Mr. Kimball

Eco-Friendly Practices

Green DUI: Developers Under the Influence

By Larry K. Kimball, Director of Hotel Development, C. W. Clark, Inc.

Being under the influence is serious business but it seemed like a good idea at the time, your Honor! Just ignore the global excitement to protect the planet and simply avoid “green” themes in new hotel projects. It is only the latest trendy hotel fad, right? Wrong, your green future is now. The major brands are going about it differently but all have evolving sustainability and environmental initiatives. Like the lovely Hotel California where you check-in but can never check out, make more room in rehab because hotel developers without green-colored glasses are on the road to making impaired decisions.

Is Kermit Really Green?

Since overused words like “sustainability” and “green” mean different things to different people is their impact diluted and not relevant? Does it matter whether or not that you believe climate change is manmade and the result of excessive use of fossil fuels? The answer to both questions above is no. Personal opinion should be set aside as hotel developers are mistaken if they think green, whatever that is, can be ignored.

Individual emotional resonance to be “green” is growing (no pun intended) into a shared global experience as evidenced by the following recent new items:

• In the U.K., an executive won the right to sue his employer on the basis that he was unfairly dismissed for his green views after a judge ruled that environmentalism had the same weight in law as religious and philosophical beliefs(1).
  
• The European Union recently issued four warnings against Bulgaria for not protecting its national heritage largely because of the country’s lack of environmental awareness evidenced by their "failure to bring Bulgarian nature legislation fully in line with European requirements.(2)" Bonus Travel Fact: The EU believes Bulgaria is home to 40 percent of Europe's protected habitats and almost 70 percent of its protected bird species.
  
• In the U.S., a consortium is developing Green Meeting and Events Voluntary Standards which will eventually be submitted for approval to standards-setting ASTM International and thereafter influence billions of dollars of meetings business.
  
• In 2009, the U.S. Green Building Council (USGBC) held its first-ever Sustainable Suite Design Competition which drew 65 contestants. The winning suite concept: “Haptik offers a multi-sensory lifestyle based on luxurious sustainability. The ethos is choreographed around individual moments that stimulate and inspire.”

As Kermit said, “When green is all there is to be, it can make you wonder why, but why wonder? (3)”

Hotel Brands - The Race to be Seen as Environmentally Relevant

In a recent study prepared by Booz Allen Hamilton, the USGBC expects “green building construction” to explode and all building types, including hotels, will support almost 8 million jobs and generate an additional $554 billion in Gross Domestic Product by 2013(4).

In November 2009, there were only 31 hotels with the USGBC’s LEED-certification in the entire U.S. lodging industry. Individual perception of a brand’s relevance to environmentalism quickly becomes a shared reality through social networking and the media. The leading hotel brands know this and if you haven’t noticed, the race is on to be seen as green.

While the decision by hotel developers to be branded or independent may be dictated by equity and debt financing sources, branded hotel companies are racing to define their green brand standards for new builds and conversions. It also helps when there is an economic return. Here is a snapshot on their progress as of the end of 2009.

Marriott

Their environmental strategy to help protect the environment and address climate change was announced in 2008 and their commitment in many ways leads the hotel industry. A web of partnerships helps Marriott implement a five-point environmental strategy that includes $2 million to save an Amazon rainforest, engaging employees and guests to take action, building greener hotels, greening its supply chain, and reduction of water, waste and energy consumption.

As a publicly traded company, the “Marriott Spirit To Preserve TM” initiative is led by a corporate Green Council and was structured to offset 3 million metric tons of CO2 emissions annually.

Marriott’s green hotel prototype is expected to debut in April 2010 for the Courtyard brand. This is their first salvo in a ten-fold expansion of their green hotel portfolio over the next five years.

Hilton

Hilton’s overall direction is driven by each brand instead of an overall corporate directive like Marriott. Hilton recently introduced a new corporate logo along with their new vision, mission values and key strategic priorities. While one of those key priorities is “Act as responsible members of our communities by creating strategies to embrace corporate social responsibility”. Specific references to green programs or the environment are not there. That stands in stark contrast to Marriott’s approach.

The Hilton Garden Inn (HGI) brand is a good example of Hilton’s brand driven efforts. First, the values that represent the HGI service culture are called “Heart of the Garden”. Every hotel employee is involved with this beginning with their orientation. Second, HGI’s partnership with the National Gardening Association is a community outreach effort for individual hotels to work with a local school to “Grow a Garden”. While the public relations benefits are obvious, it’s a unique national program with the idea of promoting environmental awareness in kids while they are learning other subjects in school.

Hilton’s other nine brands are actively engaged in defining environmental standards in design and construction. This brand-driven approach is how Hilton has an emerging alignment throughout the company verses the top-down approach of Marriott.

InterContinental

The world’s largest hotel company by number of rooms is not asleep when it comes to the importance of the environment as part of its overall corporate responsibility. Like Marriott, IHG has a substantial corporate environmental policy that guides a climate change initiative.

“Green Engage” is an online sustainability system to enable individual hotels to manage energy, water, and waste consumption more effectively. Similar to Hilton’s “HEAT” (acronym for Hilton Environmental Analysis and Tracking system), it is a tool to create benchmarks for profitability improvements at the operating unit level.

“Green Aware”, similar to Marriott’s “engaging employees and guests” strategy focus, is designed as a hotel level training course to support IHG’s sustainability efforts.

Starwood

Designed as a green hotel from its introduction in 2006 to the first opening in 2008, Starwood states that each Westin-inspired “element hotel” is saving enough energy annually to power 236 U.S. homes for one year(5). The “element” brand is Starwood’s green concept lab.

At the corporate level Starwood, like Marriott and IHG, have an environmental sustainability policy as a company value. Like Hilton, it appears Starwood is implementing this at the brand level.

How Green is My New Rooftop Garden?

Strategic locations in key markets matched with availability of affordable debt financing will drive new hotel construction. Great real estate is still great real estate but new construction faces an uphill battle in the near term due to lack of financing and the economy.

Why build new when you can buy a “distressed” property from a lender for less than its replacement cost? Nationwide cancellations of planned projects are announced daily in addition to the high-profile halts in Las Vegas. The pundits have declared that new hotel construction in the U.S. is collapsing to its lowest level in decades and that it will remain depressed for at least two years. Lodging Econometrics forecasts that a new hotel construction rebound will not happen until 2013(6).

So how is the “green building construction” boom going to impact hotels in the neat future? Brand conversions and upgrades are going strong and capital expenditures will be the next logical opportunity to incorporate “green” design upgrades that also produce a measurable return on investment. The brands are all-in on that bet.

References

(1) http://www.telegraph.co.uk/earth/earthnews/6494213/Climate-change-belief-given-same-legal-status-as-religion.html
(2) http://www.treehugger.com/files/2009/11/eu-puts-bulgaria-on-notice-over-enviro-negligence.php
(3) Kermit the Frog in The Muppet Movie, 1979
(4) USGBC Green Jobs Study by Booz Allen Hamilton; Page 21; http://www.usgbc.org/ShowFile.aspx?DocumentID=6435
(5) http://content.usatoday.com/communities/hotelcheckin/post/2009/04/65521299/1
(6) http://www.globest.com/news/1537_1537/insider/182170-1.html?sector=hotels

Larry K. Kimball has over thirty years of hotel experience in development, finance, operations, and asset management at the corporate and operating unit levels. Mr. Kimball is currently Director of Hotel Development for C. W. Clark, Inc., a San Diego-based commercial real estate developer. In this capacity, he is responsible for the entitlement, design, financing, and asset management of several large public-private hotel and mixed-use projects totaling ~1,200 keys with combined development costs of $600+ million. Mr. Kimball can be contacted at 858-875-5146 or larryk@CWCLARKINC.com Extended Bio...

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