Financing Capital Investments Through Innovative Partnerships
By Andrea Pinabell Vice President Sustainability, Global Citizenship, Starwood Hotels & Resorts | May 24, 2015
As the Vice President of Sustainability at Starwood Hotels & Resorts, I find myself searching for strategic and innovative ways to solve a myriad of challenges across our global portfolio. While I work at the company's headquarters in Stamford, Connecticut, my Sustainability team and I must look at each problem through the eyes of our constituents as we evaluate ideas, programs, initiatives and partnerships. Those key individuals are the owners, general managers, engineers and the line-level associates that actually will be implementing the solutions. In addition, we must take into consideration not only the physical and financial aspects but the climate and culture of the property's location as well.
One of the challenges owners and managers face is deciding priorities on capital investments needed to make improvements that will increase the efficiency of operating the asset while improving the guest experience and saving money. This situation rings true whether Starwood is the owner or we are working hand in hand with one of our owners from around the world. Capital improvements for infrastructure and or mechanical improvements are typically in direct competition with more guest-facing improvements like carpet, wall coverings, furniture and fixtures. What also complicates the matter is that in many cases, the savings may not be realized quickly. Owners generally look for a return on investment within three to five years and large capital improvement projects can take much longer, even up to 15 to 20 years. The average owner or manager is not looking to wait 20 years for a ROI on a new chiller, boiler or solar panel installation even though the investment will increase the overall guest comfort and reduce monthly utility charges, which on average are the second largest cost to a property after labor.
In addition to the ROI challenge, a one-size approach will not work across our diverse portfolio of more than 1,200 hotels globally. And as we grow, opening more hotels around the world, each with specific challenges, we find ourselves regularly looking for new ideas, innovations and best practices for our owners, general managers and engineers that can be replicated and scaled.
A few years ago, we began rethinking it. In 2011 to 2012, we initiated a program that required all of our properties, owned, managed and franchise, to obtain third party energy and water audit. The audit technically was between an ASHRAE level II and a re-commissioning audit. This allowed us to gain insight into a few very valuable pieces of information. First, we were able to assist properties and show them low to no cost operational and mechanical changes that the property could make over and above our already mandatory Foundational Initiatives, which include low flow faucets and fixtures, high efficiency lighting, etc. Second, we were able to help owners look at capital projects in aggregate to assess which of the bigger projects would be the most valuable to undertake during the next capital cycle and for budgeting. Finally, third, we were able to aggregate the results to a Top 10 list of projects by division and region in order to leverage our footprint to negotiate better pricing for more common projects.
With this valuable information, we assessed the needs of our properties with respect to our own capabilities and strengths. What we realized is that it made the most sense to partner with a variety of industry leaders who could deliver the solutions we needed in a way that reflected our brands and also determine the financing structure that worked.
This partnership approach is so important because in 2009 we set 30/20 by 20 goals to reduce our energy use by 30 percent, water use by 20 percent and carbon emissions by 30 percent per built hotel room by 2020 with a 2008 baseline year. These goals with regards to the hospitality industry are unique because we are agnostic to the business model and the goals are the same across the globe no matter if a property is owned, managed or franchise. We knew the goal was aggressive and we knew we would need to find innovative solutions for our properties in order to be successful.