MANCHESTER, England — Sustainability initiatives, capital and legislation are all coming fast to a piece of real estate near you, and hoteliers must be ready to adapt operations or risk losing business.
More than $30 billion of sustainability funding was raised in the second quarter of 2022, said Rekha Toora, senior vice president, Europe, Middle East and Africa capital markets, at business advisory JLL. Speaking during an Annual Hotel Conference session titled “The Sustainability Conundrum: Accreditation, Measuring and Reporting,” Toora added that figure represents a drop of more than 60% from the previous quarter.
She said the green bond space is increasing, with firms such as Accor, Host Hotels & Resorts and Whitbread raising substantial amounts in such capital.
“The banks are publishing their own framework for loans, but there is no real difference in pricing between green and non-green bonds, due to a lack of data,” Toora said.
Panelists said banks and funds are supportive of expanding green initiatives and educating all sectors on changes and requirements. Institutional investors are also asking questions of hoteliers.
There also is upcoming legislation within the European Union that will add to and/or alter its regulations for determining whether financial policy qualifies as environmentally sustainable.
Changes are occurring in other jurisdictions, too, although international sustainability standards remain “murky,” according to Malcolm Kerr, managing director at business advisory Horwath HTL.
“The difference for hotels is that they are operationally intensive, so [sustainability] is very important and more heightened than ever before,” Toora said.
Kerr said banks are asking trickier questions of hoteliers as to the sustainability of their products, from development through operations to exits, as well as the lifespans of buildings.
Toora said ESG initiatives must be integrated into the predicted returns over the lifespan of an asset, and as part of future-proofing a business or asset.
She said the big question for hoteliers is how they invest in their existing portfolio to meet the upcoming standards.
“In my mind, the environmental [part of environmental, social and governance] is separate from the social and governance, and investors need to ask, what is the narrative to take to the bank and other stakeholders?” she said.
Analysis and Action
Kelli Turner, general counsel for Village Hotels, said for operators such as her firm it has “taken the last three years to get to today where we feel comfortable with the data on consumption that we have on each of our sites and against benchmarks.”
She said sustainability can be layered over a property but if it is not operated correctly, no number of good intentions will help.
“We are always tweaking as we do not know what the goals and concerns are in 15 years’ time. There also is no direct United Kingdom legislation on this,” Turner said.
Susan Bland, managing director at RBH Hospitality, which manages 50 hotels for 24 owners, said her firm benefits from the access to big-brand thinking and initiatives on ESG.
She added initiative must extend beyond carbon footprints.
“We know to switch things off as that is about saving money, but now it is about saving the planet,” she said.
Turner added investment committees are talking about all aspects of ESG as for them it also comes down to mitigating risk.
She said everyone in the industry needs to fully share best practices and academic thinking.
ESG could use some sort of base level everyone could use, Toora said.
“There is no STR-type benchmarking, but this is coming,” Toora said, referencing CoStar’s hotel analytics division.
“Now it is hard to know what ‘good’ looks like and to get ESG comp sets,” she added.
Moderator Ufi Ibrahim, CEO of Energy & Environment Alliance, said hotel firms should consider their short-, mid- and long-term compliance risks.
“How do you do it, and how to you assess it? That is what regulators are asking and forming legislation around,” she said.