14 Jun 2019
Words Catie Langdon Informer Issue 94

Green Light: Industry moving forward on sustainability

The pace at which accommodation operators are embracing sustainability is gathering as we better understand its value, not purely as an environmental or social asset, but as a financial one. Cost savings and changing customer expectations will drive an ever-greener approach.

One of the beacons of environmental sustainability in the global accommodation industry is actually an Australian hotel. And it’s not, as you might expect, an eco retreat in the rainforest or a brand new, high tech haven.

Radisson Blu Sydney is a 5-star CBD property in a converted heritage building. It was awarded EarthCheck Gold Status in 2016 by the world’s leading environmental certification and benchmarking programme for the tourism industry. And here’s why.

This property is making enormous energy, water and CO2 emissions savings. But, let’s be honest, the result that will convince everyone – eco warriors and climate change sceptics alike – is the bottom line benefit.

COST SAVINGS

Radisson Blu Sydney is achieving average annual savings of more than $140,000. That’s a huge boost to profit and, ultimately, to business value.

EarthCheck says it has helped clients in more than 70 countries realise over half a billion dollars in operational savings while reducing their environmental footprint and enhancing connection with stakeholders (ie. guests, staff, investors, etc.).

This was endorsed by Australia’s own Professor of Sustainable Tourism at Griffith University, Dr Susanne Becken.

“Our research reveals that companies who committed to EarthCheck achieved an annual reduction in use of water by as much as six per cent (6%), electricity by as much as seven per cent (7%), and waste disposal by as much as 15 per cent,” she said.

The extent to which our industry is paying attention to sustainability is documented in the Asia Pacific Survey of Hotel Sustainability Trends 2019, the third such report released by international hospitality and tourism consultants Horwath HTL and Greenview.

RISING TREND

The participation of 2,282 hotels and serviced apartments across 13 countries in our region, including 141 in Australia, confirms the sector is paying attention. Operators are tracking energy use, giving environmental training to staff, running basic programs such as linen/towel reuse, and keeping properties efficient with preventative maintenance.

Now, the report concludes, the hotel industry is poised to move into the next phase of sustainability. “Next generation best practices such as renewable energy and water recycling are still nascent in the region, but we see the trend toward them,” it said.

Interestingly, the most significant improvements in sustainability (energy and water use and cost) were reported not in Australia, but in Asian countries, including India, the Philippines, China, Hong Kong, Japan, Malaysia, Indonesia and Thailand.

A snapshot of Australia revealed strong uptake by properties of some sustainable practices like energy and water tracking (98%), preventative maintenance programme (96%), written environmental policies (88%), all rooms non-smoking (86%), recycling in common areas (81%), and a local procurement policy (78%).

But we lagged when it came to implementing many initiatives: food waste composting (25%), recycling bins in guestrooms (15%), greywater reuse (6%) and high percentage of rooms with soap/shampoo dispensers (1%).

Interestingly, despite our rapid adoption of solar power generation on the domestic front, only 8% of our surveyed accommodation properties reported generating renewable power.

This is undoubtedly due in part to the nature and location of properties reporting, many of them multi-storey with relatively small roof areas. ResortBrokers has definitely noticed a much stronger move by smaller and regional properties to generate solar power.

NATIONAL AGENDA

Climate change is an issue that elicits strong views. It has been on the national political agenda across successive governments and elections, and again in our latest poll. People of all political stripes share frustration at the lack of clear policy direction and action. Others are fearful of measures that might drive up living costs.

But there’s no denying the science. As the Financial Review recently observed: “The economic and financial impacts of climate change have increasingly been exercising the minds of monetary policy makers.”

In March this year, the Reserve Bank of Australia took the unprecedented step of speaking out, saying it will have to take the impact of climate change into account when setting interest rates.
RBA Deputy Governor Guy Debelle sent a clear signal that “climate change is not simply a topic for scientific and political debate, but that the central bank believes it has real and permanent consequences for the economy, business and financial markets.”

So, better to plan and mitigate than do nothing. The Business Council of Australia states strongly that it “supports the development of an integrated, national and bipartisan energy and climate change policy framework.”

Even the Australian Securities and Investments Commission (ASIC) chimed in. It agrees in principle it is ‘conceivable that directors (of listed companies) who fail to consider climate change risks now could be found liable for breaching their duty of care in the future.’

ASIC also expects investors / shareholders will increasingly focus on climate-related matters when assessing where to direct their money.

SERIOUS BUSINESS

You might actually be surprised at just how seriously corporate Australia is taking the issue. Many company reports now identify risks with the potential to have a substantial financial or strategic impact on their business.

Banks are factoring in predicted losses and hardship for their customers. Crown is flood-proofing its casinos. Property groups are budgeting for higher insurance premiums and heating / cooling costs. Shopping centre owners envisage more traffic as people seek cool refuge on hot days.

Others see opportunity. Australia Post has noted the possibility of renting out roof space for solar panels. Resources companies expect the switch to renewables will increase demand for copper. Many businesses are developing new low-emissions products.

The point is, the accommodation industry at every level, from small motels and boutique properties to large-scale hotels, resorts and serviced apartments, needs to similarly assess likely risks and potential opportunities.

The UN’s World Tourism Organisation declared 2017 the International Year of Sustainable Tourism, estimating tourism is responsible for about 5% of global CO2 emissions, with accommodation accounting for 20% of those emissions due to requirements for heating, lighting, airconditioning, and the operation of bars, restaurants and pools.

LEADING THE WAY

Some of the biggest operators, Accor, Marriot Group, Hilton and IHG among them, have taken the lead. They got serious about sustainability years ago, not only because they found they could save serious money, but because of the sales and marketing upside.

In 2017, AccorHotels won the Large Business Sustainability Leadership Award in Australia’s prestigious Banksia Awards, recognised for “its commendable work in reducing emissions, food waste and its commitment to positive and sustainable hospitality.”

AccorHotels says it is moving towards carbon neutral buildings with the installation of solar panels, reinvesting savings from towel reuse into tree-planting, and aiming to cut food waste by 30% across group food outlets by 2020.

But it’s not only hotel giants that are setting an example. A quick search reveals hotels and motels of all sizes have written sustainability policies and are proudly declaring them, from the Ceduna Foreshore Hotel Motel in South Australia to the boutique Alto Hotel in Melbourne, Luxury Lodges of Australia to Ovolo Nishi in Canberra.

COMPETITIVE EDGE

After all, hospitality is a competitive marketplace. Booking.com’s 2017 Sustainable Travel Report indicated smart travellers now expect some elements of sustainability when they travel. Customer expectations must be met because customers hold the purse strings.

And the big driver for the sector may not so much be the individual environmentally-conscious guest, but corporate clients. As companies now have to monitor and report their own emissions and carbon footprint, they’ll demand similar performance from the hotels they use.

So any accommodation property that values and wants to grow its corporate business should act quickly and decisively to demonstrate sustainability credentials.

And it won’t be enough to boast a few token green features like ‘please hang up your towels’. The fact is, this is now a mainstream issue and there’s little doubt it will affect bookings one way or another.

Think of sustainability as a positive differentiator that helps you stand out from your competitors, to attract guests and to motivate and retain staff.

Some properties, while tackling the big ticket energy and waste issues to slash costs, are also promoting activities such as bee-keeping, green roofs and vegetable gardens.

ADDING VALUE

To the degree sustainable practices reduce operating costs and boost profits, business values too will increase, adding another layer to the positive outcomes we expect.

Commercial valuers ResortBrokers spoke to agreed, while capital investment on green infrastructure is not yet widely taken into account when assessing properties, demonstrated revenue gains will most certainly be reflected in higher values.

In a similar vein, we are yet to see any evidence of banks considering sustainability action as part of their lending criteria. But specialist accommodation finance broker Mike Phipps of Mike Phipps Finance says it’s certainly worth noting when applying for funds.

“If you can demonstrate that your sustainability initiatives achieve great economies, it will be viewed in a positive light. At the very least, it demonstrates that you are a good business operator, finding cost efficiencies and on the front foot when it comes to emerging issues that can impact your business,” he said.

Tackling the issue might be as simple as conducting an audit to see if your building and equipment are operating efficiently, or consulting an external energy expert to recommend a strategy.
There are loads of resources available to help, including case studies and free ‘how to’ guides and manuals at greenhotelier.org.