Hotels which embrace sustainability will help to keep our planet liveable, meet imminent legal targets and attract guests, but, says Tim Wheeldon, managing director, Zeal Hotelsis the current structure of the hotel market a hindrance and are the banks ready to support the move to carbon net zero?
Tim says: “I started to become very concerned about climate change more than a decade ago, when I first learned about the damage CO2 is having on our atmosphere. I began to understand that a tiny temperature shift meant hundreds of thousands of gallons of water a day melting from the polar ice caps in addition to what was happening to our weather systems.
I found myself wondering what the hotel sector was doing about it and realised that something needed to change and started thinking about how that might work. To date the industry has been trying to reduce its CO2 emissions through reducing energy, water consumption and removing the infamous plastic straws, all of which help reduce the problem operationally. However, the issues are mainly around construction. If you consider that the lifecycle of a hotel is 60+ years, over 40% of that hotel’s carbon emissions are emitted into the atmosphere before the first guest stays the night because of how it is built.
But the hotel groups and brands don’t actually own the assets, so it’s not up to them to make the construction sustainable. Their job is to expand the brands worldwide and put flags in the ground.
Developing a minimal carbon hotel is quite an expensive exercise, it will cost somewhere around 25% more than it would use established construction methods. Steel and concrete both emit huge amounts of CO2 into the atmosphere and, with concrete being the second most-consumed material on the planet, after water, it’s pressing that we find alternatives for these and that they be cost effective.
The fact is that you can’t simply build a new hotel for 25% more, because Joe Public will pay a slight premium on their night’s stay, but they’re not going to pay a 25% increase. In addition, you have an issue with the brands. You can’t just have one net zero carbon flag in an existing brand, all the hotels in the brand would have to be carbon net zero otherwise there would be no consistency in the brand.”
Where are we now?
“We’ve got a situation whereby we have to be carbon zero by 2050. And the hospitality industry has to reduce its carbon footprint by 66% on 2019 levels by 2030. We are making progress but we have to do an awful lot in the next seven and a half years in order to reduce our carbon emissions.
The recycling of assets will become a focus. It is estimated that 80% of the hotel stock we will have in 2050 is already built. I suggest the bulk of that is not carbon net zero, or even close to it. So the biggest challenge that the hospitality industry has at the moment is to convert existing non-sustainable assets into sustainable assets.
Some hotels have bigger problems than others. Some of them are big, old listed buildings where the costs involved in making them sustainable will be considerable. There will, of course, continue to be demand for new-build hotels: we’re all living longer and covid allowing travelling more. People will want to enjoy traveling again.
Within operations, we will have to look closely at how our hotels are running, who our electricity suppliers are, how much we’re using and how much we trim that down. Whether you start thinking about putting in some solar panels, or solar canopies over EV charging.
There are issues around food: approximately 34% of the food we produce and purchase is either rejected or wasted. We need to educate food services staff and take a more ‘local’ view on the food we purchase and use. Guests need to be made aware of the negative impact of food waste. I think everybody’s diet has changed over the last 10 years and this is likely to continue over the next 10, but at a slightly faster pace.
There’s an awful lot to go through. And I’m not sure that we’re ready for the costs that are involved.”
Is it time for a new funding model?
“The banks themselves are behind ESG 100%, they accept the fact that there is a climate change, and they want to invest in green assets. We have seen some of the big investment firms changing their appetites significantly over the past 12 months and they now have ESG at the top of their requirement lists.
What I hope will happen is that banks will look at the carbon footprint of our assets. You start off at year zero with a score of your sustainability and carbon footprint. If you achieve the target for the next 12 months, the interest rate and cost of debt should come down.
So the more sustainable you become, and the more agreeable to ESG as a whole, the cheaper the money becomes. I can see that happening, because the more sustainable you are, the more compliant with ESG you are, the more investable you are and the more value you will create.
The banks, pension funds and investors, like us, have to hit zero carbon by 2050. They haven’t got the zero carbon assets at the moment, or the zero carbon proposals in front of them yet to make these decisions. But it’s going to be interesting to see what happens when they do, let’s hope the banks offer some sort of sustainability incentive on debt interest. One thing is certain now, carbon is the new currency and ESG is the new language.”
Tim Wheeldon, managing director, Zeal Hotels