Hoteliers Make the Case for Prioritizing Environmental, Social and Governance Investment

NEW YORK — Environmental, social and governance initiatives may be gaining traction in all U.S. business sectors, but where and how ESG fits into hotel investment remains confusing for many U.S. hoteliers who lack international experience.
 
That’s not surprising, said speakers on a panel about hotel investing with an environmental conscience at the 2023 Boutique Hotel Investment Conference, produced by BLLA, the Boutique Lifestyle Leaders Association.

But the key to incorporating sustainability particularly into a hotel investment strategy is to remember that it’s different for every company, speakers said.

“Sustainability has been misrepresented over the years and this has created confusion because everyone wants to think of it as one solution that fits all,” said Benedetta Cassinelli, co-founder of sustainability consultancy Considerate Group. “Sustainability is very much linked to your brand, your ethos, the identity of your company and it means something very different for each company.”

Starting at the beginning — taking a hard look at your company, hotel or brand’s vision statement and seeing how and where sustainability and other ESG measures fit in — makes ESG a more integral part of business decisions, including those around investment, said Marissa Ballan, vice president of global investment management for CitizenM Hotels.

CitizenM owns, develops and operates the real estate for the hotels around the world under its brand, so Ballan said the company is keenly aware of how sustainability strategies affect all stakeholders. That’s why making it part of the company’s overall mission and vision is so important.

“At CitizenM, we have a sustainability vision that we want to influence positive change in a world where we are simply guests,” she said. “We have five pillars [in the company’s vision]: guest-related, employee-related, real estate-related, operations and charity. So there are five ways we can implement our ESG goals, all in service of that ultimate vision statement.”

CitizenM’s position as brand, owner and operator does allow unique perspective into cost-benefit analysis, Ballan said.

“From a shareholder return perspective, a lot of ESG policies are about risk mitigation and future-proofing your investment, so being aware of regulations and changes coming and making those changes in advance helps support your investment,” she said. “It’s also related to access to capital. European capital providers want this.”

Cassinelli said that for companies with more diverse stakeholders, taking time to align on common goals is critical. These are not easy conversations, she added. They’re ongoing, difficult and require the parties involved to confront realities, such as figuring out who pays the bill.

“Hospitality stakeholders like brands, operators, lenders and equity owners all have very different interests when it comes to value creations and return on investment,” she said. “With sustainability, it’s important to try to make sure you align the interests of all of them, make them understand why ESG is important for each of them, and what the values and benefits that investing in sustainability will bring them.”

Cassinelli added that many such stakeholders across the industry still have the outdated perception that sustainability is just a cost. She said she encourages hoteliers to think about short- and long-term benefits.

“The two main pillars to think about are the value creation sustainability brings at the asset level, and how do you manage the more demanding regulatory compliance risk,” she said. “In the short term, you can reach operational savings with the right sustainability elements implemented, and this can be achieved with low-cost investment. And in the long term, you are securing an exit route for your asset.”
 
In Europe, the affect that hotel sustainability measures have on valuations at the transaction level has been particularly visible over the past 12 months, Cassinelli said.

“It’s happening regularly on every transaction in Europe,” she said.

In America, take-up is a lot slower, but she warned that “regulations are coming faster and they will hit the American market as well.”

Ballan said that education was CitizenM’s first step, and what the company learned in its company ESG audits was critical in determining what actions it could take.

“We learned that 70% of our emissions are gas-related and because of that, our No. 1 sustainability strategy is electrifying our hotels,” she said. “We don’t build hotels that have natural gas anymore and we’re buying green electricity.”

Cassinelli reinforced how personalized sustainability strategies, and overall ESG strategies, should be for hospitality companies.

“Every brand has a different sustainability goal. In Europe, we see a lot of focus on the ‘E’ and there is a lot of work happening with environmental data and waste management,” she said. “In the U.S., the focus is more on the ‘S,’ the social side. A lot of work is happening around diversity, which is not so strong in Europe.”

Read more news on Hotel News Now.