Before moving on to the brief for the Mechanical and Electrical (M&E) engineer, I wanted to share some insights I’ve gained about the fixed and variable costs of utilities—and how they relate to the revenue from each business unit.
When I started in the hotel business, I had assumed that all utility costs were variable and would rise or fall based on daily business levels. How wrong I was!
We began tracking the daily utility consumption across all our hotels. Wherever possible, we installed separate meters for each business unit. We then correlated daily business data with utility consumption, generating charts for senior managers. This allowed them to immediately investigate any anomalies—whether it was unexpectedly high usage or unusually low consumption that could be replicated.
Electricity Consumption: A Closer Look at Room Operations
The first chart we analyzed focused on electricity consumption for guest rooms. Here’s what we observed:
1. The vertical axis represents electricity cost in RM.
2. The horizontal axis indicates the number of rooms sold per night.
3. The green regression line is relatively flat, illustrating that room electricity consumption doesn’t vary dramatically with occupancy.
4. When extrapolated to zero rooms sold, the fixed cost was approximately RM 2,700.
5. The slope of the regression line—which represents variable cost—is low, probably no more than RM 1 per additional room sold.
6. We added upper and lower limit lines based on two standard errors (a close proxy for two standard deviations). This means 95% of our daily values fall between these boundaries.
7. The orange dot represents the previous night’s reading—RM 2,908.
8. If the dot lies outside the upper or lower limits, managers are alerted to investigate further. If it’s unusually low, what worked well? If it’s unusually high, what went wrong?
We generated similar charts for other business units and utilities. Once you understand the first chart, the others become self-explanatory.
These insights helped us move from reactive to proactive management of utility costs, ensuring tighter cost control and increased operational efficiency.
Final Thoughts
Utility costs can’t be managed effectively without first understanding their true behavior. Don’t assume they’re fully variable—track, chart, and learn from the patterns. The data will guide your decisions far better than assumptions.
📌 Have you analyzed your utility patterns lately? Start collecting the data, break it down by business unit, and let the numbers reveal the opportunities for savings.
