Sustainable Design is What the Market Wants

According to a recent ULI sustainability in hotels report, titled: Sustainability in Hotels: Opportunities and Trends Shaping the Future of Hospitality, as sustainability in hotels demonstrates, embracing resource-efficient and resilient development practices is good for business as well as communities. According to W. Edward Walter, sustainable design is what the market wants—younger and older generations place a high priority on green and sustainable development in how and where they live, work, and play. “It’s also what cities want and need, as they seek to become more resilient, competitive, and livable.”

The report pointed out that “Opportunities exist for any hotel to improve efficiency and sustainability while also achieving significant financial benefits—and this report lays out some ways to do it, including in-room lighting and HVAC retrofits, renewable energy installations, replacement of water fixtures, and on-site composting.”

The report also noted that the hotel industry faces a number of unique challenges in executing on sustainability improvements, including a lack of utility data, complicated ownership models and structures, and concerns about improvements disrupting the guest experience.

“Leading owners are implementing strategies to gain a competitive edge and future-proof their businesses, including modular construction, sustainable materials selection, guest room technology, and an increased focus on health and wellness.”

So what is the business case for sustainability? The biggest driver of sustainability initiatives in the hotel sector is the potential to improve an asset’s net operating income, the report says. “Hotels are a unique asset in that they reap all utility savings from sustainability projects directly to their bottom line, without having to share those savings with tenants. To ensure hotel operators are also committed to efficiency, some owners pay out a percentage of total savings from an operator’s efficiency project as an incentive.”

Additional drivers helping hotel owners recognize the value of sustainability and motivating them to take action include the following, according to the report:

Meeting changing guest expectations: According to a survey of 72,000 Hilton guests, around 33% said they prefer hotels with environmental and social programs. Among guests younger than 25, that number jumped to 44%. To meet guest expectations about sustainability and attract younger and more environmentally aware customers, hotels are now going beyond basic efficiency measures by incorporating recycled materials into guest rooms and looking into renewable energy.

Complying with increasingly relevant government regulation: Because the global real estate sector accounts for about 40% of global emissions, countries and cities with climate mitigation plans have passed both regulatory requirements and incentives to drive the market toward increased efficiency and reduced carbon emissions.

Regulations: In the United States, hotels in many major cities are subject to mandatory utility benchmarking and other building-focused sustainability legislation. New York City’s new building emissions legislation, passed in April 2019, sets carbon dioxide equivalent (CO2e) emissions targets for all building types (for hotels: 9.87 CO2e per square foot by 2024 and 5.26 CO2e per square foot by  203012). In the United Kingdom, Environmental Performance Certificate (EPC) minimum requirements will apply to existing leases in 2020, requiring properties to post a rating (ratings A through G, with A being most efficient) certificate based on their emissions performance in comparison with similar property types and setting a minimum EPC rating of E to be able to rent.