One currently hot topic is the ongoing load shedding and the direct impact on the cost to run businesses and the economy as a whole.
Hotels and hospitality businesses are also affected by this. Due to their size and the amenities they offer to guests, lodging establishments are even more affected by load shedding than consumers or private households.
Hotels try to keep their consumption as low as possible, but of course, guests won’t stay without amenities, which is why costs can’t be reduced to a minimum.
For this reason, some lodging and accommodation establishments have decided to charge guests an additional load shedding surcharge in order to assist in keeping the backup power solutions running whilst the guests enjoy a seamless stay.
The Load-shedding Surcharge
The load-shedding surcharge is an additional charge that hotels levy on top of the overnight rate per night and person.
This is intended to partially offset the additional costs caused by the increased prices of keeping the power on during load-shedding and pass them directly to the guests.
It is obvious that such a decision should be well considered. But what are the advantages of levying a load-shedding surcharge and what are the dangers that should be considered when hotels decide to introduce a load-shedding surcharge?
Positive aspects of introducing a load-shedding surcharge:
- Cost recovery: The hotels are still able to cover their costs if demand remains constant and don’t have to draw on their reserves. This ensures that the hotel remains solvent and can continue to exist in the market.
- Price stability: Due to the openly communicated load-shedding surcharge the remaining prices can be kept stable with no surprises popping up on the bill on check out.
- No hidden price increases: Due to the introduction of the load-shedding surcharge, no hidden price increases are necessary and the guest is paying for the perceived value being delivered as per usual.
- Openness towards the guest: The situation is openly explained to the guest. They have a better understanding of the reasons compared with the situation if they only see a higher price for the overnight stay. This promotes understanding since it is openly communicated to the guest as to why they have to pay more.
- Guests become aware of energy consumption: Many guests only become aware of the fact that they also incur ancillary costs when staying in a hotel if the load-shedding surcharge is charged. This awakens the consciousness of the guests that they cannot consume everything with the overnight accommodation price free of charge.
There are, therefore, some compelling reasons for introducing a load-shedding surcharge However, there are also risks associated with levying this surcharge.
- Declining market attractiveness: The introduction of the load-shedding surcharge can lead to a decline in market attractiveness. Depending on how the surcharge is presented, the price of the overnight stay may appear to be significantly higher than that of the competitor, which is why some customers will now decide to book with the competitor.
- Decreasing demand: Due to the increased price, it may happen that the demand decreases and if the occupancy is too low, the costs can no longer be covered despite the load-shedding surcharge.
- Discounts & promotions to keep demand: Due to the higher prices and the resulting top two points, you may have to rely on discounts & promotions to maintain demand and continue to generate sufficient volumes of bookings. These discounts are applied to the room rates, which is why you run the risk of selling the rooms at too low a base price now. As a result, the other costs may no longer be covered, and there is a risk of financial problems and losses despite the load-shedding surcharge.
- Increasing energy consumption: There is still a risk that guests will now increase their energy consumption. Since guests now pay separately for this service, there is a risk of the attitude: “After all, I have paid for this service, so I can use it to a great extent!
In order to keep the dangers as low as possible and to be able to take advantage of the benefits, the following points should definitely be taken into account.
Take into account
- Legal requirements: Before introducing a load-shedding surcharge, all legal regulations and requirements should be checked and should be considered accordingly.
- Open communication with guests: Only if the load-shedding surcharge is obviously communicated and presented to the guest, he will be able to understand it. There is hardly anything more negative for guests than hidden costs and unexpected surcharges.
- Inform guests in advance: The guest should be informed of the load-shedding surcharge at the time of booking. When completing the reservation process, he or she should be shown the total price with a load-shedding surcharge in place already.
- Give reasons and explain to the guest: It is always helpful to openly present the current situation to the guests and tell them the reasons for the introduction. This increases the guests’ understanding.