Measuring the benefits of a green hotel
13 JANUARY 2014 7:38 AM
A recent study found a hotel’s green certification does not translate into increased revenue.
REPORT FROM THE U.S.—The verdict is still unclear whether going green puts green back into hoteliers’ pockets, according to sources.
A recent study, “Hotel sustainability: Financial analysis shines a cautious green light,” found, on average, booking revenue neither increased nor decreased for eco-certified hotels. The study analyzed millions of individual bookings in more than 3,000 certified hotels, with a comparison group of 6,000 non-certified properties.
“Earning a green certification does not automatically result in a large revenue bump nor a revenue fall. In short, green is not a ‘silver bullet’ strategy,” the report stated.
“In this study, we just wanted to look at if putting a green leaf on Travelocity as an indicator of whether it’s sustainable or not, will that change the market performance. So that part we saw was neutral,” said Rohit Verma, professor at the Cornell University School of Hotel Administration and an author of the study.
“We have another related study. … We have property-level cost data—cost for various types of energy usage, utilities and other things. And what we found in that study is that the hotels which are more sustainable are more productive in the sense that they are using better use of their resources than the hotels which are less sustainable,” he said.
Verma said if both studies are merged, the results show on the revenue side there is no difference between sustainable hotels and non-sustainable hotels. However, on the cost side, sustainable hotels have an advantage.
Cost, ROI of green
Ericka Nelson, GM of the 200-room Muse Hotel in New York, which is in Kimpton Hotels & Restaurant Group’s collection, sees an impact on bottom line when it comes to her hotel’s eco-certification.
“We find that today’s traveler is more aware and committed to eco-friendly travel, feeling a personal responsibility to lessen their carbon footprint,” she wrote in an email. “As a result, we do find that this affects our bookings in a positive way. … Our leisure guests consistently tell us that one of the reasons they stay with us is because of our eco-friendly practices.”
She said, as with any aspect of business, the eco-friendly products and practices must align with costs as well as demonstrate a return on investment.
“Fortunately, green products and initiatives have matured so much that many of these practices have saved us money,” Nelson said. “By investing in energy-saving measures over the years, for example, we have reduced our energy bills as well as our impact on the environment.”
She said The Muse's occupancy for 2013 ended at 90.28% with an average daily rate of $329.
Bob Sonnenblick, principal of Sonnenblick Development, doesn’t see the value in green hotels.
“If you had two identical hotels on a corner, and one of the hotels is green … and the other one isn’t, and I said to you, ‘Over the course of a year do you think that one hotel would do better making more money than the other?’ The green hotel will not make more money,” he said.
He said a green hotel is not able to charge a rate premium for having green characteristics. Likewise, if customers won’t pay for green, the concept will turn into a fad, lasting one or two years before it disappears from the industry, he said.
“We are developing six new hotels across the country, so we look into things as to whether or not they will be revenue-generating,” Sonnenblick said. “The bottom line is we’re not implementing any of those green characteristics in any of the six hotels because we found that we’re not going to make money off of it.
“Until there’s such a thing as profitability attached to it, I think you’re going to see across the entire industry people will talk about it; people will look at it, but in the end they will not implement,” he added.
But Nelson said hoteliers need to think about the guest experience.
“Green awareness is becoming more and more mainstream, and hoteliers must consider consumer demand,” she said.
She said there is an expectation that hotels will implement conservation initiatives behind the scenes that will reduce guests’ environmental impact without having any effect on the guest experience.
“Becoming a certified green hotel assures guests that you practice what you preach and that the hotel is up-to-date on the latest conservation methods,” Nelson added. “In this way, guests will keep returning to your property because they are confident in your commitment to green business practices.”
The green umbrella
Eric Ricaurte, principal of Greenview, a sustainability consultancy for the hospitality industry, said people tend to use the word “green” as an all-encompassing term. He said within the hotel industry there is so much segmentation—from business to leisure guests, to luxury to economy hotels, and so on.
“But when it comes to green, we suddenly forget everything else we’re talking about and just talk about one encompassing guest for one encompassing hotel. And that’s the biggest mistake—treating us as though we’re all the same,” he said.
He said it’s more important to look at what guests really care about. For instance, if guests are health-conscious they might want healthy food-and-beverage or in-room wellness options. Hoteliers should think similarly when it comes to green.
“You have to look at the different psychographics of the traveler. So that’s the biggest issue here that needs much further exploration—the psychographics, market segmentation, location segmentation,” he said.
Ricaurte believes green research should be expanded. “I would say there should be more studies on customer segmentation, with specific preferences, not just green ideas.”