Can ESG Support Future Proofing Your Hotel?

一    Tiffany McGrath
|    April 2, 2023

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Can ESG Support Future Proofing Your Hotel?

Navigating embodied carbon, emission, green cities, and regulatory frameworks can be a minefield. Buildings account for 60% of city emissions, and policy and regulations lag behind science, yet buildings are critical to the energy transition.  

Research commissioned by ITP highlights that the hotel industry must reduce its carbon emissions by 66% by 2030 and 90% by 2050 to stay within the 2˚C threshold agreed at COP21. We all agree this will not happen overnight but will happen if we achieve stepping stones along the way.

Start future-proofing your business, and get certified with globally recognised certifications (ISO, LEED, BREEAM) to remain competitive.  Implement Sustainable operations and remain attractive to investors.

Hospitality investors see ESG as a critical component of their investment decision-making process, according to JLL and the Energy and Environment Alliance (EEA) survey.

Engagement concerning ESG has increased.

Highlights from the survey include:

  • 53 % said sustainability-related due diligence is critical 
  • 47% said a more sustainable hotel would influence trading performance by achieving lower utility costs. 
  • 55 % of respondents would expect to pay a premium for a hotel on the NZC50 pathway. (Net Zero Carbon Emissions by 2050)
  • 63 % would still buy a hotel, not on the NZC50 pathway, which reflects the buyer pool for hotels where most are private equity and high net worth.
  • 60 % say they are currently factoring in ESG capex to comply with the regulation.
  • 28 % plan to factor in ESG capex in the next 12-18 months.
  • Yet only 35 per cent have set aside a sustainability reserve for transition capex.

Pressure is coming not just from consumers but from regulators as well. Investors are ready to pay a premium for hotels with environmental certifications when they go for resale.

Investors are looking for more than certifications such as BREEAM and LEED. Investors want to see more meaningful action, ensuring that net zero trajectories and targets are on track. Sustainability is a part of due diligence when investing in hotels, from a physical build perspective and an operational perspective.

Brand standards also need to match investor goals and align with operational standards and not just be rhetoric. Outdated brand standards require revision to consider what is necessary to make hotels more resilient, efficient, and sustainable. Hotels need to think holistically about ESG.

Behavioural changes can influence reductions and not just expensive building capex. A building can have an outstanding BREEAM / LEED certificate, but ultimately, one must operate it most efficiently and optimally to get the most out of it. 

Behavioural changes include things such as; 

  • Turning HVACS off in unused spaces, 
  • Sourcing FF and E from sustainable sources,
  • Encouraging the use of showers over baths 
  • Replacement and refurb frequency of equipment
  • Policies around sourcing locally and waste management.
  • Training staff

Leading hotels and brands are responding by creating and using ESG frameworks as a lens through which to assess risks and opportunities as they aim to reduce their carbon footprint and build the resilience they need to thrive in the coming years.

Written By: Tiffany McGrath

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