In earlier postings we have introduced the UK’s Carbon Reduction Commitment (CRC). This posting is a brief look at how the hotels sector will be affected by the CRC.

Since the test for whether or not a business falls inside or outside the CRC Scheme depends on the 2008 electricity consumption for the Scheme. it is likely that many hotel businesses will have to comply with the Scheme. The first step is to determine their group structure on 31 December 2008 and decide whether or not the parent company will take responsibility for compliance or whether this will be done by one of the group’s UK companies.

The next thing to establish is where the half hour electricity meters were located in 2008 and whether or not more than 6,000 MWh were consumed by the group in the UK in the calendar year of 2008. There is little doubt that substantial chains of hotels will easily exceed this target and will be subject to full CRC Scheme compliance. But there are complications which depend on the structure of the hotel business in question.

For hotels run under Hotel Management Agreements (HMAs) the vital question will be who signed the electricity supply agreement. In our experience with HMAs, this will almost always be the hotel operator and the operator will need to consolidate all of its UK business energy consumption figures for the CRC Scheme year starting in April 2010 and comply with all the reporting requirements, etc.

Hotels operating under franchise agreements where the franchisor specifies how premises are to be used and equipped will be subject to compliance via their franchisor. This will apply even though the franchisee signed the electricity supply agreement. Franchisees’ obligations under the CRC Scheme are to provide information to franchisors who will have the compliance burden.

For hotels which are leased, the important question will be whether the landlord or the tenant signed the electricity supply agreement in 2008 to determine whether or not liability falls on landlord or tenant for compliance of the first phase of the Scheme.