There have been major advances in LED

lighting technology over the past few

years; but while these light bulbs (or

lamps) tend to offer many benefits, the

initial investment sometimes doesn’t seem

attractive and people are hesitant to

make the switch from incandescent and

halogen to LED. Therefore, it’s import-

ant to look at the long-term investment

and other factors that go into lighting a

facility. This white paper is designed to

help you calculate the return on invest-

ment (ROI) for a LED lighting project by

accounting for all the factors that go into

quality lighting.

LED LIGHTING CREATES INTENSITY AND UNIFORMITY

Visual quality is about combining visual

comfort with efficiency, which is a person’s

ability to perform tasks involving vision. Visual

comfort is related to the ease of seeing the

task. This part of lighting quality is subjective

because it’s based on perceptions. However,

one of the main reasons why LEDs are good

for lighting quality is because of the intensity

of illumination on the areas of interest and the

uniformity of illumination.

Unlike incandescent lamps, LEDs are

directional in nature and when combined with

a unique optic, LEDs can create a specified

beam spread; so you can create illumination in

specific areas of interest. The phosphor of LEDs

also helps with maintaining color consistency

between options. Color is responsible for

the experience people get from vision. An

incandescent lamp is a simple design with a

tungsten filament, and it produces the same

type of light with the same characteristics. You

can get many types of colors and create many

different experiences with LED lighting.

Look at the Color Rendering Index (CRI),

which is a system derived from visual experi-

ments. To achieve a good CRI, you must use

a high quality phosphor. To see if you are

comparing apples to apples with LED lighting,

1

Understanding the ROI of LED LightingQuality lighting generates revenue and supports the bottom line for organizational success

you need to look at the CRI. Reputable manufacturers want a CRI that

is greater than 80.

To achieve a quality environment of color rendition and quality

light, the R9 value (or saturated red) is an important value to look at

because it’s where LEDs are the weakest. For instance, a negative R9

value is seen in cheaper manufactured LED lamps. It is also important

to note that CRI is different than CCT.

To understand Correlated Color Temperature (CCT) for a lamp,

you need to understand that there can be a number of color

combinations used to create white light. Color is defined by degrees

measured in Kelvin (K). Traditional ranges of CCT within LED lighting

go from 2400K to 5000K. Traditional incandescent and halogen

lamps can only produce at 3000K CCT.

Furthermore, a good LED driver (or the power supply of the lamp)

gives long lamp life. LEDs need to be driven with constant direct cur-

rent (DC) power supply for to achieve their long life. You’ll also want

to invest in an LED lamp that utilizes top tier LED chips, which come

with a higher cost. However, while the array of chips affects the cost

of a LED, it provides stability against electric current variations.

Illumination intensity is typically measured in lux or footcandles,

which measures the luminous flux per unit area. One lux is equal

to one lumen per square meter. While high illumination levels may

increase efficiency, it can also cause discomfort to the user.

There are many factors that go into appropriate illumination levels,

so it’s important to get quality LED lamps to help you meet those levels

and create contentment. Otherwise, it could affect a facility’s worker

performance and guest satisfaction, thus decreasing your ability to

achieve good ROI. For instance, say a hotel doesn’t have good

light quality, it could affect guest loyalty. The same can be true for a

restaurant, because there is actually a correlation with quality lighting

and how it relates to expected food costs.

CALCULATIONS FOR ROI WITH LIGHTING

As you can see, there are many things to consider for gaining ROI

with LED lighting, such as guest satisfaction and worker productivity. If

you want to calculate the ROI for installing LED lamps in your lighting

project, we can start by breaking it down into categories—guest

satisfaction, workforce engagement, maintenance savings and finally

energy savings.

#1 – Guest Satisfaction

The National Business Research Institute indicates that when a

company retains five percent of its customers, profits can increase

by 25 to 125 percent.1 Let’s look at the amount of ROI when there’s

guest loyalty in a hotel.

2

1 Retrieved September 2015 from www.nbrii.com/customer-survey-white-papers/wise-investing-customer-surveys-and-roi

Lines of constant correlated color temperature (CCT)

Kruithof CurveD65

10000

1000

100

10

1000 3000 4000 5000 6000 7000

Color Temperature (Kelvins)

Illum

inan

ce (l

ux)

Appears reddish

Appears bluish

Pleasing

The revenue per year for a guest is $10,764 when booking

a $299 hotel room three times a year. If that guest was a

customer for 10 years, he or she would generate $107,640 in

lifetime revenue. Now imagine if there are referrals, that guest

could generate $10,764 per referral.

#2 – Workforce Engagement

Employee engagement has an economic impact on a facility.

Research conducted by Gallup stated poor management and

disengagement are costing companies money. Employee engagement

is clearly tied to the bottom line of organizational success. According

to the research, employee engagement affects the following2:

• Productivity

• Customer satisfaction

• Attendance

• Turnover

• Safety incidents

Imagine how you can achieve the bottom line by providing an

environment with visual comfort and efficiency. Research shows that

companies with higher than average employee engagement

receive 21 percent more in productivity. Let’s look at the ROI for

employee engagement for a company with 500 employees.

When focusing on workforce engagement, this company saved

$5,017,982.3

#3 – Maintenance and Energy Savings

LED lamps are relatively small, solid and very efficient. LEDs are

known to bring more value because they last longer; they last up

to 10 times longer than compact fluorescents. They are durable

because they don’t have filament and can’t be broken like an

incandescent lamp.

Most importantly though, LEDs are cost effective because of

energy savings and maintenance cost. Because they last longer,

maintenance and labor shouldn’t be an issue. This should be a big

concern for those warehouse lighting projects because replacing a

lamp is no small feat. It can take many workers with cherry pickers

and U-Haul trucks.

LEDs use 87 percent less energy than halogen lamps and have

a 25,000 to 50,000 hour lifespan. Say your facility leaves its lamps

on for 24 hours per day, lamps won’t have to be replaced for almost

six years. The following are items to consider when measuring ROI:

• Amount of hours lights are on each day

• Number of days per week lights are in use

• Number of existing and new fixtures and lamps

• Wattage amount of existing and new lamps

• Current KWh rate

• Estimated cost of yearly maintenance

• Installation cost for lighting

Let’s say you have a hotel with 300 rooms, and you’re consid-

ering taking out the MR16 halogen 50 watt lamp and replacing it

with the 7 watt LED lamp. If the cost per kWh is $.12 and the labor

cost is $.39 per lamp installation, then the total kWh saved would

2 Retrieved September 2015 from http://www.gallup.com/businessjournal/163130/employee-engagement-drives-growth.aspx3 Retrieved September 2015 from www.officevibe.com/employee-engagement-roi

3

ROI – Customer Loyalty

Average customer check/purchase............................ $299.00Visits by customer per year ................................................ 3

REVENUE PER YEAR $10,764.00

Years as Customer............................................................ 10

LIFETIME VALUE OF CUSTOMER $107,640.00

Potential Revenue Generatedby each Customer’s Referral

Referrals to others per year ................................................ 5Average purchase per referral .................................. $299.00Visits per year per referral .................................................. 3

REVENUE PER YEAR PER REFERRAL $10,764.00

Years each referral is a Customer...................................... 10

LIFETIME VALUE of EACH REFERRAL $107,640.00

Total Lifetime Value of Referrals $538,200.00

Company Size 500

Average Salary 50,000

Turnover Rate 25%

Productivity Savings 1,637,500

Absentee Savings 682,292

Turnover Savings 2,053,425

Onboarding Savings 644,766

Total Annual Savings 5,017,982

325 Campus Dr. | Aurora, Ohio 44202 | P: 800-324-1496 | tcpi.com©TCP OCT 2015/56366

TCP®

we know light.™

be 180,806; and that’s if you needed 480

lamps, had a 43 watt reduction and used

those 24 hours a day throughout the year.

As a result, you would get an annual savings

of $22,696 in energy for the hotel.4 See

example at top left.

Another example is when TCP donated

$17,000 worth of LED lamps to Lied Lodge

& Conference Center’s renovation project for

supporting conservation mission, which is to

inspire people to plant, nurture and celebrate

trees. After looking at its previous lighting

system, the lodge and conference center is

expected to save an estimated $25,000

annually in energy consumption.

The donation gave the lodge and

conference center a longer-lasting, energy

efficient light source, because it has reduced

wattages after switching from incandescent

lamps to TCP’s LED A-lamps and LED

decorative lamps. Keep in mind that

efficiency is measured by comparing the

number of lumens per watt. The switch will

not only help the lodge and conference

center to save energy, but it will also save

on overall maintenance costs due to the

long life of the lamps.

If you want to compare the different types

of lamp wattage to lumen, see the chart

below for finding energy efficient lamps.5

As you can see, there are many factors

to consider when installing LED lamps.

Therefore, it should be easy to demonstrate

the ROI just by looking at the type of environ-

ment LEDs create for customers and workers,

the type of savings on an energy bill and

the amount of savings for maintenance and

labor. Each year, as LEDs are dropping in

cost and technology develops, making that

switch from incandescent to LED lamps will

become the obvious choice.

4 Retrieved August 2015 from www.ahla.com/Green.apx ?id=357465 Retrieved August 2015 from cltc.ucdavis.edu/sites/default/files/files/publication/2013-title-24-lighting-for-office-applications-guide-may15.pdf

4

Analyzing Lamp Wattage for Energy Efficiency

NOT EFFICIENT EFFICIENT

Standard Incandescent Halogens CFLs LEDs

WATTS LUMENS WATTS LUMENS WATTS LUMENS WATTS LUMENS

40 450 29 450 10 450 5 450

60 800 43 800 13 800 9 800

75 1100 53 1100 16 1100 13 1100

100 1600 72 1600 20 1600 16 1600

300 Room Hotel MR16

50WHalogens

LED7W

Lamps

REPLACED

with

REPLACEMENT COST & SAVINGS

Cost per kWh .............................. $.12

Labor Cost (per lamp installation) ........ $.39

TOTAL kWh SAVED ................ 180,806

ANNUAL ENERGY SAVINGS .................. $22,696* That’s if you needed 480 lamps, had a 43 watt reduction

and used them 24 hours a day throughout the year.

*

HVAC SAVINGS

OVERALL COST & POTENTIAL ENERGY SAVINGS

kW Reduced ............................ 32.378

Avg kWh Rate (National Average) .... $0.12

kWh Reduced:........................ 183,706

Annual Direct Utility Savings .................... $22,044.72

Annual Total Utility Savings (With HVAC) .... $24,800.30

Annual Maintenance Savings $3,440.72

TOTAL NET SAVINGS .......... $28,241.02

Incandescent Lampsemit 90% of their

energy as heat

= Significant Savings on overall Energy Consumption Costs

LED Lightingutilize thermals for

optimal heat dissipation

vs.