Singapore Applied a Holistic Commercial View
|by Robert Allender, MD of Energy Resources
HOTEL Asia Pacific columnist, October 2003
Every year for the next 15 to 20 years, the Grand Hyatt Singapore will see an additional US$700,000 in profits. That’s not the gross figure – it’s straight on the bottom line.
Much of the credit goes to Daniel Chong, the hotel’s operations analyst, whose job it is to look at ideas designed to increase revenues and/or reduce costs.
When asked to analyse a chiller-replacement proposal, he saw what dozens of other decision-makers reading similar proposals failed to see - a commercial goldmine. GM Willi Martin and hotel manager John Beveridge also saw the potential – and gave Chong full support to see it through.
The hotel's first plan for chiller replacement was good old RIK [replacement in kind] – or, four 650-ton chillers out, four 650-ton chillers in. But - taking a holistic commercial, rather than a focused engineering, view - yielded another route: redesign the whole system.
The proposal Chong saw and which revealed this alternative path came from the hand of Lee Eng Lok, boy genius and PhD. OK, he's no longer a boy, but he remains a genius. He is not simply cited but openly lauded in such significant works as Natural Capitalism by Hawkins, Lovins, and Lovins.
Where the RIK approach was expected to produce little, if anything, in the way of savings, the holistic approach included a guarantee to produce a 30% return.
Too good to be true? Let me jump ahead in the story and tell you that the $1.5 million the owners invested in this project are now returning just shy of 45% a year. No wonder Lee was happy to guarantee 30%. With an “under-promise, over-deliver” attitude, it’s little wonder he’s everyone's favourite kind of supplier.
The proposal did not promise only a handsome payback, however - it also identified exactly how results would be measured.
And it listed additional benefits, including improved guest comfort [not deteriorated comfort, as one sees when energy saving is achieved by raising humidity and lowering ventilation rates], elimination of some nagging condensation problems, the freeing up of a nice 1,000sq ft area that would become rentable space - and all the environmental and social benefits that accompany a reduction in energy consumption.
Chong and his colleagues did not take these at face value, of course. They visited other properties that had been given the same treatment. They asked tough questions and they ran all the numbers.
One thing they particularly noted was that other users, although 100% satisfied, would not share the actual performance data of their plant. The hotel decided at that point to add one more feature to its own chiller replacement project - a means to make the performance public by sharing their experience with the rest of Singapore's hotels and commercial buildings.
While the cost of this chiller-replacement exercise was $1.5 million, another figure should also be mentioned: $300,000. That is the amount saved in capital costs from carefully designing a new system to meet the hotel's cooling needs, instead of simply buying four new 650-ton chillers.
This new system also improves reliability, reduces maintenance costs and extends the life of other parts of the hotel's plant.
If you are in any way technically minded, or if you care to get your own hotel's information from your engineering colleagues, it will amaze you to learn that the efficiency of the new chiller plant [it is monitored every 60 seconds, and can be viewed live on the internet] is .56kW of electricity per ton of refrigeration (0.56kW/RT).
Some care needs to be taken with comparisons, though. Air-cooled chillers, for example, cannot reach the efficiency range of water-cooled chillers like the Hyatt's. But this present rate of 0.56kW/RT compares with the 1.05kW/RT the hotel was living with before the replacement exercise.
As Chong likes to say, that's like having a car which did 10.5 litres per 100 km and replacing it with one giving you mileage of 5.6 litres per 100 km. Munich to Amsterdam on one tank!
The primary air-handling units replaced as part of this project weighed in with an even bigger efficiency boost - almost 10 times better than those they replaced. In fact, the combined chiller and AHU efficiency numbers are believed to be the best not only in Asia, but in the world.
Perhaps the most critical part of the entire project is the control system, which monitors performance and prevents any deviation from set efficiency levels. The most important parameters are controlled by sensors with an accuracy of plus or minus 0.3%.
Compare that with your own hotel, and don't be surprised to find it is 10 times more accurate. [Lee's company, Electric Eye, keeps watch over this control system via the internet].
What was the opportunity cost of not taking this decision earlier? How many years' worth of 45% returns were wasted? Chong is too polite to say.
If it is so good, why isn't everyone doing it?
Owners and decision makers:
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