Climate Crisis: An opportunity or a threat for the hospitality industry?
The Paris Agreement on Climate Change outlined that the hospitality industry needs to decarbonise its operations by 2050. Hotels are amongst the highest users of energy and water per surface unit, highlighting the importance of the sector to work urgently to embrace new ways of operating to cut carbon emissions on the journey to net zero. In the context of hospitality, and more specifically hotels, a net-zero hotel is an asset that consumes as much energy as it can produce through renewable energy sources. These can range from solar panels, heat pumps, and window insulation. Removing carbon from operations is advantageous in terms of improving efficiencies, realising savings, combating climate change and producing a favourable reputation in the eye of consumers.
The spiralling energy crisis is acting as a catalyst for the closure of hospitality businesses, with a quarter of hospitality bosses considering closure within the next year. This article evaluates the opportunities in reversing the impact of future energy price increases by adopting sustainable energy practices.
Brand Reputation
Geopolitical tensions in Europe, the Russian invasion of Ukraine and inflation have resulted in unprecedented energy costs. In the UK, the energy regulator, Ofgem, increased the energy price cap to £4,279 in January 2023, an increase of more than 80% since October 2021. The subsequent impact on businesses and consumers alike is harrowing, with a fall in discretionary income and increased insolvencies, actions need to be taken to mitigate the pressure of rising energy costs. As guests become more environmentally conscious, could innovative changes in energy improve the reputation of hospitality businesses? According to Booking.com, 61% of travellers, now more than ever, want to travel more sustainably, with almost half noting that there is limited sustainable accommodation readily available. Future-proofing hotels with net zero in mind address these issues, providing an opportunity to improve and protect the brand image and overall reputation of the business.
Business Benefits
The energy crisis has accelerated the need for hospitality businesses to look at ways to become more energy efficient. Energy consumption represents between 3% and 6% of hotel operating costs and is responsible for around 60% of its carbon emissions, highlighting the potential savings that could come from improving energy efficiency. The challenge presented here is how to alter existing structures and fit them with green technology to allow this goal to be met, while minimising guest disruption.
The best time to add enhancements that can improve a hotel’s green credentials is clearly during a refurbishment, which typically happens every ten years. “Those moments are opportunities to think about what technologies you can install,” Claire Whitely of the Sustainable Hospitality Alliance comments. However, ten years is a long time to wait, and we are opening our eyes to the importance of imminent action. Adapting and retrofitting existing hotels to become more energy efficient is going to become an increasingly essential aspect of the journey to net zero. In fact, according to Simon Gill from ARUP, “carbon-intensive hotel assets risk becoming stranded assets if action is not taken to decarbonise them”, highlighting the severity and time sensitivity of the issue.
An article by the EHL Hospitality Business School outlines three main elements which need to be considered when focusing on improving energy efficiency: energy production, conservation, and management. Firstly, sustainable energy production relates to the sources of energy, for example, heat pumps or solar panels. Energy conservation focuses on building insulation, for example, intelligent heating and cooling management systems. Finally, energy management involves tracking energy, as well as measuring energy usage, for example, in-room thermostats.
Many hotels across the UK and Europe are already making the vital steps to commence their ‘green’ journeys, including Hamilton’s managed assets. YOTEL Manchester Deansgate, a hotel located in the heart of Manchester, produces zero landfill waste, has solar panels installed, and bedroom fittings are made of recycled materials, such as bamboo beds and scaffolding repurposed as desks. Hotel Ullensvang, found nestled in the heart of Hardanger Fjord in Norway, uses heat pumps in the fjord to regulate the building’s temperature throughout the year. An energy efficiency plan with net zero emissions in mind creates an opportunity for the hotel business to increase profitability through operational savings and efficiencies.
Why is this necessary?
Although energy cost pressures may drive the industry to innovative change in sustainability and efficiency, large-scale changes need to be implemented rapidly if the 2050 net zero carbon target is to be met. According to the Global Hotel Decarbonisation Report, hotels need to reduce their absolute carbon emissions by 66% by 2030 and by 90% by 2050, to ensure that the predicted growth of the industry does not lead to a corresponding increase in carbon emissions. Hotels already account for about 1% of total greenhouse emissions as per the United Nations World Tourism Organisation, a number expected to increase. The current consumption levels of the planet’s natural resources are far too high, creating a situation which is now known as the Climate Crisis.
Reduced operational costs and enhanced brand reputation are opportunities created by energy-efficient solutions, but the true opportunity lies in averting and reversing the Climate Crisis. Rising energy prices have created a financial incentive and hastened the need for innovative change, but it will take a collaborative effort to reverse the current impact on the planet. For hospitality leaders, the balance between guest satisfaction and energy conservation measures must be met so that net zero targets can be achieved in keeping with the heart of hospitality.
Sources:
transforming-existing-hotels-to-net-zero-carbon.pdf (ihgplc.com)
Spiking UK Energy Costs Pressure Hoteliers, Guests (hospitalitynet.org)
ESG reporting in the hospitality industry: PwC
Sustainability in hospitality: Putting construction issues first (ehl.edu) The Hotel Collection invests in green technology to save £360k a year (bighospitality.co.uk)
A time for action and change (bighospitality.co.uk)
Sustainable Hotel Management: Trends Hoteliers Should Keep Track Of (ehl.edu)
Smarter, Kinder, Safer: Booking.com Reveals Nine Predictions For The Future of Travel
https://www2.deloitte.com/uk/en/pages/consumer-business/articles/sustainable-consumer.html
https://sustainablehospitalityalliance.org/resource/global-hotel-decarbonisation-report/
Author: Marios Michaelides
Marios , Operations Manager for the UK & Scandinavia, joined Hamilton in May 2021.
Prior to joining Hamilton, Marios gained exposure to the hospitality industry through valuable operational and administrative experience at luxury 5-star hotels in the UK, Germany, and Cyprus, such as Rosewood London and Hotel Adlon Kempinski in Berlin. In Cyprus, Marios has worked at his family’s hotel at the coastal town of Larnaca, having touched everything, from Reservations, F&B, Sales and Front Office. In his last occupation, Marios worked as a Manager in training in F&B at Rosewood London, as well as in Sales.
Marios graduated from the Ecole Hôtelière de Lausanne with a Bachelor of Science in International Hospitality Management, with a focus on Hotel Planning & Development and Hotel Asset Management.
Author: Mia Marston
Mia is an Operations Analyst in the UK and Scandinavia team, supporting the management of a selection of assets across the region. Prior to joining the team, Mia graduated with a BBA (cum laude) and Pre Masters degree in Hospitality Business Management from Hotelschool The Hague. During her studies, Mia was able to gain experience in the hospitality industry through internships and part-time jobs. This experience included five-star hotels and several food & beverage outlets in The Hague and London.