The greening of the hotel industry

By Jose Pepito E. Zabat III

First Published in Business World (12/10/2012)

Globally, the hospitality industry has been showing significant recovery and growth, with better performance indicators and increased capital investment. While recovery was somewhat derailed in the latter part of 2011 — due to events such as the Arab spring, natural disasters in Asia, the downgrade of the US debt rating and the European debt crisis — it is expected that recovery will continue. These findings were reported in the recently released Ernst & Young Global Hospitality Insights publication titled Top Thoughts for 2012.

While the report covers numerous aspects of the hospitality industry, an area of particular interest is the subject of “Green Hotels” and how the trend towards sustainability is becoming a new standard in the industry.

Driven significantly by global consumer awareness, hotels, resorts and lodging industries are now integrating green strategies into their design, construction and daily operations. The expectation is that companies that do not adhere to environmental or sustainability standards will eventually experience lower occupancy and resale values. This direction is further supported by the existence of numerous green certifications, including Leadership in Energy and Environmental Design (LEED), Green Globe, Green Key, Energy Star, Green Seal and the Sustainable Tourism Eco-certification Program (STEP). The LEED certification, in particular, has been adopted in over 30 countries, with 96 lodging properties achieving certification and 1,100 projects registered and working towards it.

While certifications are important, it is also significant that hotel owners and operators can already take steps to reduce the negative environmental impact of their operations. Some of these may include energy and water efficiency, waste reduction and management, and sustainable and local purchasing. Part of this effort can pay off in terms of enhanced guest comfort, such as indoor air quality, access to daylight, and better control over thermal environments. In fact, a number of hotels around the world have already created programs to manage their sustainability efforts.

A green hotel can reap significant savings and cost reductions. Consider these: green buildings use less energy, emit less carbon dioxide, use less indoor water and generate less solid waste. These can impact the bottom line in the areas of utilities, property operations and maintenance. The Ernst & Young report noted that, in 2011, a leading global hospitality company announced the results of its sustainability measurement program and cited savings of more than US$74 million in utility costs since their program began in 2009. This came about through a 6.6% reduction in energy use, 7.8% reduction in carbon output, 19.0% reduction in waste output and 3.8% reduction in water use.

Nevertheless, there is still some resistance to “green conversion” primarily due to the common perception of high costs and that the return on green investment may take longer than what developers expect from their investment.

The good news is that new developments in technology, processes and support have lowered the cost of investing in materials and methods in compliance with green standards. Studies have shown that the cost savings from just the first few years of operation can already compensate for the additional initial costs, such as alternative materials, related fees and structural changes. This is on top of related benefits accruing to the hotel through greater guest satisfaction, employee engagement, and of course, a positive and highly marketable brand position for the hotel itself.

In the Philippines, the trend towards green operations has begun. At the ASEAN Green Hotel Recognition Award held in Indonesia last January 2012, two Philippine hotels received awards. Some of the criteria for this award include environmental policy and actions for hotel operations, use of green products, collaboration with community and local organizations, human resource development, solid waste management, energy efficiency, water efficiency, air quality management (indoor and outdoor), noise pollution control, waste water treatment and management, and toxic and chemical substance disposal management.

For hotels that are part of an international chain, green practices may be mandated by the global parent entity. One such example is a luxury hotel in Metro Manila which has adopted a sustainable development program in accordance with the global group’s goals to change production and consumption patterns to protect our planet, its people and the environment. These practices include waste management disposal, water recycling, and using more energy efficient equipment such as energy saving chillers and light-emitting diode (LED) lights. It has also shifted towards locally grown organic products, and supplier accreditation includes environmental considerations on organically grown produce and livestock. The hotel is also looking to set up an organic garden on its rooftop.

For the international lodging industry, sustainability is no longer perceived as just a public relations campaign; it has become a strategic means of managing operating costs and enhancing the satisfaction of stakeholders, including guests and employees. More hotels are also implementing company-wide programs that include full disclosure of sustainability reports to customers, shareholders and government regulators.

The hospitality industry, much like other sectors, still has a long way to go on the road to sustainability. There are still obstacles, such as the fact that some vendors and other components of the supply chain are unable to provide sustainable product offerings. There is also still some confusion as to how to adapt to certification requirements without incurring consulting costs.

Some operators believe, however, that it is only a matter time before governments around the world mandate sustainable development and operations. Hotels and lodging companies that begin “greening” their operations and working towards certification now may be able to mitigate future compliance costs. More significantly, proactive guests who demand validation of a hotel’s “green operations” will certainly be easier to please.

Jose Pepito E. Zabat III is a Partner of SGV & Co.

This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinion expressed above are those of the author and do not necessarily represent the views of SGV & Co.