REPORT FROM THE U.S.—Once confined in a separate silo, the notion of sustainability has spilled over and is becoming ever more engrained in all aspects of hotel development and operations.
The green thumbprints are easy to spot. Companies such as Marriott International and Hyatt Hotels Corporation have mandated new construction and major renovation projects adhere to the U.S. Green Building Council’s Leadership in Energy and Environment Design guidelines. In day-to-day operations, meanwhile, franchisors such as InterContinental Hotel Group are providing owners with a wealth of resources to monitor and improve carbon footprints. In IHG’s case, such efforts are done in part through its proprietary Green Engage platform, which offers more than 200 “green solutions” for franchisees.
The reasons for this sea change are many. Regulatory mandates are certainly one. Public acceptance (and appetite) is another.
Above all else, sources said, is sustainability’s appeal to the almighty bottom line.
“The bottom line question now is, is there an (return on investment) on this sustainable design decision that I can recognize without sacrificing the guest experience?” said Blair D. Hildahl, COO and principal of Base4, an architecture and project management firm.
The widespread adoption of LED lighting provides a case in point.
“Five years ago, almost none of the hotels we designed included LED lighting because of the initial upfront cost,” Hildahl said. “However, the technology has made considerable gains driving the cost down. In 2014, I would estimate that 90%-plus of our hospitality projects took advantage of LEDs.”
The technology is a clear cost-savings play that is easy to understand, he explained. Others might tout the value of sustainability within the context of corporate social responsibility—that is, sustainability points to a larger responsibility to ensure a healthy planet.
Luxury hotel chain Belmond is one of them. The company has partnered with the Sustainable Restaurant Association for ratings of all of its on-site restaurants because that’s what the group’s “intelligent, well-travelled and well-informed” guests are looking for, Chief Marketing Officer Ralph Aruzza said in an email.
“Our products are located in some of the most culturally and environmentally significant locations in the world, and sustainability and social responsibility have always been at the heart of what we do. We undertook this assessment with the Sustainable Restaurant Association because we wanted to find out where we are today, how to improve and how to communicate what we are doing to our guests,” added Belmond’s president and CEO, John Scott, also via email.
While those goals matter, their might often is overshadowed by pure dollars and cents, Hildahl said.
“Sustainable development will continue to grow in our industry as long as the technology continues to make sustainable elements easier and cheaper to instate,” he said.
That was one of the motivating factors behind IHG’s Green Engage, which launched in 2006. The brand standard can deliver energy savings of up to 25%, according to Paul Snyder, the company’s VP of corporate responsibility and sustainability.
“Hotel owner interest in sustainability continues to increase,” he said via email. “We know that what makes environmental sense also makes business sense, and our owners know that, too. As the No. 2 line item on a hotel (profit and loss statement), energy savings drive operational performance. Additionally, the hotels' sustainability efforts are helping them win more business through the RFP process, so the business case makes itself.”
Maxime Verstraete, VP sustainability for Hilton Worldwide Holdings, noted a similar increase in interest.
“We have seen owner interest increase over the past year,” he said via email, “and we anticipate it will continue to rise.”
Leaning on LEED
The number of LEED certifications provides a good glimpse into owners’ stomach for sustainability, Hildahl said.
“In recent years, I would say that interest has held steady. Prior to 2008, we were seeing much more interest from owners and developers in pursuing LEED certification on a new hotel. Although the hotel industry has recovered since 2008, we are seeing that hotel developers are being more conservative in the design decisions they pursue,” he said.
His experience mirrors data the USGBC provided to Hotel News Now. The number of certifications has largely held steady during the past five years.
There are now 264 LEED-certified hotels worldwide and approximately 180 in the U.S. according to the most recent data. (Note: Some projects are not listed for reasons of confidentiality.)
“(Revenue per available room) and occupancy numbers are very strong right now, but land and construction prices are also on the rise,” Hildahl said. “Because of this, I think most developers are less worried about a LEED-certified plaque and more interested in making design decisions that are good for the environment and their bottom line.”
For instance, his Base4 team has worked with owners who have abandoned the LEED certification process because of the extended design and development timeframes required to submit paperwork and undergo an USGBC review. However, that doesn’t mean those owners are also abandoning sustainability.
“We have, however, had many clients initially pursue LEED only to decide later that it will be better to keep many of the sustainable design measures included in the design but not worry about achieving a formal rating with the USGBC. This limits the paperwork and review time but also gives them the benefits of having sustainable design measures included,” he said.
To its credit, the USGBC has responded with its LEEDv4 framework that makes the certification process faster and easier for owners, according to Melissa Baker, VP of technical solutions at the USGBC.
She noted the biggest misconception with LEED certification is the high cost to achieve with little ROI or reward—a misconception that has been debunked by several studies, most recently from the Center for Hospitality Research at Cornell University. In “The impact of LEED certification on hotel performance,” the authors found that LEED-certified hotels obtained better financial results as compared to their non-certified competitors for at least the first two years after certification.
When asked how much LEED certification costs, Hildahl said it is hard to estimate given so many unique variables for each project. “In general, to get a typical prototypical mid-scale hotel to LEED I think you would typically be in the $350,000-$450,000 range,” he said.
Hilton’s Verstraete admitted those costs do hinder some developers from pushing their projects to the next realm of sustainability. That’s particularly true for owners looking to trade assets before they can realize the full cost savings, he said.
Snyder noted the same in the IHG system but added that hoteliers need not spend a lot of green to be green.
“One of the biggest misconceptions is that becoming more environmentally sustainable is an expensive endeavor for businesses. We've worked to combat that misconception through IHG Green Engage. Once a hotel enters their current energy, water and waste data into the system, the hotel is benchmarked, and Green Solutions are recommended to help the hotel reach their sustainability goals. The program provides the estimated cost and return on investment.
“I think many hotels are surprised by the simple actions they can take and the instant savings they can see.”