In Sydney, hotels both new and old have until 2026 to meet the city’s net-zero target for carbon emissions, but starting next year tougher rules will apply to developments.
The city itself is aiming to be net zero by 2035, but all new hotel developments will have to comply with minimum energy ratings starting in 2023 and achieve net-zero energy output by 2026.
A government-run scheme, NABERS — National Australian Built Environment Rating System — is helping hotel owners shift to net-zero emissions.
According to its marketing, an “exceptional” score of 6 stars signifies a hotel has produced half the greenhouse gas emissions or water use of a 5-star building.
Sabine Schaffer, managing partner and co-founder of Pro-invest Group, said energy efficiency is now a development priority for its 17 Australian assets, including three Sydney hotels.
Pro-invest’s expanding portfolio across various brands hinges on a development agreement with IHG Hotels & Resorts, she said.
“All our assets are achieving the best possible outcome on ESG,” Schaffer said. “To ensure we achieve 5-star NABERS energy across the portfolio, we’re working with our consultants to understand what it will take to reach Sydney’s net-zero 2026 target and get [our hotels] to a state that is net-zero-ready."
Pro-invest’s Holiday Inn Express Newcastle, opened in 2019 just north of Sydney, is the first hotel in Australia to get NABERS carbon-neutral certification on its pathway to net zero.
Energy-saving measures include special flooring, light sensors and minibars six times more efficient than the norm.
“There’s an energy-management system in every guest room with occupancy sensors to control lighting and air-conditioning, coupled with water conservation, thanks to efficient fittings and fixtures,” said Rob Fahey, general manager of the hotel. “The carbon-neutral modular carpet dramatically reduced installation waste."
Schaffer said the Holiday Inn Express Newcastle is "a stepping stone and a test for net-zero targets.”
Similar steps are being taken across all of Pro-invest’s hotels, including a move to energy-saving “regenerative lift drives” that recycle energy as they move. That is one of the sustainability features that will be implemented at the 239-key Holiday Inn Express & Suites Parramatta, which opens in the Greater Sydney area in 2024.
“Parramatta has been developed in keeping with a minimum 5-star NABERS rating anyway,” Schaffer said. “We had to put energy saving into the design. So, for us [the new Sydney requirements] won’t make a significant difference."
She said some hotel firms might end up with newly finished hotels and new-builds that will have to be adapted to the new standards.
“And that's going to be quite costly,” she said.
Schaffer said assets that fail to update “to smart-building and ESG standards” risk becoming obsolete.
“Ninety-five percent of the hotel industry is not ready for the switch. Smart hotels are built with water and energy-saving technology and systems to recycle and reuse energy, which will pay off on the energy bills,” she said.
Expensive in the Short Term
The costs to reach net zero will differ depending on the hotel.
Hotel developers and operators that go for “all the bells and whistles ... are going to face the biggest challenge,” according to Cindy Van der Wal, Pro-invest’s manager for environmental, social and governance. “Different companies have different targets. A lot of hotel companies have net-zero targets in 2040-2050. We have a net-zero target for 2030."
Most hotel operators in Sydney will have a lot of catching up to do, but hoteliers are realizing that expensive changes now will be profitable in the long term.
Ross Beardsell, executive vice president of strategic advisory, hotels and hospitality at business consultancy JLL, said the hotel industry already has set the wheels in motion.
“For an industry long associated with waste and excess, the way Sydney is going shows just how the sector will face increasing pressure from customers and regulators to reduce its environmental footprint," he said.
“But both hotel operators and owners are very much behind this initiative and at the forefront driving it. The substantial investments required to achieve dramatic reductions in energy consumption, such as upgrading lifts, chillers, heating and refrigeration, are often the least marketable,” he added.
Beardsell said one example of a business case is at the Hilton Sydney, where the installation of a new chiller at the end of 2017 has led to a 11% savings in energy in a year and more than $80,000 in cost savings.
It’s going to be trickier for established hotels, Beardsell said.
Australia’s largest private hotelier, Jerry Schwartz, said solar panels contribute 5% of the annual load at hotels, including at his assets Mercure Sydney and Rydges Sydney Central.
Surplus power produced at Schwartz’s solar farm in Australia’s Hunter Valley is transferred through the national grid to the company’s other hotels in New South Wales and Canberra, Australian Capital Territory.
“In effect we produce enough energy to run these hotels,” Schwartz said.
A second solar farm is on its way.
“This will ensure that we manufacture all our energy requirements, and hence we will be using 80% renewable energy for these New South Wales hotels,” he said.
Build Better
Paul Briggs, sustainability officer at SFC Hotels, said the biggest hurdle remains the expense and time of upgrading hotel buildings.
“To reach 100% renewables is doable. But a net-zero hotel needs to be extremely well-built with extra insulation and high-performance windows to minimize cooling and heating needs. That’s a hard task for our hotels unless we upgrade,” he said, adding that sooner or later hotels in Sydney will have no choice but to upgrade.
"Existing hotels have a whole variety of technologies out there to make them more energy efficient in terms of energy consumption,” said Pro-invest’s Schaffer. “The challenges faced will vary on the age, structure, scale and technologies, coupled with environmental processes already in place at each hotel or group."
A sign of the times is that in 2021 there was a 242% hike in the number of NABERS-rated hotels.
Yet there are still many stragglers in the industry who have done nothing.
“Hotel owners cascading down from international owners to independents are very mindful of the way forward with sustainability targets,” Beardsell said.
Gary Lopez, senior assets manager of hotels at Salter Brothers, which owns six IHG-run properties, said a 2020 refurbishment at the Crowne Plaza Sydney Coogee Beach increased the hotel’s NABERS score to 3.5 stars for energy rating and 4 stars for water rating.
He said that project’s energy consumption remains a work in progress. The hotel is closely monitoring and improving on its energy performance with the help of outside experts, but the transition is challenging.
In late March, Salter announced a deal to rebrand 11 of its owned Travelodge hotels — consisting of more than 2,000 rooms — in Australia to Accor brands brands. The agreement will begin at the start of the 2023 financial year and will include "industry-leading link to ESG outcomes."
“Most hotels haven't been designed that way,” Lopez said, referring to the Coogee Beach asset.
Lopez said investors are stepping up the pressure on the industry “to have the highest ESG and NABERS ratings and hold hotel managers to account.”
He said guests will soon demand to know hotels’ NABERS ratings.
Schaffer said the rest of Australia should follow Sydney’s lead, even if it requires government policy to enforce that.