A growing group of Rhode Island hotel and restaurant owners are pooling their bargaining power to buy natural gas at a discount of as much as 25 percent.
The Rhode Island Hospitality and Tourism Association, a group of about 600 restaurants, hotels and other businesses, administers the natural-gas buying group. Although it started four years ago, interest in the program has swelled in recent months because the tourism sector has been hit by a slowing economy and lofty energy and labor costs.
Rhode Island's Market Has Changed. Developers, Builders, Investors and Sellers Must Change With It.
By Emilio DiSpirito IV License Partner | Engel & Völkers Oceanside Leader | The DiSpirito…
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“Tourism has been flat this year and people are starting to take a good look at where they can cut costs,” said Dale J. Venturini, president and CEO of RIHTA. “A lot of hotels have tried to pass on the energy increases by adding surcharges, but those aren’t enough.”
About 75 RIHTA members – varying in size from small eateries to large hotels – are buying their natural gas through the association’s contract with HESCO LLC, a Houston-based gas supplier.
“By combining the members’ loads, they’re basically saving an average of 20 to 25 percent,” said Diane Van Pelt, an industrial marketing representative for HESCO. She said members must use at least 5,000 ccf (hundred cubic feet) of gas annually to be included in the buying group.
About 1,300 of Providence Gas Co.’s commercial and industrial customers buy from outside gas marketers, according to company spokesman Paul Fioravanti. Providence Gas delivers the commodity and customers get two bills: one from the utility for transportation costs and a bill from the outside supplier for the gas.
Fioravanti said there are several such buying groups in the state, although most are industrial users that buy relatively large amounts of natural gas.
But many businesses in the tourism sector are looking to cut costs wherever they can. After a string of record years, Rhode Island’s second-largest sector is feeling the effects of the reeling economy.
Occupancy rates are down at many hotels: In Newport, hotel revenue was off 4 percent during the first five months of this year, according to the Newport County Convention and Visitor’s Bureau. Sales at restaurants, at least nationally, have fallen flat, according to a recent report by Technomic Inc., a Chicago-based food-consulting firm.
The slump has magnified the added costs of energy and labor for many hoteliers and restaurant owners.
“None of us can keep raising prices just because our expenses keep going up,” said Bob Antignano, owner of Angelo’s restaurant on Atwells Avenue. “We’ve got to look at the other side of the equation and cut costs.”
Angelo’s was one of the first RIHTA members to join the buying cooperative. The small Italian restaurant, which has gas heat and gas-fired ovens, saves more than 10 percent on its bills, Antignano said.
For larger members of the RIHTA’s gas-purchasing group, the savings in dollar terms can be big.
Carpianato Properties joined the cooperative late last year in an effort to save on gas costs at its 266-room Crowne Plaza Hotel and 147-room Holiday Inn Express Hotel & Suites, both in Warwick.
A spike in energy costs prompted the move, according to Rudi Heater, director of hotel operations for Carpianato Properties. He said the hotels’ gas bills jumped 40 percent beginning in the spring of 2000 – compounded by a 60 percent increase in electricity costs this year.
“We try to find savings wherever possible, as long as it doesn’t affect guest satisfaction,” Heater said. “The program was a pretty easy call to make.”
Heater said the hotels have seen average savings on gas bills of nearly 30 percent since joining the buying group. Although she declined to disclose the dollar value of the savings, HESCO’s Van Pelt says some of the larger hotels in the cooperative are saving as much as $40,000 annually.
Joining the program is relatively easy, Venturini said. New members are required to buy a telemetering device – installed by Providence Gas Co. – and a non-dedicated phone line, which the utility uses to read the meter during off-hours. The metering device costs between $400 and $900, according to HESCO.
Venturini said a lot of business owners are reluctant to make the switch because they see it as a hassle or they don’t realize the potential savings.
“It takes a little work to get started,” Venturini said. “But when you show them the concrete savings, all of a sudden it clicks.”
