Eco article for southeast lodging news

Reprinted from the September/October 1998 issue of Southeast Lodging News.

"Save Big Bucks on Waste Disposal"

by Chris Balfe and Dave Engeldrum, HVS Eco Services

The disposal and removal of solid waste has always been a problem for the hospitality industry. Adopting the motto "see no garbage, smell no garbage," hoteliers have traditionally opted to keep trash out of guests' way by any means and at any cost. The result is that waste and recycling costs are higher today than ever before. Hotels, resorts, inns, and conference centers are seemingly addicted to service-intensive and high-priced trash hauling, and for many owners and managers there appears to be no route to recovery.

Before the situation gets any better, let me tell you that, unfortunately, our problems don't stop with this voracious appetite for instant and invisible waste service. Prosperity has pushed the boundaries of luxury for hotels; as amenities and offerings have increased, so have waste volumes. At the same time, corporate pressures have squeezed every available inch out of architectural lay-outs, leaving less and less room for chutes, compac-tors, and storage (make no mention of recycling). To top off this pile of trash dilemmas, the public commonly points the finger at the hospitality industry for being one of Corporate America's biggest wasters and producers of trash.

While no hotel school or hospitality executive education program I know of currently includes a course on solid waste management, many of us have learned to employ a variety of strategies to bring waste costs out of the red zone. Purists, for example, believe in bid comparisons and hard-nosed negotiation with waste haulers, while NewAgers favor waste diversion through recycling, reduction programs, and reuse. While hoteliers are typically satisfied with the initial results of these cost-control initiatives, at year's end the predicted savings somehow never reach the levels expected.

National Accounts Program Problems

Another strategy which has become more and more popular in this age of consolidation is a national accounts program to purchase waste services from a national hauling company. While this may be the easiest way to achieve some savings, it is probably the least effective because dif-ferent areas of North America have different waste situations, and costs vary dramatically across borders. Unless you represent one of the larger hotel companies, relative savings earned this way will be small when compared to other initiatives more worth your time.

National accounts programs, however, do have advantages, such as consoliated billing. Paying only one account essentially eliminates the need for property managers to deal not only with waste bills, but more importantly contracts and haulers, thereby giving them more time to do what they do best -- run the hotel. When the corporate office takes on billing responsibility, the company can negotiate one contract for hauling, cut one check each month for waste and recycling services, and negotiate for special services such as having one representative that all the hotels contact when there is a problem or special service is required.

But other disadvantages are inherent in national accounts programs. Without an on-going audit function, the savings initally achieved can evaporate as individuals at the property level no longer directly monitor their service bills. While hauling companies will often offer to 'self-audit' their bills to ensure that a given client is not overpaying for services, and even offer consulting to help further reduce costs, most hotel executives realize immediately that this is more often than not a conflict of interest. Hauling companies are, after all, in business to make money too.

For example, let's compare a recycling program to a corporate client to whom a hotel company sells rooms at a discounted rate. Hotel sales agents do not try to sell out the hotel with corporate rate guests because it lowers revenue amounts for the period. Similarly, waste representatives often fail to encourage their clients to recycle because recycling waste is less expensive to dispose of than wet waste. For haulers, helping hotels reduce waste and audit bills would be counterproductive, as they often also own the landfills. This problem intensifies when we realize that most haulers work with multi-year contracts, sometimes as long as six years. While corporate hotel accounts can decide to stay with a competitor across the street as soon as tomorrow, the hotelier is legally bound to its hauler.

Another disadvantage of national account programs is inconsistent service across locations. Many national waste haulers have grown by acquiring small local companies. While the names of these smaller companies are gone, in many cases the orginal management and systems are not, hence characteristics of the service -- reliability, timeliness, cleanliness, noise levels, and so forth -- can and do vary to great degrees. Hotels craving instant and invisible service may find that they cannot get what they need when they are bound to one company in a number of locations.

A Different Solution

There is a solution. For years, industries including chain restaurants and department stores have utilized third parties, both waste consultants to reduce costs and waste managers to handle all of the company's solid waste issues, from daily customer service to negotiating corporate contracts for an entire portfolio. Using third parties eliminates conflicts of interest, enlists experts to control waste expenditures, and allows for the one big advantage of national accounts programs: consolidated billing.

Third-party waste management systems often begin by grouping all of a company's hotels under one umbrella to handle auditing and billing, and by negotiating lower pricing based on the company's purchasing power and clout in the industry. The second step is to use expert consultants to ensure that each property has a streamlined waste system that will minimize both costs and hassles to the property staff (often a key concern for hotel general managers). Recycling may or may not be part of the cost minimization strategy designed for each hotel. Recycling programs can often save money, but if the time required to separate the waste is too great or the procedure too impractical, frustrations and increased time pressure on employees will negate any dollar savings.
The savings that a hotel can expect through any of these strategies depends on a number of factors, and will therefore differ drastically from location to location. For example, good negotiation by a purchasing manager or engineer can save 5 to 40%. Setting up a successful recycling program can save as much as 75%, but can actually increase costs if careful cost-benefit analyses are not performed. The best gauge for savings comes from the solid waste management companies, which average anywhere from 15% to 65% savings for a company's whole portfolio.

One way to realize the most of these savings is to work with a company willing to take on the risk itself and share any savings achieved. Shared-savings programs eliminate risk for the hotel, and do not require budget changes since there are no payments if there are no savings. Moreover, shared-savings agreements provide incentive for all parties to continue to find more and more money in the hotels' trash.
Although the hotel industry has been addicted to expensive waste and recycling service for many years, there are now many options available to curtail costs and minimize hassles. As with all elements of effective, efficient hospitality, the key to both solving waste management problems and preventing their occurrence is smart management.