Practical moves help hotel industry embrace ESG efforts

The conversation about the importance of sustainability has evolved and the industry’s commitment to integrate Environmental, Social and Governance risks in investment and operating decisions is on the rise.  

Practicing sustainability in hospitality was once mainly driven by the desire to attract more customers; today sustainability in hospitality has a more genuine purpose to make a difference with the added benefit of appealing to a much more environmentally conscious traveler. Another important mindset shift is that the industry is no longer waiting for customers to pay more for a green hotel before committing to sustainable practices. Instead, they are using green innovations as a key differentiating tool and competitive advantage.

Moreover, the conversation has expanded to hotel brands, owners and investors. All stakeholders are aware that sustainability risk is an investment risk and understand that action needs to happen. Investors are undertaking due diligence in sustainability as part of their underwriting process. 

From an asset management perspective, a logical next step is to add an annual sustainability reserve that could be contributed by owners and brands. Sustainable initiatives likely will translate into business incentives, increase brand awareness, decrease asset obsolescence, decrease the cost of capital, reduce energy costs and have a positive impact on asset values. 

In addition, the JLL Research team reports that there is regulation coming down like an avalanche, planning authority policies are changing and hotels will ultimately be required to operate more efficiently to reduce energy, water and waste consumption.  

In addition to capital investments, and given the intense operating side of our industry, practical solutions within the context of everyday processes are the most effective way to get a hotel team’s buy-in. We believe that giving employees a purpose will assist with employee retention, improve culture and accomplish needed behavioral changes. 

Here are examples of how hotels can embrace ESG efforts:

  • Assess, measure and document the ESG risks in a hotel operation
  • Conduct an energy and waste audit and find tangible ways to operate more efficiently 
  • Implement a smart building-management system
  • Measure energy use and water consumption 
  • Reduce or eliminate plastic by seeking eco-friendly products
  • Use supplies/ingredients with fewer chemicals and preservatives
  • Source more ingredients locally
  • Include ESG goals in a hotel’s annual plans and the team’s performance evaluations

We are finally seeing some tangible ESG actions across the industry. Hotel owners and operators/brands need to work together and share the cost and responsibility of running a sustainable hotel.

Andrea Grigg is head of global hotel asset management at JLL.