New Hotel Projects May Have No Choice But to Go Green

By Dan Brown Partner, Sheppard Mullin Richter & Hampton LLP | January 14, 2010

LEED Certification

During the 1990's, developers first began to consider environmental impact as though it were a design or building specification, just like other specifications associated with a new project. The most prominent organization to advance green building standards is the U.S. Green Building Council ("USGBC"), a Washington DC-based non-profit entity, which since 1993 has touted a ratings system certifying the environmental sustainability of construction projects. The USGBC's rating system, known as Leadership in Energy and Environmental Design ("LEED") awards points or "credits" to projects that include green design specifications. The LEED system is broken down into discrete ratable categories, such as: Sustainable Site; Water Efficiency; Energy & Atmosphere; Materials & Resource; and Indoor Environmental Quality. LEED certification is achieved based upon a review conducted by a LEED Accredited Professional ("LEED AP"). The LEED AP awards points based upon the particular features of the property. For example, a solar paneled roof could earn a property high marks in the Energy & Atmosphere Category. Once a property achieves a threshold number of points it receives basic LEED certification. Higher levels of LEED certification (LEED Silver, LEED Gold, LEED Platinum) are available depending upon the number of green points awarded.

LEED Certification as a Marketing Tool

Until recently, the LEED certification process was voluntarily and typically employed by hotel brands seeking to attract environmentally conscious hotel guests. For example, in late 2006, hotel impresario Barry Sternlicht billed Starwood Capital Group's launch of "1" Hotel and Residence, as the "first luxury, eco-friendly global hotel brand", which is "committed to protecting and preserving the 'green.'" In late 2008, Sternlicht's former company, Starwood Hotels and Resorts, announced its own eco- hotel brand- element Hotels- to cater to the environmentally conscious crowd. For element, LEED certification is a branding tool. The element Hotels website boasts that "element has made a brand-wide commitment for all element hotels to pursue the U.S. Green Building Councils (USGBC) LEED certification."(1) LEED-centric marketing is not exclusive to big-name hotel brands. The 77-guest room Ambrose Hotel in Santa Monica, California made headlines by becoming the first existing hotel to receive LEED certification, and the Proximity Hotel in Greensboro, North Carolina was the first hotel property to receive a Platinum rating, the highest level of LEED certification. The Proximity's rooftop includes an impressive 100 solar panels that heat the water throughout the hotel, and boasts that its green features allow it to use 40% less energy and 30% less water than a comparable property.

Mandatory LEED Certification

While hotel developers have recognized the social, cost-saving, and marketing benefits of going green, and have done so in order to, among other things, preserve the environment, increase revenues, and reduce costs, they now have an additional reason to seek LEED certification. LEED compliance is becoming mandatory, as cities around the country have introduced LEED into their building codes. A number of cities require public construction projects to be LEED certifiable - Dallas, Chicago, Atlanta, New York, Oakland, and Austin, among others. Other states and cities offer incentives for private development projects that include green features. For example, Arlington County, Virginia grants a density bonus for LEED certified buildings that permits an increased floor-area-ratio for those projects. New Mexico and Maryland each offer tax credit incentives for projects that are LEED certified. However, the most significant development for Hoteliers is that certain municipalities have implemented mandatory LEED compliance not just for public construction projects but for private projects as well. Developers who build hotels in these municipalities will have no choice but to comply with LEED standards.

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