MIPIM UK Sustainability Whitepaper: The impact of sustainable practices on the financial statement of a hotel
Younger generations are more concerned about their future on planet Earth than ever before, and are increasingly vocal that something must be done to halt or even reverse global warming. Activism against climate change and plastics polluting the world’s waterways has become almost mainstream, with increasing numbers of Green Party politicians being elected across Europe. Protesting schoolchildren and increased media coverage are influencing more and more people to think about changing their behaviour with regards to single use plastics, excessive meat consumption and carbon emissions.
According to a recent report by Nature Climate Change in 2018, the tourism industry was responsible for approximately 8% of global greenhouse gas emissions (GHG) between 2009 and 2013 –a far greater and more daunting figure than previously estimated. The same article forecasts the industry to grow by 4% annually in the coming years, underlining that the hospitality industry has a key role to play in the global fight against climate change. The Hotel Decarbonisation Report, a 2017 study by the International Tourism Partnership (ITP) further states that the global hotel industry will need to reduce its GHG emissions by 66% per room per year by 2030 and 90% by 2050, in order to adhere to the global goals.
Meanwhile, demand for ecotourism has seen an annual growth rate equal to about 30% in recent years, according to a recent release by Edie. The booking.com Sustainable Travel Report found that a large majority of global travellers (87 %) would like to travel sustainably and would pay at least 5% more to ensure their stay had a low environmental impact. Furthermore, pressure from government, the public and team members will force corporations who generate demand for hotel rooms from Monday to Thursday to review their travel policies and hotel selection criteria. Green hotels can capture this increasingly environmentally conscious demand and can thus maintain or ideally increase their net room revenue. In the short term, especially hotels targeting millennial guests will profit from adapting their practices, as this generation is willing to spend more on sustainable offerings. A study by Nielsen from 2016 showed that about 66% of millennials are willing to pay more for products and services with a positive social and environmental impact.
Such is the nature of capitalism, that most hotel owners, operators, and brands focus on items that impact their customer satisfaction and bottom-line profit. The changes that have made the biggest impact on the environment in the past have tended to be forced on businesses by legislation, but as discussed above public opinion is changing and guests increasingly care about their impact. Hoteliers who do not adapt will realise that both the top and bottom lines of their business will be affected. While the scientific evidence supports the necessity of a global commitment to combat climate change, doubt about the economic profitability of sustainable practices discourages many hotel owners from adapting such procedures. Although there can be substantial costs associated with transforming a property into an eco-friendly hotel, these actions can produce financial profits in the long-term. Even properties with limited investment reserves can implement small procedural changes to help them save money and reduce their carbon footprint. Small changes by many can and will make a difference.
PKF hotelexperts has written this paper in collaboration with the Considerate Group and MIPIM UK. The full report will highlight the greatest impacted line items of a typical hotel profit and loss statement (USALI format) when implementing sustainable practices into a hotel operation and provide guidelines and benchmarks to achieve positive returns.