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With sustainability, give ROI time to grow, experts say

Column: industry Tag: South American Hotel Investment Conference,hotel investment,South American Published: 2017-11-29 15:47 Source: Author:

Cristián Roberts, of real estate investment bank Prime, said investment in sustainable development should be looked at as having long-term returns. He spoke on a panel on “Financial sustainability” during the recent Costa Rica Sustainable Hotel & Tourism Investment Conference. (Photo: SAHIC)

SAN JOSé, Costa Rica—Don’t invest in sustainability with the expectation of fast returns, said investment and development experts who spoke during a two-day event hosted by the South American Hotel Investment Conference.

Also, as one speaker suggested, don’t be so quick to toot your own horn using buzzwords such as “sustainable,” “green” or “eco,” which have become somewhat meaningless due to overuse.

But there were just as many “do’s” as “don’ts” in the advice doled out by the experts at the Costa Rica Sustainable Hotel & Tourism Investment Conference, which was organized by SAHIC at the behest of the Costa Rican government and its Institute of Tourism.

For investors, that advice included:

take a longer view with regard to sustainability;

do your research, and make sure the developer has the right reasons for taking a sustainable approach to the project;

be realistic about what the market and project can support; and

set measurable benchmarks for success.

Demand is driving decisions

Developers and hotel operators don’t really have a choice if they listen to the consumers, which increasingly are demanding sustainability, speakers said.

“When you see how people are living today, how they measure what’s important to them, that’s what’s changing,” Cristián Roberts, president and CEO of real estate investment bank Prime, said via translation during a session titled “Financial sustainability: The importance of keeping the business profitable.” His firm?has offices in Costa Rica, Colombia and Guatemala.

“The customer is demanding (sustainability),” he said. “There’s a change in everything; not only tourism: We’re reaching a point where humans are a little bit tired of being disconnected, of being placed outside of the decision bubble. … The client, or customer, is saying, ‘I’m the one needing attention.’ They want to associate with the story of your brand.”

InterContinental Hotels Group has conducted surveys which found that 75% of its guests are “concerned with staying at a hotel that has a policy related to the environment,” Salo Smaletz, IHG’s VP of development in Latin America, said via translation on a panel titled “Strategies for growing our brands.”

“Not only individual guests, but groups … one of the points demanded by large companies, to be able to give the account to the hotel, was that there be something with regard to taking care of the environment,” he said.

For seven years, IHG?has operated a project called Green Engage, which provides hotels in its portfolio with tools for conserving energy, water and gas as a cost-saving measure.

“Obviously, that is something that in the end translates into money in the pockets for operations,” Smaletz said.

He added that it’s become key in recruitment as well.

“From our employees, the third most important factor is knowing that they work for a company that is aware of the environment,” Smaletz said. “Taking all of this into consideration, this is really a requirement. The business side brings more money, but the worker and client demands it.”

Investment side

Carlos J. Hernandez Garcia, CEO of Pellas Development, said he has seen more awareness and interest in sustainability from the capital and equity side, as well.

“(Investors) want to create wealth, but they have realized they cannot do it if they’re not protecting the communities first,” he said via translation during a panel on “Investment and development opportunities in Costa Rica.”

“Inclusive development means socially conscious, and it allows you to present the authenticity card with a client. … We have no choice; this is the way forward,” he said.

The size or scope of a hotel or project doesn’t matter; sustainability can be achieved on a small or large scale, as long as the desire is there, said José Koechlin Von Stein, founder and CEO of Inkaterra, a firm dedicated to eco-tourism and sustainable development that has five hotels in Peru.

“The market is headed in that direction,” he said via translation. “The millennial youth come with an understanding that the world cannot continue being used the way we use it.”

Of course, sustainability comes with a cost, but speakers agreed it pays dividends in energy savings—just not necessarily right away.

“It’s important to think about the cost and value in terms of the life cycle of a hotel,” Roberts said.

“Think about how much energy, water, everything is going to go through that asset,” he added, and what the savings will be over the long run by building sustainably now.

Action needed now

It can often take years before sustainability efforts are proven right from a profitability standpoint, speakers said.

The problem is, it can’t wait, Greenview founder Eric Ricaurte told the audience by video conference.

With initiatives like reusing towels and bedclothes in hotels, “it took 20 years to bring this to something that is common now,” he said via translation. “The problem is we no longer have 20 years. We need to accelerate our best practices and make them really happen.”

Hoteliers who want to start on a path toward sustainability traditionally look first toward meeting the requirements for certain certifications, he said, like the popular Leadership in Energy and Environmental Design (LEED).

But, he said, certification “doesn’t solve anything” by itself or “guarantee performance.”

“Less than 10% of the world’s hotels are (LEED) certified,” he said. “We need to reach these other hotels and give them the tools to start.”

More than words

Hans Pfister, co-founder and president of the Cayuga Collection of Sustainable Luxury Hotels & Lodges, agrees that actions speak much louder than words or certifications.

During a session titled “Calling things by their names: Green tourism. Ecotourism. Sustainable tourism,” Pfister said without defined guidelines, “anybody can call themselves anything they want,” which makes that terminology mostly meaningless.

“Lots of people are sick and tired of sustainability. It’s preachy, it’s not really sexy,” he said.

So at his company, he said, “we’re not really trying to sell them on sustainability, but once they’re in our hotels, we try to show them what we do … how we do things sustainably. … It’s a process. We’re not sustainable; you’re never sustainable; you can always do more and better. … Like Kermit says, ‘It’s not easy being green.’”

Instead of marketing your hotel as sustainable, “do storytelling … walk the talk … do things right,” Pfister said. “If people stay with you and see it, they’ll spread the word, and help you do things right.”

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