Home Environmental education Environmental and social issues are a “real business driver” for hotel investors

Environmental and social issues are a “real business driver” for hotel investors


BERLIN — Environmental, social and governance issues cover a wide range of topics, and investors who invest in European hotel and hotel projects pledge to comply with them, despite the lack of universal measurement standards.

One of the main drivers is the European Commission’s European Green Deal, approved in 2020 as a set of policies to make the European Union climate neutral by 2050. the combination is a must for all activity levels.

Starwood Capital’s Timothy Abram (left) and Stoneweg Hospitality’s Miguel Casas discuss how ESG requirements are considered in hotel investing at IHIF. (Stephanie Ricca)

But compliance for issues ranging from carbon neutrality to fair labor practices requires a lot of education, data collection, and investment, something the hotel investment industry doesn’t take lightly.

“Transition is mandatory. No one can avoid it, and thankfully the hospitality industry is coming together on alignment,” said Miguel Casas, managing director of Stoneweg Hospitality, a Geneva-based property investor. “This is a huge opportunity, and it’s built into our investment strategy. Future generations will want hotels that will follow [these practices] and from a cost perspective, everyone is perfectly aligned.

Speakers on an International Hotel Investment Forum panel on “Hospitality Investment with Purpose” acknowledged that while at first glance many ESG topics appear to fit more within the framework of hotel operations, they need to be fully integrated into all aspects of a hotel project, from acquisition to operations.

“It’s about what you own — the asset itself — but also what you do in hotel operations,” Casas said. “We are fully aligned with the operator. We do our part and engage on the physical and construction side, but then in the [hotel management agreement] we commit the operator to best practices.

While there are no universal measurement standards that assess compliance with environmental and social issues, hotel investors said that’s no excuse to stand still. Data collection is the first step, which greatly facilitates analysis.

“As an investor, we look at energy, carbon, water and waste KPIs – these are important pillars of our strategy,” said Adrian Flück, director of hotel asset management. for Invesco. “Then we analyze the net zero carbon impact, using real estate carbon risk monitoring tools, and we also look at the physical risks of the buildings.”

Collecting the data is part of “doing our homework,” Flück said, citing Invesco’s efforts to measure carbon use as an example.

“We’ve collated the data over the past 24 months, and then we discuss as a team how the data makes sense,” he said. “Do we need to make greater investments to stay below this zero carbon trajectory? The objective of our strategic investments is to keep them below this line – it is our fiduciary duty to identify the risks when we acquire [property]. We now have the tools to get things done.

Showing your work and establishing systems are key approaches to ESG compliance for real estate investors in particular, whose asset holding periods may simply not allow enough time to see full compliance through to completion.

Casas said Stoneweg’s detention period is usually five to seven years.

“We are investing now, so this decade is when it will be a big and mandatory issue, so we need to implement things now,” he said. “Or if we can’t implement, at least we can create the business plan and we have the metrics and the underwriting of those things for the inbound investor.”

Non-compliance with ESG practices is factored into a property’s income statement, he said. “And not adhering to factors in underwriting and more investment strategies at this stage. It becomes a valuation factor for operating real estate assets,” he added.

Timothy Abram, senior vice president of European acquisitions for Starwood Capital, said measuring return on investment in ESG practices is “a bit of science and a bit of art.”

While it’s fairly straightforward to calculate costs, ROI and the usual metrics, Abram said the softer side of the equation involves looking ahead.

“We’re looking forward to five to seven years, until we come out,” he said. “We think about who will buy this asset – usually it’s someone more institutional than ourselves – and we ask what their ESG requirements are, and we do them too. It’s an additional investment that is not not profitable today but we still do because we want to create the most institutional assets.We don’t want someone not to buy this hotel in the future because it does not meet their ESG requirements.

Environmental issues are perhaps the easiest to measure, but stakeholders agreed that the social elements of ESG are just as essential.

Gilles Clavie, CEO of AccorInvest, said his company’s approach to improving the social conditions of employees has been made clear during the pandemic, and it requires as much planning and investment as any other aspect of the workforce. ‘business.

“There’s the financial part – we had to increase pay because it just wasn’t fair in certain situations,” he said. “We learned early on that housekeeping in our industry is the equivalent of nursing in the medical industry.”

Beyond wages, Clavie said investing time, effort and money into building programs to accommodate different types of workers pays off.

“We had to look at working conditions, offer flexibility and family services, look at all the jobs that are constraining and realize that a lot of people don’t want those constraints,” he said. “All the elements [to address those] are fairly easy to set up. We need to engage in new models of leadership, and we have put a lot of effort into leadership programs.

“ESG is a real business driver,” he said.

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