UK energy hike a salient indicator
Hotels and restaurants should brace themselves for sharp rises in their fuel bills, as both domestic and global events have made the markets for oil, gas and electricity "unstable and volatile".
Chris Arnold, senior purchasing executive for Best Western buying consortium Beacon, warned that the crisis in Iraq, the labour strike in Venezuela and the poor performance of the FTSE could all drive fuel prices higher.
"They all lead to a perceived nervousness that there could be a shortage of supply in the market, and the risk of a supply shortage drives prices up," he said.
Closer to home, consolidation in the UK utility market meant there were fewer players and therefore less competition to keep prices down.
Arnold said oil and natural gas prices had risen by 10% in the past few weeks. The price of gas, the most volatile fuel, almost doubled between 1999 and early 2002, at a time when hotels were suffering from the impact of the foot-and-mouth epidemic, the 11 September tragedy and widespread flooding.
"In 1999, prices were very stable and people did not feel the need to shop around," he added. "Now, they have to, in order to get the best rates."
Arnold said the demand for Beacon to use its buying power to negotiate utility rates for members has risen by 75% in the past year. Beacon currently buys for 320 Best Western hotel members, plus 2,000 other leisure firms including hotels, restaurants, golf clubs, nursing homes and pubs and clubs.
Beacon's utility consultant, Inenco, is advising members not to renew contracts until the war in Iraq is over, but to do so afterwards before prices climb any higher.
They should also consider fixing rates across two-year rather than one-year deals, to remove the risk and allow them to budget with more confidence - although they could lose out if prices did fall during the period.
24 March 2003