Sustainable development is not an elective behavior—especially as government regulations loom ever closer, panelists agreed during the Hunter Hotel Investment Conference.
ATLANTA—If Marty Collins had his way, the 60-minute green hotels panel in which he participated during the Hunter Hotel Investment Conference would have been short and sweet.
“If it doesn’t cost you anything materially, why wouldn’t you do it? I just don’t think it requires a whole lot of discussion,” said the president and CEO of Gatehouse Capital Corporation.
Collins isn’t sick of talking about the issue. On the contrary, he’s a whole-hearted and outspoken supporter of sustainable hotel development. He just doesn’t understand why hotel investors wouldn’t choose a path that creates greater operating margins, puts them one step ahead of impending government regulations, and adds incremental value to their assets.
The so-called “cost of green” on the front end is a non-factor today, he said. During the 10 years it took him to develop the W Hollywood Residences, which won the Green Building Environmental Leadership Award for opening the first LEED certified hotel in Los Angeles, Collins spent US$250,000 in additional costs to make the project Silver LEED-certified. With the exception of the nominal fees required to hire a LEED consultant, that premium has shrunk considerably since then—and the cost savings (up to 30%) more than make up for it.
In addition to cost savings, sustainable development yields additional benefits, such as improved guest satisfaction scores and an engaged employee base that’s less prone to turnover, said Faith Taylor, VP of sustainability and innovation for Wyndham Worldwide.
Government crackdowns inevitable
Collins, Taylor and fellow panelist Gene Singleton agreed the federal government will eventually mandate sustainable development and operations for all sectors of business.
Singleton, who serves as president for Summit Associates LLC, said the regulations likely will be rolled out during the next five years.
Collins saw the crackdown as imminent.
“This whole discussion disappears in three years,” he said. “… Either you’re going to get onboard early with this … or you’re just not going to be in this business. I’m absolutely convinced that it will go that way.”
There already exist various regulations and restrictions in various states and municipalities throughout the country, Taylor said. Two dozen states have some sort of climate policy and mayors in 1,100 cities are pushing for greenhouse gas emissions regulations.
“It’s coming. We have this mosaic of legislation across the United States, so what are we waiting for. … There’s a very compelling argument for why we should be doing this.”
A good investment
“A lot of it’s just about the money, honestly,” Collins said of pursuing LEED certification. “…You get marketing juice for it. You obviously get energy savings for it.”
Just don’t expect to get a rate premium for it, he added.
Indeed, while guests aren’t willing to throw down extra cash to stay in a LEED-certified property, there’s still a strong value-proposition for developing sustainably.
“We measure our value on net operating income, part of which we derive from operations and a large part of which many folks derive on sale,” Collins said. “If you set yourself up for a big ding on the sale, you’re just eroding so much value. It’s just good business, in other words.”
And while lenders might not be demanding green initiatives to finance hotels, equity capital is a different story, Singleton said. They’re “very primed” about it, he said.
Vendors slow to get on board
One of the largest obstacles to sustainable development is the lack of offerings from vendors, the panelists agreed. Especially in secondary and Midwestern markets, vendors simply don’t offer a comprehensive variety of eco-friendly products and services.
“Vendors … have lagged the market. There just hasn’t been enough demand for a lot of this stuff, but as demand increases, it’s just going to be good business for those folks to get behind that,” Collins said. “It used to be you couldn’t certify a PTAC unit. There was no way to get a LEED rating because there was no PTAC unit that met that standard. That’s clearly not the case anymore.”
Collins is confident vendors will get on board—as will his peers throughout the rest of the industry. It just makes too much sense not to, he said.
For instance, he said, “It just makes sense if you’re doing a new hotel to put in some kind of motion sensor so that when folks aren’t there, you’re not blowing energy.”