Today, sustainable development is an integral part of corporate strategy in the hotel sector throughout all stages of development. From the construction of buildings to the property management, and of course training staff and implication in the local community, sustainable initiatives have multiplied in recent years and the race to obtain labels has intensified. Nonetheless, within an economic context that is not always propitious to investments, the normalization of this type of development raises the question of its profitability. While it contributes to improving corporate image for increasingly demanding clientele, its financial benefits are not always evident and even less immediate. Under the current circumstances, is it possible, to realistically evaluate the pertinence of the CSR policy in financial terms? Hospitality ON takes a look.
“I believe in the idea that by doing something good for the planet, we will attract more clientele” said Caroline Tissot, Group Chief Procurement Officer, AccorHotels, at the Global Lodging Forum in 2017. Increasingly consensual, sustainable development also proves to be an important asset for marketing, but that’s not all. While this undertaking currently strengthens a property’s image with respect to existing clients – and even attract new ones – it also contributes to reducing costs, particularly in terms of energy. According to a survey realized by the observatory OlaKala in 2013, this was a key factor for 60% of hoteliers surveyed, and represents a leading argument in favor of a responsible commitment. In addition to reducing the environmental footprint, energy savings contribute to limiting costs for property management, thereby compensating for investments connected to implementing more costly technology. Today a great deal is being done to reconcile responsibility and profitability from the construction stages.
Green buildings, cornerstone of sustainable development
The first lever in a responsible approach lies in the construction of green buildings which is one of the key challenges for the hotel sector. In addition to standards and regulations implemented by the government to limit the environmental footprint, such as RT 2012 (Regulation Thermique Française), many hoteliers have now adopted certified green building procedures. Developed in the 1990s, the HEQ (High Environmental Quality) program is the most widespread concept in France and involves phases of programing, conception and realization for new build and renovated buildings. It is based on various performance criteria ranging from choice of materials to energy management including building procedures and the quality of the worksite, and favors the durability of the project while improving the property’s comfort. Whereas the HEQ program targeted energy consumption of 75kWh/m2/year, the new version known as THQE, for Très Haute Qualité Environmentale, requires consumption of 50kWh/m2/year. Completed in 2011, the Suitehotel in Issy-les-Moulineaux (close to paris) is one of the first hotel properties to receive HQE certification in France. The quality of insulation, the choice of equipment and the use of steam produced by a local factory allow the hotel to reduce energy consumption by close to 30%. Despite a higher cost, originally estimated at an additional 20%, HEQ practices have developed extensively. “Today, HEQ subjects have become standard, and no project is conceived that does not include the new standards in terms of energy efficiency and user comfort,” remarks Joanna Rebelo, Responsable Construction Durable et Environnement at Bouygues Construction Rénovation Privée, before adding: “We are currently trying to change production systems, and are also working on the sanitary quality of products and materials used. We tend toward materials that are more natural and less energy consuming.”
The implementation of sustainable construction solutions also implicates the use of materials that are ecological and derived from renewable resources for the foundation of hotel properties. Innovation is no exception: the Maya Boutique Hôtel, recognized at the Worldwide Hospitality Awards 2016, was built using bales of straw, resulting in better insulation end savings in electricity. Similarly, Ecolodge La Belle Verte adapts the building method of wattle and daub from the Neolithic era for its walls. Another example hails from Portugal with the Ecorkhotel Evora Suites & Spa, where primary raw material is cork, which is available in the territory around the property and of which Portugal is one of the leading producers worldwide. Modular construction can also combine ecology and quick construction, as may be observed in the initiative of the Balladins brand starting in 2014 with its assemblage of wood panels. The brand Eklo Hotels, created in 2013, also focuses on wood in its eco-responsible approach and explains its importance in the construction process: "Wood is a sustainable resource and a natural captor of CO² which requires little energy for its transformation. It makes it possible to realize constructions with low greenhouse gas emissions. Wood is a performance material. It has better stability in case of fire than traditional building materials. Offering excellent thermal insulation it helps save energy and offers real comfort. Wood is recyclable at the end of its lifecycle and is entirely biodegradable." It is not about producing a semblance of a luxury ecolodge, with photovoltaic panels and materials that are hard to recycle, but anticipating the reuse of materials within a long-term outlook. This philosophy is also supported by Jean-Eric Fournier, Head of Sustainability at Foncière des Régions, for whom “environmental certifications enhance the value of a building in the long term”, thereby limiting its obsolescence.
Nonetheless, construction is not the first step for ardent supporters of "100% sustainable". The development of green buildings is completed by associating management methods that have an end result of reducing energy consumption and adopting more ecological alternative solutions at different levels within the properties in question.
Implementing sustainable management systems
First of all, reducing energy and water consumption constitutes a lever for both decreasing costs due to wastefulness and arguing in favor of green positioning. The Carlson Rezidor group made no mistake when it started its Think Planet program, targeting additional costs due to poor energy management at its hotels. In practice this initiative resulted in the installation of 6,000 LED lightbulbs that respect the environment at the Radisson Blu Hotel Oslo Scandinavia, and the implementation of a root irrigation system at the Radisson Blu Resort Sharjah, reducing water consumption at the property by 30%. Moreover, a partnership with the firm Agrivalor allowed the Barrière Ribeauvillé to use biogas produced by agro-food waste to heat its balneotherapy spa.
Sustainable management concerns not only supplying with natural resources, but also foodstuff. This is particularly true for F&B divisions which require high investment, and where financial losses due to food waste can rapidly add up to hundreds of thousands of euros per year. Control of such waste is achieved through adequate staff training with respect to the ecological challenges so that their good practices contribute to this environmental momentum. Thus AccorHotels’ Planet21 has fully understood the lost earnings for this sector with its effort to reduce food waste at the group’s hotels by 30%, while focusing on local products. A concrete way to outline its implication in the local industry consists of producing food for restaurant guests on site. Recently this has resulted in garden rooftops at hotels: gardens have taken root and begun to grow, shortening F&B circuits and giving clientele fresh and quality products.
In this sector, the Paris property Pullman Tour Eiffel presents itself as a fine example of responsible hospitality with homemade products in its brasserie, reused rainwater and special emphasis on composting natural products. A pioneer in the field, the group Lucien Barrière offers locavore menus in nearly all its restaurants, and moreover developed specific menus for the COP21 based on seasonal local products, at some of its properties. "Of course we work with organic products, but we are also committed locally, with small and midsized producers. Such businesses are also interesting because of their reactiveness. Local businesses are able to provide efficient solutions more quickly," explained Philippe Emprin, Procurement Director, Groupe Barrière, at the Global Lodging Forum 2017.
Here and there, a few alternative concepts have sprung up, such as the installation of beehives at Lucien Barrière properties, and Fairmont where the 'Bee Sustainable' program led to the installation of hives the grounds at the chain’s properties, and also the hotel Le Germain Charlevoix (Quebec, Canada) where the organic vegetable garden and the ecological farm are the primary producers for its gastronomic restaurant. Moreover, the Canadian property offers its guests tours in order to show them the quality of products and the challenges of such an environmental policy.
Involving clientele and the local community
The last example illustrates the potential of such an approach: in addition to encouraging the use of local products, to be part of a territory and even a gastronomic region or terroir, it offers a way for clients to participate in this green initiative. For a supplement – maintenance of the garden and the salary of the gardeners are more costly than outsourcing products from distant suppliers – guests may participate in supporting the community and developing local ecological initiatives.
This is nothing new: many hotel properties offer guests the possibility of reusing their bath towels during their stay. The brand Radisson Blu is a pioneer of this new trend with its Blu Planet program which donates the savings realized to associations. The goal is not just to increase awareness of the benefits of this ecological reflex, but to also provide a grasp on the social reach of it: as Inge Huijbrechts, Vice President Responsible Business at Carlson Rezidor explains, "What we have learned from research by our marketing department is that people are interested in environmental problems, but only when they understand either the social dimension or how it is useful to them. We based ourselves on this observation for our Radisson Blu properties where we connected our towel replacement program with a social cause. For each towel reused at our hotels, we make a donation to an association. We connect our customers’ actions to a social cause. By doing this, we observed that the percentage of towels reused increased by 20% to 30%. Social impact provides incentive."
In the same area, LuxResorts also asked its guests to pay an extra 1€ to develop ecological solutions: its program Tread Lightly donates the sums collected to the development of green energy (photovoltaic, hydraulic, biomass) at its properties that are trying to reduce their CO2 emissions. Similarly the use of local water with bottling done in house, wines with low carbon content, technology to reduce paper consumption, economic and ecological lighting with LED lightbulbs… are all levers for Tread Lightly thanks to the commitment of guests.
Thus clients are directly involved, at properties that act like laboratories waiting for financing. Finally, the installation of charging stations for electric vehicles is widespread in France and Europe since 2016, particularly under the aegis of the automobile manufacturer Tesla: there are many in France, including at the hotel Le Vallon de Valrugues, within the Barrière Le Westminster Le Touquet, and at Maranatha. In these cases the customers themselves incite new developments from hoteliers wishing to maintain their clientele.
Although these innovative measures – once taken in reaction to eco-responsible trends within the hotel market – are now firmly established, they are also becoming increasingly proactive. In the field of construction, this means through anticipation: it is important to “foresee that the building will be subject to certification” reveals Éric Fournier, Director Sustainable Development at Foncière des Régions, and thus integrate the inherent costs upstream. The aim is for transparency for investors and clients: “We always operate under certification so that the environmental performances of our buildings are visible,” he concludes.
After analyzing motivations and outlining the contours of these different initiatives that are integrated at different levels of the properties in question, it is important to understand whether or not these developments constitute profitable investments, or if it is a necessary evil for most hoteliers offering these services.
Quantifying the return on investment: feasible?
The first observation that must be made is the difficulty inherent to quantifying the profitability of such measures. The balance sheet or financial results of a hotel property cannot outline the net benefits of such investments, because while they result in a larger clientele base, it is difficult to understand which part of this added-value is a direct result of eco initiatives. This is particularly true for “long-term” initiatives foreseen by Jean-Éric Fournier: how can one reasonably imagine estimating the value of something in the long term within the framework of certified constructions aimed at limiting obsolescence?
Nonetheless, actions taken in to save water or energy are more easily interpreted in terms of accounting. "For Think Planet, we measure environmental indicators each month, we know the level of efficiency of each of our hotels," assures Inge Huijbrechts. "We invest in technologies that are profitable within 5 years. We have been doing this since the beginning and have been able to see results. Our lighting technology (LED…) for example are profitable in under two or two and a half years. These returns are easy to quantify by looking at the investment and the environmental performance indicators."
The Think Planet program by Carlson Rezidor estimate the profits from its efforts in three points: profits from water and electricity conservation and the use of sustainable materials. As examples it gives the African property Radisson Blu Hotel Accra Airport, in Ghana, and mentions that it saw its energy bill drop by 21.9% and its water consumption drop by 23.5%, for net benefits of approximately $14,500 per month. In terms of profitability, AccorHotels’ program Planet21 aimed to reduce garbage and food waste by 30%, as mentioned above: the group announced that its property Sofitel Bangkok (Thailand) produced $80,000 in savings with 80% less waste per dish. It is thus possible to calculate the benefits of such environmental initiatives when their impact is not negligible and a real plan of action has been implemented and followed, and its results are analyzed and communicated. With this observation, it is not surprising to see divisions dedicated to sustainable development within the organigrams of hotel groups.
Nonetheless, while these figures make it possible to measure the return on investment, what may be said about other environmental initiatives – training of personnel, shortening of production lines, use of vegetable gardens – where the benefits are all the more difficult to quantify in that they have an impact on demand and thus eventually revenues generated by an offer that is generally more ecological?
Collateral benefits of such measures
Moreover, these developments towards a “greener” hotel industry generate other economies, even though they were not necessarily expected: "More generally speaking, we have noticed that our responsible measures have a positive impact, but it is difficult to quantify," concedes Inge Huijbrechts. "We cannot measure it specifically within our properties, but studies have been made by several universities that showed there is a connection between sustainable practices and employees’ loyalty.” One of the benefits is a reduction in employee turnover by 3%.
While this does not clear up the question of the profitability of such investments, these explanations show that hoteliers’ motivations are not limited to a simple return on investment. Some see it as a necessary expense in order to stand out from properties that are not hopping aboard the sustainability train; they even see it as a way to stay in the race within an industry where clients are proving to be increasingly attentive to ecological services offered as part of their stay. Alex Rawson, Vice President Talent Development at the Swiss group Mövenpick maintains: "Sustainable development is very important. Of course it leads to additional costs, but today consumer expects a sustainable organization. Increasing numbers of travelers and organizations request proof of our commitment to sustainable development before signing a contract." In this sense, the return on investment does not correspond to the economic definition of the term, but rather to unrealized losses that could have occurred if those initiatives had not been taken. The same is true for the development of adapted menus at the F&B division of today’s hotels, where vegetarian and even vegetalian menus, organic and gluten-free products reconcile the health, nutrition and diversity the diets of informed clientele. For example, Cyril Aouizerate’s MOB Hotel, developed at the Saint-Ouen Flea Market north of Paris, is intended as a humanist hotel with a focus on locavore and organic trends, this philosophy is well developed in the hotel industry.
Moreover, it is not by chance that many environmental actions implemented by hoteliers respond to the needs of clients themselves, and are the result of studies carried out by these brand’s marketing teams: by satisfying new needs, properties ensure they have won over the favor of this clientele while strengthening their own brand image. "It can no longer be said that sustainable development is just a passing fashion," summarizes Christian Mantei, Directeur Général of Atout France. "For national and international tourists, recycling, sorting, saving water, eating greener... they are all "eco" gestures that have become commonplace and are not so demanding. They are fully appropriated particularly by younger generations that have grown up with a “natural citizen’s” approach."
The sustainable hotel industry thus acts on several levels: at the construction stage, focusing on methods and sourced materials; in the operational phase by developing sustainable management measures in connection to clients and employees. But by speaking only about the constructors and operators of hotel properties, it would be all to easy to exclude investors who, nonetheless, also play a very important role in the development of ecological initiatives. This is the case of Foncière des Régions, whose real estate investment strategy is part of a “materiality matrix” centering on four principles: “make the property evolve in order to integrate the changes that affect sustainable building, customs and health; build a more intelligent, convivial and sustainable city; diversify and develop the loyalty of our human capital; guarantee ethical practices.” This CSR policy as applied by investors shows very well that the hotel landscape and all the actors are following the trend towards environmental responsibility.
So, while the environmental measures that make it possible to economize – especially by limiting waste and using water and electricity parsimoniously– the installation of the technologies that support them often cost more than the financial benefits they bring in the short term. Nonetheless, they result in a positive impact on other levels: valorization of brand image, customer and employee loyalty, local and governmental aid, attraction of a younger clientele who is more conscientious about environmental challenges... All these elements are vectors of financial durability for the brand that benefits from it. The latter must therefore believe, without necessarily seeing, that profitability does not exclusively mean financial compensation, even less so within the framework of investments spread out over the long term – as is the case for those that were realized in terms of employee training or ecological construction. Their profitability lies more in the development of a more complete offer in terms of ecology, and the commitment of many actors (employees, investors, builders, clients) within a context where not following changes in the market could even cost a lot more...
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