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Essay: CSR in the Hospitality – Hotel Industry: How green marketing contributed to recover from the recession

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  • Subject area(s): Business essays
  • Reading time: 7 minutes
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  • Published: 27 July 2024*
  • Last Modified: 2 August 2024
  • File format: Text
  • Words: 1,861 (approx)
  • Number of pages: 8 (approx)
  • Tags: Corporate social responsibility

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Analysis of the Hospitality Industry
The hospitality industry is a multibillion-dollar industry serving millions of people worldwide, and it is expected to grow more in the future with an estimation of additional 1,000 million travelers and tourist by the year 2020. Currently there are around 21million hotel rooms globally serving 876million travelers per year (data for 2011-12). Hotel operations vary in size, cost, and function, serving travelers with different budgets and purposes. From an economic perspective, looking at the hotel industry, we identified that the level of competition among different hotel brands is high, key competitors, to name a few, are: InterContinental Hotel Group, Hilton, Accor, Marriot, Wyndham, and Starwood. So in order to achieve an economical advantage over their competitors, the hotel has to be able to provide superior services with relatively lower price. The level of new entrants is medium high, this is because hotel industry has been divided into numerous small segments serving travelers with different budgets and purposes, with the rising concerns of pricing and environmental issues, more and more new types of hotels have been set up (e.g. capsule hotels in Japan) to meet the demand of energy saving, eco-friendly, and price sensitive. But to the big players in the hotel business, the new comers does not pose a high treats. Concerning the bargaining power of suppliers and buyers, the hotel industry is facing a relatively high level, due to the fact that more and more suppliers and buyers are starting to look into not only the level of services of the hotel, or the level of luxury vs. price, but also the sustainability of the hotel, the brand image of the hotel owners and their initiatives towards environmental and social issues.
Here in the United States alone, in 2012, with 51,214 properties, 5 million guestrooms, the hotel industry generated $155billion in sales and $39billion in pretax income. It is a 14.1% growth comparing to 2011’s data. This indicates that the hotel business is still growing with an alarming speed, and it is getting increasingly important for the hotel brands to respond to CSR challenges, and to pay more attention to sustainability issues. Hotel owners are faced with the challenge of better responding to the environmental issues, social issues, and economic issues while satisfying demand of the general stakeholders, remaining attractive to investors, and making a profit. As costs of energy consumptions rise and demand becomes sensitive to environmental and social performance, CSR challenges and sustainability has become a critical issue faced by hotel owners today. Among the major hotel groups and players in the hotel industry that have taken initiatives and steps towards sustainable growth and environmentally and socially responsible, the following players are worth mentioning: InterContinental Hotels Group, Accor, Marriot, Hilton, Starwood, and Wyndham. In addition to overcome the challenges of incorporating social and environmental responsibilities into their business operations, they also take a step further to pushing the social and environmental awareness of stakeholders.
Key words, RevPAR (Revenue per available rooms)= Occupancy rate (%) times Average Daily Rate (ADR)
Steps: lodging market potential
Issue: consistency
Labor and skill shortage
Current trends:
Drivers to sustainability:
Hoteliers widened the scope of their sustainability efforts by incorporating environmental objectives into a broader corporate social responsibility (CSR) approach, which included the establishment of partnerships with a variety of public and private environmental organizations. The LEED green building program gained significant global momentum amongst institutional investors for new build projects. The financial crisis of 2008 ‘ 2009 resulted in an increased emphasis on cost control measures, which has prompted hoteliers to reevaluate their plant equipment and operational practices to reduce utility costs.
Current thought in facility management, and specifically hospitality operations, is largely focused on optimizing operational efficiency (and the resultant cost savings) in primarily three areas: energy, water, and waste.
Energy. Hotels consume energy for HVAC operations, lighting, cooking fuel, and other miscellaneous power requirements. From a facility management perspective, the majority of focus is placed on reducing energy intensity, which can be accomplished using a technical, engineering-based approach known as commissioning. Front of the house energy efficiency measures include lighting retrofits, minimization of plug loads, and sealing of the building envelope. Back of the house energy efficiency measures include improved equipment and equipment scheduling, proper sensor calibration, elimination of simultaneous heating and cooling, and maintenance of proper building ventilation. Recent advances in technology relating to renewable sources of energy (solar, geothermal, wind, etc.) have improved the economics of using these alternative energy sources at the individual facility level.
Water. Hotels consume water on a domestic basis (bathrooms, F&B, laundry), as well as ‘process’ water for facility operations (HVAC, irrigation, cleaning and maintenance). Hotels also collect and in some cases treat greywater (i.e. water generated from domestic activities) and blackwater (i.e. sewage) generated by guests and back of the house operations. Typical water conservation measures employed by hoteliers include fixture retrofits, towel and linen reuse programs, HVAC and plumbing system improvements, and use of recycled / rain water for process and irrigation use.
Wastes. Waste streams generated by hotels include wastes from construction and refurbishment, consumables (e.g. paper, toner, batteries), durable goods (e.g., furniture, office equipment, appliances), F&B wastes, hazardous materials (e.g. cleaning solutions, fluorescent bulbs), and recyclable oil. Hoteliers employ a variety of strategies to reduce, reuse, and recycle wastes to minimize processing and hauling costs. Vendors are increasingly providing ‘waste-to-energy’ processing services, whereby wastes are processed into alternative energy sources such as natural gas or biodiesel fuel and sold back to hoteliers at reduced prices.
In addition to the three core areas of facility development and operations, other emerging areas of focus include sustainable procurement, indoor environmental quality (focusing on air quality and chemical/cleaning product use), and staff training programs (which can facilitate improved performance and higher levels of employee satisfaction/retention). The number of resources to assist hotel owners and operators in understanding and implementing sustainability measures is vast. These resources are provided by international organizations, public agencies (national and local governments), environmental firms, architectural & engineering consultancies, energy firms, utilities, trade organizations, and other entities. Additionally, a growing number of environmental certification programs have arisen that are targeted toward the hospitality sector. These programs can be divided into several broad categories, including: 1) Environmental programs targeted toward the hospitality industry; 2) Programs targeted toward green building design and operation; and 3) Green product certifications and standards. Table 1 on the following page lists some of the more prevalent certification programs that are relevant to the hospitality sector.
Drivers Toward Sustainability
In today’s economic climate, there are multiple factors that encourage business owners and managers to adopt sustainability measures into standard operational procedures. While the more obvious drivers include cost savings and demonstration of corporate social responsibility to investors, a number of more subtle reasons ‘ such as employee retention and enhancing the guest experience ‘ are also coming increasingly into play. These motivations are explored below.
Cost savings. The realization of a bottom line financial return from implementation of sustainable business practices is arguably the strongest motivating factor to encourage private sector participation. Energy efficiency and conservation measures have been studied in depth over the past several decades, leading to assessments that the majority of building stock throughout the world is consuming more energy than necessary. There are also potentially significant opportunities for cost savings in the areas of water consumption and waste handling/recycling. From a financial perspective, many of the cost reduction and efficiency strategies can be achieved with no-cost or low-cost measures focused on optimization of the performance of both equipment and personnel. Given the competitive nature of the lodging industry and the associated difficulty of increasing revenue, the potential for reduction of operating costs provides a compelling incentive for hoteliers to consider investment in environmental technologies, as well as more efficient operational procedures.
Regulatory affairs. Existing environmental regulations targeted toward the hotel sector are largely focused on various aspect of facility operations such as stormwater management, hazardous materials handling, and environmental health and safety. However, a wide range of present and future legislative activities will impact hotel design, construction and operations. This legislation ranges from the broad and long-term (e.g. cap and trade legislation regarding emissions) to the specific (e.g. U.S. Energy Independence and Security Act of 2007, which applies phased efficiency standards to incandescent light bulbs). The concept of Life Cycle Assessment for products (i.e. the ‘Cradle to Cradle’ review of environmental impacts from raw material extraction through disposal) has gained significant acceptance as a policy instrument and basis for evolving regulatory mechanisms ‘ most notably in the European Union. Hoteliers will need to monitor legislation at the national and local levels to properly plan for operational practices and associated capital expenditures that may be required in the future.
Stabilized utility prices and availability. Going beyond simple cost savings and regulatory regimes, hoteliers can deploy more efficient equipment and alternative forms of utility generation to hedge against future price increases in utility costs. This approach is especially important in geographic locations with developing or unreliable infrastructure, to prevent a compromised guest experience in the form of power cuts or sub-standard water quality.
Marketing / Brand image. Most of the major hotel brands have incorporated some fashion of sustainability platform into their brand definition. Sustainability initiatives are routinely demonstrated in both marketing materials and annual reports (for publicly traded entities). Several brands have been repositioned to cater to a younger generation of more environmentally and socially-conscious customers. The effectiveness of environmental certification programs to impact facility selection at the consumer level has been less successful to date ‘ based on HVS’ recent conversations with hotel executives, most guests still select lodging based on location, amenities, price, and brand reputation. There has been somewhat greater market penetration for certification programs within the corporate travel sector, especially relating to the growing field of green meetings and conventions.
Guest experience. Hoteliers are increasingly understanding that investments in environmental technology can have a direct positive impact on guest experience, which can affect both occupancy and ADR. The new generation of ‘intelligent’ HVAC systems and energy management devices, coupled with a properly managed maintenance regime, can result in significant improvements in thermal comfort and indoor air quality ‘ for both guests and employees. Improvements can also be realized in the indoor acoustic environment, where noise from building equipment such as fans, boilers and compressors can negatively impact the guest experience.
Creation of a positive corporate culture / Employee retention.
Investor requirements. Investors in both public and private companies are increasingly looking for quantifiable indicators of sustainable performance, which has led large public corporations such as IBM and Walmart to adopt strong sustainability programs with measurable performance indicators. Sustainability has emerged as an investable concept, with the underlying assumption that ‘corporate sustainability leaders achieve long-term shareholder value by gearing their strategies and management to harness the market’s potential for sustainability products and services while at the same time successfully reducing and avoiding sustainability costs and risks.’ (Source: Dow Jones sustainability website, www.sustainability-index.com).

References

http://www.hospitalitynet.org/news/4029554.html
http://www.wttc.org/

Library


Lodging Market potential Index Michigan State University: http://globaledge.msu.edu/lmpi
http://www.hvs.com/Content/3218.pdf

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