Excerpt from RebusinessOnline
Amid one of its most transformative periods in history, the U.S. lodging industry has an opportunity to enact real change through a renewed commitment to sustainability. As the world looks to reduce its carbon emissions, hotels play an important role as they are the most energy- and water-intensive of any commercial building type globally.
Not only will a commitment to sustainability help to slow climate change, but failure to do so has the potential to result in lower asset value, increased operational costs and decreased consumer demand.
Following the pandemic’s unprecedented impact on lodging demand, which was worse than that of 9/11 and the financial crisis of 2007-2008 combined, the industry demonstrated its resilience in 2021 with U.S. RevPAR (revenue per available room) reaching 83 percent of 2019 levels.
While demand rebounded quicker than most prognosticators expected, the industry continues to struggle generating consistent profit, with gross operating profit per available room (GOPPAR) only recovered 71 percent relative to 2019 driven by rising costs, lack of ancillary revenues and a historic labor shortage. As the industry looks to right-size profits, sustainability should come top of mind.
Aside from labor, utilities and property maintenance represent the highest variable cost in hotels (12.1 percent of sales in the U.S.). The implementation of even the simplest sustainability measures such as LED lighting or smart thermostats have the potential to reduce utility costs up to 40 percent, while also increasing the lifespan of portions of the asset. With owners and operators looking to mitigate rising margin pressures, it’s time for the industry to embrace these opportunities.
Some owners have already observed the benefit, such as Hersha Hospitality Trust’s guest room energy management systems, which have saved the company $1.5 million in utility costs annually with a 2.5-year payback period. Hersha is in the process of building upon its commitment to sustainability via the implementation of onsite renewable energy through the installation of solar panels across its portfolio. Hersha expects this measure to reduce total electric use by as much as 25 percent per hotel.
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