Conservation Pays Off: Creating a road map to controllable energy cost savings and material bottom-line results

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Cinemas Features

Every business asks the question: How can we save costs and operate better? Within the exhibition business, energy, water, waste and maintenance management provide an ideal opportunity to reduce costs and gain the benefits of being a better business for your patron communities, staff and shareholders. This discussion looks at how to implement an energy cost-reduction program effectively and achieve the very best results.

Operating cinemas is a challenging business. To maximize ticket sales and concessions, each location must differentiate itself as the preferred customer choice and best experience, and have remarkable staff and management to make it all happen. The focus on these critical business requirements leaves few resources to dig deeply into operations and internal costs.

Sitting below your balance sheet revenue and big cost lines are the overlooked controllable costs of energy, water, waste and their related maintenance expenses. While there are a few industry “opportunists” who have mined these savings, most operators miss this hidden opportunity, and don’t take advantage of the material bottom-line impact readily available from cost savings in these areas. The delivered value from expertly reducing these costs can compare to growing revenues by 10 to 25 times for the same bottom-line dollar impact: $1 million saved can impact your bottom line as much as $10 to $25 million of revenue growth.

So how does an exhibitor take best advantage of this waiting opportunity?

Energy and sustainability is a complicated sector with no shortage of potential solutions in the marketplace. In recent years, there has been significant, almost exponential, growth of energy and sustainability-related products, services and software solutions, creating a challenge for most operators to determine what to do, with whom, and in what order. Most cinema operators just can’t afford to cover the cost of having the substantial in-house “Energy and Sustainability Expertise” required to fully exploit the available opportunities.

Industry experts such as McKinsey1 agree there is no “silver bullet” energy and sustainability solution that will produce the results that companies are trying to achieve. The most successful organizations have shown that the best results are achieved only by adopting many diverse solutions, optimized to local criteria (facility age, utility incentives, energy rates, etc.), implemented in the right order over a relatively short period of time. These industry leaders, from all types of multi-facility operations in food service and retail, have demonstrated that the benchmark for organizations with comprehensive energy and sustainability cost-reduction programs is a minimum of 20% savings over a two to three-year period. Such performance is illustrated in the summary below of the results achieved by a major retailer’s energy-savings program.

Achieving significant material results in energy and sustainability requires three pillars that form the foundation for building and managing an effective program:

1. A strong organizational governance platform to establish goals and targets, policies, accountabilities and responsibilities.

2. An information management platform that ensures data is readily available and results can be reported on a regular basis (including tracking of consumption, spending, customer experience standards, building details, performance targets, etc.).

3. A repeatable process for efficiently and quickly selecting, testing and implementing the best opportunities that deliver maximum savings and other benefits.

With dozens of potential savings areas available, it is essential to leverage the expertise and knowhow of a broadly skilled team to map out the program strategy and to prioritize systematically the myriad of potential solutions. Equally, the program guidance needs to be on “your side of the table,” acting as an impartial and industry-savvy advisor to the program, either as part of the core operations team or with a third party that acts directly for you. Maximizing the results from this space requires having expertise within the energy, water, waste and maintenance sectors, regional knowledge of utility rates and incentive measures and programs, and specific cinema-related business, customer and technology/equipment experience and knowhow.

Very large organizations have the requisite energy spend and business scale to justify in-house teams focused on energy cost savings and program management. Businesses below this scale can still achieve industry-leading results with a third-party partner that brings the necessary breadth and depth of expertise—at a practical cost.

Energy Advantage has developed an energy and sustainability service that delivers what most businesses, and exhibition operators, cannot do alone. This service offering is based on decades of helping companies efficiently navigate and save costs in the energy and sustainability markets, along with continually adapting to the business needs of today.

With proven success in taking this approach to multi-location and jurisdiction customers including major retailers, grocery chains and restaurants, we are now building program pillars and launching early-stage pilots for select exhibitors wanting to prove out the results they can achieve from their controllable energy and sustainability costs.

First-step pilot sites are delivering a double win in generating material operational cost savings and reducing customer comfort complaints for a better-quality experience. These results are being analyzed for broader rollout and gains circuitwide. From here, the process repeats to determine the next best thing in continuing the saving and improvement process.

Bill Walker, chief operating officer of Canada’s Landmark Cinemas, reflects on their program: “We don’t have the size to warrant hiring a dedicated energy manager. Having a partner like Energy Advantage on our program has allowed us to identify and investigate areas of savings that we would otherwise not have been able to get to.”

The exhibition business is getting ever more complex, with auditorium upgrades, continually advancing presentation technologies and ever-expanding food and beverage offerings—all of which add additional complexity and underlying controllable costs that will benefit from the right steps and guidance of a true energy and sustainability program—while improving the status-quo bottom line. The opportunities are there to be taken, or missed—what are you waiting for?

1“Turning down the cost of utilities in retail,”Levi Hetrick, Steve Hoffman, Steven Swartz; McKinsey and Company—Operations Extranet, June 2015

Luke Ferdinands is an energy and sustainability professional with Energy Advantage, a leading solution provider for savings programs in energy, water, waste and maintenance costs. He can be reached at luke.ferdinands@energyadvantage.com.

Paul Panabaker is transferring his years of technical cinema innovations into rethinking and remaking exhibition operations and efficiencies. He can be reached at ppanabaker@energydimensions.ca.