achieve a better rate than we would by relying solely on the governments 6-month aid. Rather than having a fixed price, our flexible rates are bought the next day ahead of the auction price of electricity. On top of this, there’s the management fees and non-commodity charges which are pass-through.
Our new flexible rate is currently lower than the government’s support bracket of 21p per KWH on the wholesale price. Whilst these types of contracts do not guarantee a fixed annual price, should this rise over the current government rate, the national subsidies will then come into play. This is a trend we are seeing more throughout the industry and is working well for us currently, so we hope this will be beneficial for other businesses in the short-term.
Do you have any further concerns surrounding the rise in energy costs?
The deepening energy crisis is already creating troublesome situations for our industry and the soaring rise in bills will unfortunately be a hurdle that many businesses will not be able to overcome. It’s a frustrating time and a shame to see yet another factor following the pandemic that’s causing the hospitality sector to struggle.
As we prepare to open our fifth venture within the midst of all this, we are certainly having to be more mindful about outgoing costs and design plans to factor the increase in bills.
The rising cost of living also threatens to effect footfall in the forthcoming months, especially during what is usually a very busy Christmas period. We’ve seen a really positive response to enquiries around Christmas at our venues so far, but this will most likely have a serious impact on a lot of businesses who rely on continued support from the public.
How has the wider hospitality industry reacted to this?
Alongside hotel professionals and industry body leaders throughout Cheshire and the surrounding area, we are now making a conscious effort to discuss how we can all collectively try to help each other in this situation. But ultimately, it is long-term government support that will prevent further business closures around the UK. The aid that the government put in place throughout the COVID-19 pandemic was a huge help to our industry, but the recently unveiled plans for a 6-month energy cap for businesses are only limited and without further long-term support, many operators will simply close permanently as their utility contracts become due for renewal.
Recent announcements that business rates will continue to be discounted will help, but what the industry really needs to survive, recoup and flourish is a permanent cut to VAT. We are seeing astonishing rates of closures within the industry now and without a cut to VAT, this will only accelerate as the cost of living and recession continues to bite. We hope to see further plans revealed sooner rather than later.