News / Member Insight / Business operations

Why energy has become a planning variable in hospitality

Energy volatility is reshaping hospitality planning and investment decisions.

Historically, energy was seen as a simple background cost in hospitality, managed and budgeted with minimal discussion outside operational teams. Contracts were routinely renewed, forecasts adjusted only slightly, and energy seldom influenced strategic decisions regarding growth, funding, or asset value.

This simplicity and predictability has gone.

Energy costs are now volatile enough to impact planning assumptions at the leadership level. This change is not driven by a desire for expertise in infrastructure or markets, but rather by the fact that forecasts, valuations, and funding discussions increasingly depend on cost projections that have to withstand scrutiny.

Overhead assumptions

Traditionally, hospitality planning relied on stable assumptions regarding labour, rent, demand, and energy. Although each could fluctuate, energy was often viewed as the most controllable. Now, energy can present the most unpredictable of scenarios.

Even small fluctuations in energy costs across multiple sites can now affect margin expectations, attracting attention from lenders, investors, and boards. Consequently, issues previously managed by estates or facilities teams are now addressed earlier in discussions about expansion, refinancing, and long-term strategy. We’re not suggesting that energy now drives every decision, but it can no longer be treated as a fixed and assumed condition in standardised scenarios.

Energy scrutiny has increased

As confidence in cost predictability declines, scrutiny increases. Lenders seek to understand downside exposure, investors want assurance that assumptions are sound, and boards require clarity on risk recognition and management.

In this context, energy planning is less about optimisation and more about credibility. Can the business demonstrate how it incorporates energy risk into forecasts? Are assumptions realistic across sites? Is there portfolio-level oversight rather than only reactive site-level management? It’s become a real commercial focus that demands attention.

How an operator addresses uncertainty now reflects the quality of business management. Forecasts that acknowledge volatility and model its impact inspire more confidence than those that assume stable conditions without justification.

Earlier energy considerations

A considerable change in the sector is the earlier inclusion of energy considerations in planning discussions. These now arise during:

Site feasibility assessments

Capital allocation decisions

Estate-wide risk reviews

Investor and lender reporting

This earlier involvement demonstrates a wider shift. Planning now focuses on managing uncertainty rather than predicting a single outcome. Energy volatility has increased complexity, requiring structured engagement. However, it would be naive to expect perfection, as no operator can eliminate uncertainty entirely.

What matters is whether uncertainty is recognised, understood, and incorporated into planning in a way that can be clearly explained and justified across departments.

A permanent industry shift

It may be tempting to view current conditions as a short-term disruption, but the underlying factors are unlikely to change anytime soon. In fact, according to the UK Hospitality Energy Report 2023, energy price volatility for commercial operators has remained elevated, with contract rates more than double the pre-2020 average. Estates are ageing, capital markets remain cautious, regulatory criteria are evolving, and long-term lease commitments amplify the impact of poor assumptions. Trends such as shifting supply chains and increased global demand indicate that volatility is expected to persist across the sector.

As a result, energy planning is now vital to how hospitality businesses demonstrate competence and foresight. The goal is not to lead a movement or pursue ambition for its own sake, but to maintain control in an environment where margins, trust, and access to capital are closely connected.

Recognising energy as a planning variable is not an environmental statement. It acknowledges that the foundations of hospitality decision-making have shifted and that planning must change accordingly.