The Operational and Market Value of Hotel Sustainability
By Michael Sturman, Ph.D. Professor, Human Resource Mgmt, Rutgers School of Management & Labor Relations | May 04, 2014
Coauthored with Glenn Withiam, Executive Editor of the Cornell Hospitality Quarterly
In many ways, the global hotel industry is leading the way by implementing sustainable operating practices, but some operators have been reluctant to plunge deeply into sustainability, fearing that the return on any investment would be slender or even negative. Anecdotally, some hotels have reported that adding sustainability programs has increased costs but not rates. Moreover, some studies have indicated that consumaauthored by ers say they want green products but are generally not willing to pay for them. In 2011, AC Nielsen dubbed this "The Green Gap," after a study found that 83 percent of consumers said it's important for companies to have environmental programs, but only 22 percent said they'd pay more for those products.
It's possible that consumer acceptance of sustainability has grown in the intervening three years. We know, for instance, that many organizations are including a hotel's carbon footprint as part of the information they consider in choosing a hotel for meetings and conferences. One other factor that complicates hotels' sustainability picture is the dual nature of hotels' supply chains. Hotels are part of other organizations' supply chains and simultaneously deal with numerous suppliers in their own chains.
Researchers are gradually untangling some of these threads to assess the effects of sustainability on hotel operations and marketing. In this essay, we report on several studies by researchers connected with the Cornell School of Hotel Administration, both as faculty members and as research associates visiting from other universities. What these researchers have found is that sustainability programs are at worst a net wash for the hotel industry, and in many cases attaining environmental certification can be beneficial.
Promising indications come from two studies that examined the effects of adopting the ISO 14001 standard. This research found that gaining certification had benefits both in terms of marketing and operations. The highlighted benefits were incidental to the standard's core purpose, which is to "map out a framework that a company or organization can follow to set up an effective environmental management system," as stated on the ISO website. Thus, the ISO 14001 certification addresses environmental criteria but does not set specific requirements. By using this systemic focus, hotels (or companies in any industry) can set up programs that reduce energy and materials consumption, as well as limit the cost of waste management.
ISO itself suggests one other possible benefit of adopting the 14001 standard, and that is an improved image among customers and the general public. A study written by Angel Peiró-Signes and his colleagues, published recently in the Cornell Hospitality Quarterly, confirmed this effect for hotels in Spain, as a demonstration for the broader industry. That study analyzed the impact on hotels of the ISO 14001 environmental certification system from the customers' perspective. For a sample of 6,850 Spanish hotels, this research team compared customer ratings for those that had ISO 14001 certification and those that did not have that certification.
The study found that guests rate the hotels with ISO 14001 certification higher overall than those without the certification. This disparity was most noticeable for 4-star hotels, although the researchers also tested this effect on 5-star and 3-star properties. One possible conclusion is that sustainability is not the only consideration, or even a major consideration, when guests are choosing certain types of hotels. It may be that the highest-end 5-star luxury hotels do not gain additional differentiation by having the ISO 14001 certification, since they already offer many points of difference from their competitive set. On the other hand, guests' price sensitivity may override environmental concerns when it comes to 3-star hotels. But for 4-star properties in Spain, hotels seem to be able to gain a distinct market advantage from environmental certification.
Another issue for high-end hotels is the perception that sustainability programs are inconvenient or reduce the hotel's luxury. Beyond that, for hotels at all levels, the favorable opinion that guests might hold for environmentally conscious hotels does not always translate into room sales. Potential guests who do not assign a high level of importance to environmental matters are less likely to book a "green" hotel room than those who believe sustainability is important.