In my conversations with suppliers I often hear complaints about their potential customers being hesitant to invest in green equipment, systems or software with a very reasonable ROI. It is no news that hoteliers can be a thrifty bunch, but suppliers must sometimes wonder if their customers just don’t understand the kind of cash they could be saving. Some investments are simply “no brainers.” Perhaps suppliers are also guilty for not clearly making their case?
Fortunately, new finance options come along every now and then to make the capital investment discussion easier for suppliers and hoteliers. For example, PACE financing is one mechanism that has been featured in Green Lodging News in recent years. PACE programs allow a property owner to finance the upfront cost of energy or other eligible improvements on a property and then pay the costs back over time through a voluntary assessment. The unique characteristic of PACE assessments is that the assessment is attached to the property rather than an individual.
This past week I wrote about a unique subscription payment model being offered by a company called Sparkfund. With Sparkfund, an off-balance sheet, OpEx payment covers installation, repairs, monitoring, and ongoing service, with no upfront costs. Sparkfund removes the risk of having equipment fail by guaranteeing that it will function as promised through the entire contract term. Sparkfund works with contractors around the United States who handle the actual purchase, installation and ongoing maintenance.
“We believe at this point the market for contractors is very well established and we partner with the best ones,” says Asher Burg, Chief Revenue Officer for Sparkfund. “We become the cash customer for the contractor.”
AD1 Global Finds Value in Subscription Model
Orlando, Fla.-based ADI Global has been using Sparkfund to finance upgrades at the 20 hotels it owns and manages. ONPEAK is the contractor. PTACS, thermostats and LED lighting are some of the items that have been financed. “We are always looking for ways to save energy,” says Daniel Berman, President and CEO of AD1 Global.
Sparkfund has partnered with utilities to raise awareness of its payment model. In just five years the company has worked on projects in 46 states. “We earn a margin on the project—an origination fee,” Burg says. “From a customer standpoint it is a great model.” Burg adds that even equipment as large as cogeneration systems have been financed.
Sparkfund will initially do a walk-through of a property, then bring in a partner such as ONPEAK, then put together a proposal. “We put together a master technology subscription document—terms of agreement,” he says. “They sign a statement of service—a flat monthly payment. We propose a term equal to the equipment life. At the end of the term they can upgrade, extend or take ownership of the equipment.” Customers can terminate the agreement at any time but there are fees for doing so.
Burg says the biggest challenge his company faces is education regarding the subscription way of doing business. He encourages hoteliers to be open-minded about the new finance options brought to the market. “Fundamentally, it is a lower cost way of doing business,” he says.
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