COMMENT There is a new generation of players entering the hotels market. For them, the level of capital expenditure required to bring an asset’s environmental credentials up to an investable, purchasable or leasable standard can mean the stark difference between very quickly “checking in” or “checking out” from discussions.
Recently, we’ve seen Mayfair Capital acquire a net-zero Premier Inn hotel in Leeds from Town Centre Securities for £16m and Lamington Group launch the world’s first fully net zero carbon hotel in West London. For investors such as these, acquiring or developing an asset with minimal or low environmental impact in today’s landscape is imperative and, of course, makes the returns all the more significant. But just how do you prepare your asset to be sustainable enough for the investment eye?
Well, the scale of the challenge faced is enough to warrant a “do not disturb” sign. According to the Energy & Environment Alliance, there has been a 49% increase in energy usage in the accommodation sector globally since 2000 and more than 3.1bn kg of CO₂ is produced annually from it. Our research found that almost half of UK hotels are more than 15 years old, and around 40% are over 20 years old. Independent hotels, accounting for 40% of total hotel rooms in the UK, are older still. Many of these assets run the risk of becoming obsolete and “uninvestable” if action is not taken.
Quick operational wins
Thankfully, for those operational hotel assets, there are a few quick wins that can support your credentials and demonstrate value to a prospective investor.
First, by implementing measurement systems to track environmental impact, you can set targets with a roadmap to meet them. Demonstrating to an investor a clear record of actively reducing impact can positively affect discussions. Evidence is key here – investors will want to see an end goal.
Measures should include, among others, deriving energy from renewable sources, such as solar panels, and investing in room occupancy sensors for energy efficient lighting and heating. Water usage, preservation and recycling should be a consideration, with low-flow technologies, rainwater collection, and wastewater treatment systems also providing an investment boost.
Finally, the circular economy and supply chain sustainability should also be considered – in other words, how each element within a hotel could be reused, recycled, repurposed, from furnishings to food waste. Sourcing furniture, food, and general suppliers from the local community can reduce an establishment’s carbon footprint, enhancing its environmental credentials in the process.
Legislation driving change
The EEA is facilitating change within the sector. Aside from enabling members to source their energy at a low cost and carbon free, the BREEAM In-Use assessment for the hospitality industry will act as a major support for the industry, aligning its construction and refurbishment standards for hotels. In providing benchmarking and performance analysis, it can help hotel owners understand the changes that must be made to their properties to bring them up to required standards.
Green Tourism is helping to promote more sustainable ways for businesses to operate. Its awards certification acknowledges environmentally-friendly practices, acting as a hallmark of “green quality”. Key areas in which it provides advice include reducing energy use, saving water, eco-friendly waste disposal, ethical buying, using local goods, minimising food miles, promoting biodiversity and adopting a smart, sustainable outlook.
As time goes on consumers will demand more from the hotel accommodation they choose and those that do not meet necessary standards will lose out. This was reflected in the latest Booking.com Sustainable Travel Report, which noted that 83% of global travellers think sustainable travel is vital, with 61% saying the pandemic has made them want to travel more sustainably in the future.
In some cases, the steps needed to reach the end goal may result in high costs, but the reward will ultimately compensate in a world where ESG concerns are a top priority for all.
Rebecca Shafran is senior associate director of alternative markets research at BNP Paribas Real Estate
