The UK water market is changing. From April 2017 the government will open the water market to deliver improved value to businesses and non-residential customers. Suppliers will now compete against each other to offer the best possible deals to prospective customers.
The hotel sector is incredibly water-intensive, using anywhere between 200 and 600 litres a day per each guest, and as such, the opening of the water market represents an ideal opportunity for hotels to secure the very best possible water tariffs.
The water regulator OFWAT expects there to be in the region of 40 water retailers competing for new business. This increased choice will enable hotels to gain substantial savings on their water bills, reducing costs and adding directly to the bottom line. Hotels can also benefit from receiving improved customer service, and if a hotel chain operates across more than one site, it will also mean receiving a bill from a single supplier, saving time and money on administrative resource.
The market will operate in a very similar way to that of the Scottish water market which has been in operation since 2008 (the first competitive water market in the world). When the competitive water market started in Scotland, the savings from switching were around 3% – the savings are now in the region of 20%. It is expected that the market in the rest of the UK will follow a similar pattern of increased savings over time. Our recommended approach to this new market is to combine competitive water tendering with tariff analysis and water management to achieve savings of up to 20%.
As with other utilities, changing water supplier is a straight forward process. The water used by a hotel, and the pipes that supply it, will remain the same. Water suppliers buy wholesale services from regional wholesalers, meaning that purchased water will come from the ‘retailer’ as opposed to the current regional ‘wholesaler’.
How to gain financial benefits from changing supplier
Our recommended approach, which is based on our 25 years of water management, is for hotels to maximise water savings by switching supplier, reviewing tariff structures, and implementing water reduction measures.
From our experience of the Scottish water market, we are confident that a 20% reduction in hotel water costs can be delivered by implementing all of the above. We are also confident that once in the competitive market, hotels can gain further savings of over 15% as competition in the water market drives down costs over the next few years.
We advise to act now and switch supplier to commence saving and begin work on a water reduction plan. This will place you in a good position to take advantage of further reductions in market rates in the future. If your current water spend is over £20,000 per annum, it would also be advisable to engage with a water management specialist. A water management company can help to find you the best deal in terms of price and service, as well as monitor consumption, benchmark, then produce and manage your water reduction plan.
About the Author
Briar Associates is an independent utility management and water procurement consultants based near Birmingham. Find out more about the open water market by visiting the government website www.open-water.org.uk, or if your current water spend is over £20,000p/a please feel free to contact the company directly via www.briarassociates.co.uk or 01384 397777.