Barely on the radar screen half a decade ago, "green hotels" have become a hot topic within lodging circles. And some industry heavyweights have gotten behind the idea in a big way.

Barry Sternlicht, who built Starwood Hotels and Resorts Worldwide Inc. into a global powerhouse, has launched 1 Hotels, billed as the first eco-friendly luxury lodging chain. Sternlicht's Starwood Capital Group Global LLC is behind the new brand, which has one property under the 1 Hotels banner going up in Seattle and another proposed for Manhattan.

But for those who build, own and operate hotels, the subject is more than just feel-good talk and esoteric concepts. For them, the paramount question is: What is the payback for going green?

Definitive answers are hard to come by in terms of how much more it actually costs to build a hotel with earth-friendly features. To be sure, most experts agree that the upfront cost to construct a green hotel is usually a bit more than a traditional one. The premium can range from slight (1% to 2%) to as much as 10%, according to the experts. However, they are quick to emphasize that those costs may eventually be recouped or offset through lower operating costs, higher resale value and in some cities, municipal subsidies.

Greg Hartmann, managing director of HVS International in Boulder, CO, pegs the cost to build green between 5% and 10% higher. "It's probably not the premium most people would have expected it would be, which might be far north of 10%," he says. "But it can make a difference in a development deal because oftentimes the developer's profit falls within that range."

The payback, suggests Hartmann, may come later. "You can save money by not building green, but I do think years from now when you go to sell or refinance the hotel, if it has that green component, by then for sure it will have a higher value appreciation than that 5% to 10% initial cost."

Ariane Steinbeck, Chicago-based senior vice president of design firm Gettys, says the research shows it costs 2% to 5% more to build a green hotel. "Yet if the aim of the developer is to hold onto the property for the long term, the inherent energy savings that can be achieved by complying with LEED (Leadership in Energy and Environmental Design) standards has a payback in probably three to five years," she says.

Hartmann points out a developer's intended hold period does have a bearing on whether green principals are used in the construction. "Hotels are still commonly built with the idea of selling them in a three- to five-year window," he says. "The payback is obviously short-lived with only a three-year hold period. So those developers are going to be very hesitant to do anything extra in terms of cost. If they have the choice, they'd rather do something environmentally beneficial than not, but not if it increases their cost."

The hotel's price segment is also a factor. Alan Benjamin, president of Benjamin West, a hotel furniture, fixtures and equipment procurement firm based in Lafayette, CO, says developers and owners of hotels higher up on the rate scale are more likely to pay the extra cost. Not so for those lower on the ADR spectrum.

"For some of the more limited-service down to the budget/economy brands, it doesn't fit within their business model if they have to spend 5% to 10% more for an item. They can't absorb it in a room rate and that guest is generally not as in tune to green," Benjamin says.For owners, reducing energy costs is perhaps the best incentive, points out Peter Atkin, an associate at GreenOrder, a consulting firm in New York City that is currently serving as a strategic advisor to 1 Hotels.

"One of the barriers in the greening of commercial office space or even residential apartment buildings is that typically the owners don't pay the utility bills. The tenants are paying them, so there is little incentive for owners to put a lot of money into energy efficiency equipment," Atkin explains. "However, in the hotel industry, essentially the owner and operator pay the utility bills for the whole building. So there is a direct incentive for them to reduce energy costs."

The Pipeline Grows

As developers weigh the financial benefits, the burgeoning pipeline of potentially LEED-certified hotels indicates that the green movement is moving beyond the discussion stage into actual bricks and mortar.According to a spokesperson for the US Green Building Council, which bestows LEED certification, there are currently four LEED certified hotels in the US and another in Sri Lanka. In the pipeline are more than 80 hotels, mostly in the US, under construction that are aiming for a LEED designation.

Earlier this year, Noble Investment Group of Atlanta opened its Lodge and Spa at Callaway Gardens. The property is currently undergoing the audit process for LEED certification, which would make it the first of its kind in the company's portfolio. The 150-room asset is situated within an upscale resort in Pine Mountain, GA, an hour southwest from Atlanta.

The project came in at $30 million, and Mark Rafuse, managing principal and chief development officer at Noble, estimates building to LEED specifications added some 2% to the development costs.

"Callaway has made a commitment that any new buildings will be LEED certified, so we as both the manager and the developer were committed to making this a LEED certified hotel," he says.

One of the upfront costs was $35,000 to enter into an agreement to purchase energy from a renewable power source, Rafuse reveals. Specifically, Noble purchased American Wind Energy Certificates under the Green-e certified Renewable Choice Energy Program, which provides an offset of 100% of the building's energy load. Based in Boulder, CO, Renewable Choice is a national company that provides wind energy credits to organizations and individuals.

"That was an incremental cost that would otherwise not have been required," he says. "I don't have the percentage on savings, but we were looking at between a two- and three-year payback on the incremental cost associated with" that program.

Meanwhile, Sage Hospitality Resources has taken advantage of a couple of subsidies available in Portland, OR as it erects the Nines, a 331-room hotel that will be part of Starwood's Luxury Collection when it opens in the summer of 2008. Chris Ziegler, project manager for Denver-based Sage, estimates that there was a 1% premium factored into the $120 million it took to build the Nines to LEED silver standards. However, he points out that by building in Portland, the project was able to take advantage of subsidies offered by the state under two programs: the Business Energy Tax Credit and Energy Trust of Oregon Inc. Ziegler declined to disclose the exact value of the subsidies, but says they made up for the extra expense of obtaining LEED silver certification.

In a sense, the Nines is recycling an old building: the historic Meier & Frank department store. The 15-story, white terra cotta property was built in three stages between 1908 and 1932, Ziegler says. "The store was able to consolidate into five floors and we bought the top 10," he relates.

As part of the conversion, a 7,000-sf atrium was cut down the middle of what will be the lodging portion of the building, the project manager says. Of the 24 million pounds of concrete, metal and wood that has been removed from the building, approximately 85% to 90% has been recycled and diverted from landfills. In terms of energy usage, Sage has also contracted with Renewable Choice. By doing so, the developer estimates it will result in a savings of $109,000 a year, he says.

And although installing dual-flush toilets in guest rooms costs $100 more for each fixture, the hotel will save 400,000 gallons annually in water usage, Ziegler notes.

Sage is also developing a Courtyard by Marriott in Portland to LEED standards. Whether the firm would proceed with other green developments hinges on the specific project, Ziegler maintains. "It depends on the building. But if it makes sense and it's right for the market, then it's absolutely something we would consider."

New build hotels are not the only ones that can endeavor to become more earth friendly. About four years ago, the Doubletree Hotel and Executive Meeting Center-Portland (OR) Lloyd Center, went green, instituting a comprehensive program of energy conservation and waste reduction through composting and recycling. The hotel was originally built in 1962, has 476 guest rooms and 40,000 sf of meeting space.According to the hotel's calculations, in 2005, the property carted off 92% of its refuse to a landfill; by 2006, that percentage went down to 41%. The hotel's general manager, Steve Faulstick, reports that the property is now undergoing a major renovation program and is in the process of obtaining LEED certification for an existing building.

What propelled the hotel into the green movement was the realization that if it wanted to get more group business, it better be more ecological minded, says Faulstick. "Convention customers do a request for proposals process, where they will ask a lot of questions about rates and dates and what type of restaurants you have," he says. "One question that started popping up was, what green measures do you have in your hotel? As we investigated further, we found that sustainability is an initiative for many companies. And some government entities mandate their business travelers only stay in hotels that are sustainable."

In that vein, the State of California has what it terms a "Green Lodging Program" that has certified nearly 100 green hotels in the state. State and local government travelers are encouraged "to seek out and give preference" to those properties, according to the agency's website.

So do green hotels garner a rate premium? Not yet, insiders concede, but the revenue boost comes through other avenues, such as better operating costs and a definite marketing advantage. "Companies that are green minded and have sustainability initiatives have found their way to our hotel because of what we're doing," Faulstick says. "So there is a financial savings from using compact fluorescent light bulbs and the recycling and compost program. But there is also a revenue aspect of it. From an employee standpoint, we've enjoyed lower turnover. We tie a lot of that back to the culture and who we are as a sustainable organization."

So as Faulstick suggests, so-called green hotels may not get higher rates right now, but they may get more customers. Especially the younger traveling set, Hartmann says. "For those 40 and under, it is very much intrinsic in their personalities and their interests," he says. "They appear to be willing to pay for it and are certainly willing to choose a hotel or brand because of it."

Some studies indicate that guests are indeed amenable to forking over more dollars to stay in an environmentally sensitive lodging property. Online travel services firm Orbitz conducted a survey last spring to find out how much of a factor was the environment in the travel plans of US citizens. More than two-thirds—67%—said the eco-friendliness of a destination was important to them. A similar percentage, 65%, stated it would "somewhat impact their decision" to stay at a hotel if they knew the property was using solar or wind energy. And perhaps most important, 63% said they are willing to pay "a little more" to rent a hybrid vehicle or stay in a green hotel.

But what exactly constitutes a green hotel? Of course, the gold standard is LEED certification, which addresses mostly construction methods and materials. The Energy Star program, administered by the Environmental Protection Agency, focuses on the energy operations of a building and it has a special category reserved for hotels. Additionally, the Green Seal Program, overseen by Green Seal, a nonprofit organization based in Washington, DC, has specific standards and a certification process for hotels that outline environmentally responsible products and practices. As the group explains: "The average hotel purchases more products in one week than 100 families typically do in a year. Furthermore, both hotel guests and staff may be exposed to many environmental toxins from products ranging from cleaners to paint to floor coverings. These all represent opportunities to reduce impact and improve sustainability."

After that, there are organizations like the Green Hotel Association and the Green Meeting Industry Council, which dispense information and guidance. The EPA also has a Green Conference Initiative. Yet all that advice doesn't add up to a reliable, all-encompassing criterion, say lodging experts. In fact, it could lead to confusion and a hodgepodge of standards.

Industry insiders concede a property could "spin" its greenness. Or as Hartmann says, "Someone once joked a hotel could be washing their sheets in gasoline and still be a LEED-certified building." Likewise, meeting planners could steer conventions to favored hotels based on the property's purported eco-friendliness, he adds. "One of the difficulties is, there is not really a definable level for green hotels," he says.

"There are various shades of green," Atkin says. "On the construction side, LEED is the standard. Then there are a lot of operational features that you need to take account as well. There are a number of hotel certifications out there. None have gained that much traction in the market. A hotel may be LEED certified, but what are they doing in terms of ongoing procurement, energy monitoring and tracking? What kinds of food are the restaurants serving? What materials are used in the rooms? There is a whole host of things that can be looked at and there isn't a good, transparent rating system yet for hotels. That's why you are seeing so many chains looking at greening their operations in different ways."

HVS International has an affiliate called Ecotels, which certifies the greenness of a hotel in five areas: environment commitment; solid waste management; energy efficiency; water conservation and preservation; and employee environmental education and community involvement. A hotel must be given a "globe" in two of those five areas in order to be certified an Ecotel property. Currently, there are five operating Ecotels, with another four under development, according to HVS. All are outside the US.

Alan Benjamin says that when it comes to FF&E, there is no comprehensive rulebook hoteliers can follow to ensure the interior furnishings are environmentally friendly. LEED standards address this to some extent, but "the overall points toward LEED certification are very minor in the FF&E area. It's mostly the physical building, and energy usage is key," Benjamin says. "The interior furnishing part is really where the industry is struggling right now."

Going green inside a hotel involves a number of factors, Benjamin points out. For many years, carpet makers have produced products that use recycled content and less harmful ingredients. However, to be truly green, one must use local products as much as possible to cut down on vehicular traffic. But getting an environmentally friendly carpet to a hotel in, say, Portland, could mean shipping that product cross country. "A lot of what we buy today comes from Asia and even the solution dyed nylon carpet is coming from Dalton, GA or Southern California, both of which are far away," Benjamin says.

In the future, Ziegler expects more green furniture to be constructed for use in hotels. "The furniture industry right now is being influenced by the hospitality designers and purchasing agents to use either recycled product or wood that is formaldehyde free. I think it will happen, but it's taking some time, particularly with a lot of the manufacturers located in China."

Steinbeck concurs that it is becoming easier for hoteliers to find eco-friendly fixtures and equipment. "There are products that are green certified and there are certain fabrics that have a portion of recycled content," she says. "The simplest thing to do is not put vinyl wall coverings on your walls, just use paint that has low or no volatile organic compound-emitting substances. There are carpets out there that are certified, that have recycled content and/or are able to be recycled once the useful life has been achieved. Reusing a certain amount of the existing furniture is the right way to go instead of throwing everything out and starting over. Sometimes that can be achieved, sometimes it can't. But there are more products becoming available to designers that are green certified."

For hotels already up and operating, incorporating planet-friendly features may mean simply instituting a comprehensive recycling program or installing fluorescent lights in guest rooms.

For instance, InterContinental Hotels Group's Americas Operations division announced in May that it would replace more than 250,000 incandescent light bulbs with energy-efficient compact fluorescent lights in over 200 company-managed hotels in the Americas. According to IHG's estimates, the switchover will result in an annual reduction of nearly 50 million pounds of carbon dioxide emissions, or the equivalent of removing over 17,000 cars from US highways.

Back in 1990, Canadian-based Fairmont Hotels & Resorts instituted a Green Partnership Program that centers on energy and water conservation methods at its hotels. Recycling even the smallest bits of waste is important, according to the firm. For example, as the largest hotel purchaser of wine in Canada, the Fairmont Royal York in Toronto participates in a cork-recycling program.

The Doubletree Hotel & Executive Meeting Center Portland-Lloyd Center also uses compact fluorescent lighting. Among its other sustainability initiatives are the purchase of only 100% recycled paper and the closing of entire floors during low occupancy.

Hartmann of HVS owns a hotel in Boulder, the Boulder Outlook, built in the 1960s. In the property's 165 guest rooms are recycling containers. "That hotel is considered, or aiming to be, a zero waste hotel," he says. "Something as simple as that is beneficial because the guest sees it, understands it and it's not an imposition on them. Energy management systems are obviously very helpful to put in, but they do come with a cost."

Some even predict that in the near future, being green will not be that much of a differentiator for a hotel. It simply will be how all buildings are built.

"Some of the new brands are trying to be all about green, but my personal opinion is that is not a sustainable brand, no pun intended, because soon everyone will be about that," Alan Benjamin says. "It's like saying we comply with ADA or basic life safety codes. Of course you do, you can't get a certificate of occupancy without it. I think that is where environmental measures will move to."

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Is There a Payback For Going Green?

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