Charging Ahead: A Primer on EV Charging for the Hospitality Industry

However, recent data from Hilton reveals one amenity increasingly holds sway for consumers — electric vehicle (EV) chargers.

As more Teslas, Rivians, and Ford Mustang Mach-Es fill the roads, EV charging requirements present a new challenge, but also an opportunity, for property owners. The hospitality sector, in particular, is expected to play a large role in this EV charging puzzle, as it is estimated that hotels hold nearly 15% of all EV charging points in the United States. Below, we explore this surging trend in greater detail, including the incentives and subsidies available to install EV chargers.

EV Growth, Charging Pains

EV sales have tripled in the United States since 2020, bringing the total number of EVs on the road to around three million. It is further projected that there will be 27 million EVs in the United States by 2030 and over 90 million by 2040. EV uptake is even greater abroad, where China accounts for half of all global zero-emissions vehicles today. As California and other states target 2035 as the year when all new cars have to be zero-emission, EV adoption is certainly on an upward trajectory.[1]

Historically, however, EV charging infrastructure has lagged behind EV sales, leading to driver concerns about how often they will have access to a charger when needed. The resulting “range anxiety” has hampered the more widespread adoption of EVs.[2] Certainly, the network of charging stations still pales in comparison to the number of gas stations for fueling non-EVs or hybrids, but it has been expanding to accommodate increased EV ownership. Around 130,000 public charging points currently exist in the United States, but this number will need to grow significantly to keep pace with the expected EV growth over the next couple of decades. The Biden Administration has announced a goal of building a convenient, affordable, and reliable network of at least 500,000 publicly available EV chargers by 2030.

Types of EV Chargers

Charging stations differ greatly in type and in the amount of power they can provide, so some context is needed. 

Charging Levels

There are generally three different levels of EV charging stations, based on the speed of charging:

• Level 1: These are the slowest chargers. They use common residential 120V outlets and provide only two to five miles of range per hour charged. Given their slow speed, Level 1 chargers are almost exclusively used in residential settings and make up less than 2% of public chargers.
• Level 2: Level 2 chargers can provide 10 to 20 miles of range per hour charged, which can generally recharge a vehicle in eight to 12 hours depending on battery size. More practical than Level 1, these are often the type of chargers found in commercial settings like hotels and are generally preferred residentially as well.
• Level 3 (Direct Current (DC) Fast Charging): Exponentially faster than the other two levels, Level 3 chargers (like Tesla Superchargers) can provide 180 to 240 miles of range per hour charged. However, not all EVs can be charged this way, and Level 3 charging stations are significantly more expensive to build.[3]

Charging Ports

A charging station must be compatible with a port on the EV in order to charge it. The three most common ports in the United States are the following:

• J1772: Capable of Level 1 and Level 2 charging only, all American EVs except Teslas traditionally have had this charging port. However, this older port is becoming obsolete.
• Combined Charging System (CCS): An international charging system introduced in mid-2012 by several American and European automakers. It is now used by most of the world’s car companies. Most newer, non-Tesla vehicles have an upgraded J1772 Combo/CCS port capable of Level 1, 2 and 3 charging; Teslas can utilize adapters to access CCS.
• North American Charging Standard (NACS): This was developed by automaker Tesla as a proprietary charging system also in 2012 and is capable of all three levels of charging. The main difference between CCS and NACS is that Tesla’s NACS connector is smaller, and the cable (between vehicle and charger) is more lightweight, which proponents say makes NACS generally easier to plug in and charge.

Tesla’s name for its charging system hinted at its ambition to be more widely used than just for its own vehicles, and in late 2022, Tesla announced that it would open up its charging stations to non-Tesla vehicles. Ford EVs recently became the first to have access to Tesla’s NACS network. Experts have noted that since Tesla aggressively built out a charging network that has much greater availability and is known for more reliability than CCS, NACS has become the dominant player in charging infrastructure. Consequently, almost all global car companies have announced plans to make their vehicles compatible with NACS, most beginning in 2025.

Considerations for Hotels

Hotels are at an EV inflection point and look primed to take advantage of additional customers drawn by the need to recharge, which spurs EV owners to prioritize charger availability over hotel loyalty programs. The recharge interval of a standard Level 2 charger is similar to the typical night’s stay at a hotel, and such concordance is one reason that hotel charging may be ready for greater growth.

Websites including Expedia, Kayak, Hotels.com, Booking.com, Hilton, and others now also offer the ability to filter for options with access to EV charging. Additionally, rental car companies have started to add significant numbers of EVs to their fleets, which some claim could have a downstream impact on the hospitality sector as more business and leisure travelers opt for EV rentals.[4] Advocates note that staying in front of the EV transition and providing charging points for travelers will allow hoteliers and developers to future-proof hotels and give them a competitive advantage over other hotels that don’t provide access to charging.

It is estimated that roughly 26% of all US hotels currently have chargers. Unsurprisingly, charging stations are found more often at luxury hotels (almost 90% offer), whereas only about one in five limited-service hotels offers charging, representing an opportunity for substantial growth.

Funding Options for EV Infrastructure

Though potentially expensive upfront, experts say that the cost of building charging stations is worthwhile for hoteliers because it gets new customers to stay. As the hotel business rebounds to pre-pandemic levels, these charging stations are a great way to attract tech-savvy guests. Moreover, incentives abound for installing EV chargers as the federal government and states have made charging infrastructure a high priority to tackle climate change and keep the United States competitive in the new EV era. Determining how to fund an investment in EV charging stations — whether at one hotel or thousands of locations — involves many factors including permitting, site location and preparation, software and hardware purchasing and installation, and connections to the local electricity grid. Many options are possible, but these agreements typically take one of the following forms:

1. Owner Funded: The landowner pays for all infrastructure costs, and once the charging stations are installed, the owner owns the equipment and keeps all of the profits. Most often, the landowner will pay a Charge Point Operator (CPO) that develops EV charging sites and ensures ongoing EV charging operations due to its expertise and economies of scale. Once installed, the owner can choose to be responsible for operation of the charge points like a build-to-suit, which might entail needing management and billing software if the hotel charges for the service, or pay a CPO or an Electric Vehicle Service Provider (EVSP) or E-Mobility Service Provider (EMSP) that manages both operations and drivers’ interface with the charger through mobile software apps or subscription services that provide location information and billing. CPOs are akin to back-of-office workers providing the infrastructure backbone of EV charging, while EVSPs are more customer-facing through mobile apps, though CPOs can be EVSPs as well (e.g., Tesla). Examples of CPOs include ChargePoint, Tesla, Blink, EVgo, and Electrify America. Examples of EVSPs include Driivz, ChargeLab, and EV Connect.
2. Hybrid (Partially) Funded: The owner can agree to share upfront infrastructure costs and revenue from operations with the CPO or EVSP. Typically, the CPO or EVSP would handle all operation and maintenance activities under this model.
3. Fully Funded: This option would involve the CPO or EVSP funding the full capital of an infrastructure project and also operations and maintenance for a fee while sharing revenue with the owner, though the owner may still have to do certain site preparation and other work if the CPO or EVSP approves of the location(s) for the charging stations. Commercial factors including scale of the installations, EV driver density, and proximity to highways and major arteries will influence the revenue sharing arrangement, which could be a percentage profit share or a rental fee for use of certain parking spaces.

Funding Incentives

A variety of incentives are available to the private sector to promote the development of a more robust EV charging network, at both the federal and state levels. Proponents assert that hotel companies interested in providing EV charging stations for their guests stand to benefit from these incentives.

Federal

Most importantly, the federal Inflation Reduction Act (IRA), enacted in 2022, provides an Alternative Fuel Refueling Property tax credit for up to 30% of the total costs of equipment and installation for each EV charger installed. 

1. EV charging projects installed after January 1, 2023, are eligible for a:
   1. 6% credit, subject to depreciation, with a maximum credit of $100,000 per EV charger.
   2. 30% credit, subject to depreciation, where the applicable prevailing wage and apprenticeship requirements are met, with a maximum credit of $100,000 per EV charger.
2. EV charging projects installed before January 1, 2023, are eligible for a 30% credit, with a maximum credit of $30,000 per EV charger subject to depreciation.

The caveat to eligibility for the IRA’s credits is that each EV charger must be located in a population census tract that either qualifies as a low-income community or is not located in certain urban areas designated by the US Department of Energy (DOE). The DOE has announced formal guidance, in addition to informal tax maps, to help participants project and determine their tract eligibility. These geographical restrictions complement the IRA’s emphasis on making clean energy investments accessible across the nation, not just confined to certain metropolitan areas. This initiative provides financial incentive for hoteliers to develop properties at locations outside of major hubs.

Another federal program aimed at funding the buildout of EV charging infrastructure is the National Electrical Vehicle Infrastructure (NEVI) Formula Program. Under the NEVI program, $5 billion has been allocated to the states to fund projects that will expand the national network of EV charging stations. By working with a state’s Department of Transportation, hotels located along designated Alternative Fuel Corridors can use NEVI funds to cover up to 80% of the costs of installing, operating, and maintaining publicly available DC Fast Chargers. NEVI funds can also be used to upgrade existing chargers to meet the NEVI program’s standards and requirements.

State-Level

Since 2021, at least 47 states and the District of Columbia also offer financial incentives to encourage EV expansion efforts. Below are some examples of these state-level incentives:

1. New York: Charge Ready NY 2.0 awards up to $4,000 per charging port installed at eligible facilities by public, private, and not-for-profit organizations.
2. Massachusetts: MassEVIP offers up to 60% the funding required for installing a charging port, with a maximum of $50,000 provided per street address.
3. Virginia: EV Charging Station Deployment Grants are available to private businesses and public-private partnerships to provide up $400,000 toward the installation of EV charging stations in rural or underserved communities.
4. California: The Golden State Priority Project offers 50% rebates for the installation of DC Fast Chargers. The maximum rebate amount is $55,000 for chargers with an output of 150 kW to 274 kW and $100,000 for chargers with an output greater than 274 kW.
5. Illinois: EV Charging Station Grants are available to public and private entities to cover up to 80% of the costs of installing and maintaining Level 2 chargers and DC Fast Chargers.

National- and state-level funding incentives can work in tandem with state and local regulations that increasingly require EV charging infrastructure at new developments. For example, California, New York, Massachusetts, and the District of Columbia have regulations requiring certain new buildings to provide electric charging capabilities at a minimum number of parking spaces, ranging from 10% to 25% of total spaces constructed.

Operational Models

As hotel owners and operators consider investing in EV charging infrastructure, they will also need to determine the appropriate model for operating the EV charging stations based on their objectives and guest expectations. Options include:

• Offering free charging: Under this “loss leader” model, guests are able to use EV chargers at no cost. As the goal is to attract and retain new guests, the costs of infrastructure and electricity can be offset with increased room revenues. One downside to this model is that free chargers can be taken advantage of by non-guests, including nearby apartment dwellers or office workers, if they are not walled off by “digital fences” to ensure only hotel guests can use them. This model works well with Level 2 chargers’ charging time and positively impacts brand image and loyalty.
• Fee-for-charging for cost recovery: Under this cost recovery model, hotel guests pay a fee to use EV chargers to cover operational costs (or costs including installation). This model is becoming more the norm, including to use Tesla’s charging network, so it requires a seamless experience to make it easy to pay and use.
• Charging to generate revenue: Under this model, the balance is to charge rates high enough to exceed costs and generate profits, but not so high as to discourage use. This model is ideal for those with a captive audience – and long-distance travelers staying at hotels fit this description. This model could work for any of the infrastructure funding options (owner-funded, hybrid, or CPO funded).

Recent Hotel News

Hilton, Marriott, and Choice Hotels are among the major names to recently hop on the EV surge and expand EV charging access at their properties. Hilton plans to install up to 20,000 Tesla Universal Wall Connectors (Level 2) at US hotels starting this year. These chargers will be able to charge all North American EVs, not just Teslas. Marriott has partnered with EV Connect to provide new EV chargers at 6,000 Marriott hotels across its properties in the United States and Canada, expanding its arsenal from the 5,500 Level 2 and 3 chargers it currently provides. Choice Hotels has paired with both Tesla and EOS Linx and projects that it could have EV chargers at 15% of its hotels globally in 2025. Finally, Best Western Hotels has announced plans to install Tesla’s Universal Wall Connectors across its portfolio.

Conclusion

The competitiveness of the hospitality industry requires companies to meet guests’ evolving needs. According to commentators, as demand for EVs continues to grow, hotels that provide EV charging stations will be at a strategic advantage, enhance their brand, and attract more travelers. 

As the EV charging landscape continues to expand, innovate, and consolidate, ArentFox Schiff will continue to monitor how it affects the hospitality sector in the years to come.

[1] More recently there has been a slowdown in EV sales and a retrenchment in EV production among car companies due to a number of factors, among them higher interest rates for car loans and a hesitancy among buyers due to the lack of charging infrastructure. Mike Colias, Nora Eckert & Sean McLain, “The Six Months That Short-Circuited the Electric-Vehicle Revolution,” Wall St. J. (Feb. 14, 2024). Although industry executives still believe EVs will continue to grow in popularity, expectations have been tempered in the short run. Id.

[2] An April 2023 survey by the Energy Policy Institute at the University of Chicago and the Associated Press-NORC Center for Public Affairs Research found that 80% of respondents cited lack of charging infrastructure as a reason not to purchase an EV. Madeleine Ngo, “Slow Rollout of National Charging System Could Hinder E.V. Adoption,” NY Times (Dec. 23, 2023).

[3] Level 3 charging stations can cost anywhere from around $20,000 to $100,000+ to install, with the average landing around $50,000. Level 2 chargers, on the other hand, tend to cost between $2,500 to $13,000, with an average cost of $6,000. Level 1 chargers generally cost less than $1,000, but, as mentioned above, they are not viable commercially and may become obsolete as technology improves. How Much Do EV Charging Stations Cost?, Property Manager Insider.

[4] For example, Hertz is committed to ordering 100,000 Teslas and 175,000 EVs from GM, but recent price cuts and maintenance costs have slowed this rollout. Laura Kolodny, Hertz Pulls Back on EV Plans Citing Tesla Price Cuts, High Repair Costs, CNBC (Oct. 26, 2023).