Achieving Sustainability ratings and asset value in hotels

This article was first published in The Hotel Engineer, page 45 and 47. 

Sustainability has already become one of the quickest and most effective commercial initiatives that can be undertaken by any organisation individually, and the country as a whole. Many hotels are now taking steps to improve their sustainability outcomes. At the same time, guests are seeking evidence of environmental responsibility when they choose where to stay.  After years of advice from scientific and engineering groups, legislators are generally accepting they have to bring in building codes and emission standards that reinforce society’s increasing environmental demands of their infrastructure.  The real change in this area though needs to be made in the disciplines of the hotel ownership and stewardship. Hotel buildings have significant opportunities to reduce their energy and water consumption and greenhouse gas emissions.  

An efficient hotel can reduce its impact on the environment, and save operating costs for the owner and manager.  Sustainable practices used in construction, refurbishment and operation of Australia’s property and hotel industry is a major factor in the country’s total effort to combat climate change.  And therefore it’s a major opportunity to carve a very real competitive and performance difference between one hotel and another, between one hotel developer and another and between one hotel property manager and another.  Sure, the Federal, State and Local level are critical to the agenda of getting all players taking the sustainability agenda in their teeth. They need to provide a concerted set of financial incentives and legislative frameworks in which the commercial property and facilities sectors can maximise the sustainable technology that is available in its operations. Benchmarking is also critical and with the NABERS ratings now available for hotels, this is making the process simpler. 

Many hotel groups are starting to recognise the gains that can be made from the sustainability agenda. It is simply making increasing sense from a competition perspective and a genuine advantage in hotel property management, property revenues and property sale value, not to mention the growth in occupancy rates. As many in the property industry know, during the 90’s and into the early 2000’s property ownership meant cutting costs in every way possible, regardless of the outcome. ‘Tomorrow will look after itself’ was the adage, and as a consequence property asset maintenance budgets were reduced to below minimum levels in many cases.

We saw many shortcuts being taken to reduce maintenance costs and thus improve service delivery margins. Over time, all this had an impact not just on property assets but also on the way the industry operated. That culture still exists in some organisations today.  The change in this approach and its inherent faulty premise began to be exposed when OHS and essential service compliance legislation (among other workplace initiatives) were gradually introduced and monitored by government agencies.  There followed court cases which helped define our current workplace and safety environment.It is this very same path that both hotel owners and operators are faced with in the sustainability legislative framework introduction in the coming years.  The challenge is the creation and the retention of asset values over this period of dramatic change and beyond. It is how to build new assets that are good investments and that make good commercial sense within a very competitive marketplace. 

The hotel has to meet all these sustainability performance requirements - not just when it was designed and built, but for the length of its useful life.  For new or refurbished hotels, this issue can be solved with engineering designs that address the technical construction, building systems that capture real time information and measurement systems and operational procedures that improve ongoing building management.  Increasingly, facility services and their components are recognised as factors to manage well from the outset. Managing the performance of the facilities within the property impacts returns from the property, the sale value of the property and addresses an increasing awareness of sustainability environmental agendas. 

So an emerging trend in property, whether existing or new, whether a commercial building or a hotel, is the proactive inclusion of what’s inside a property into the greater CFO-level meaning of ‘assets’ and ‘asset management’.  As a leading developer of facility management software, we can attest to this increasing demand for richness of data from properties. We’ve seen the value that can be obtained from it for the facility manager, asset manager, CFO and CEO working more and more in concert. By including sustainability management as a core component of the property works management software and, using the NABERS benchmarks, we can manage the energy, water and waste outputs of hotels and commercial properties. Hotel and property owners can now achieve sustainability.  Green buildings have increased efficiency with which they harvest energy, water and materials thereby reducing building impacts on human health and the environment. This is managed through better locating, better design, better construction, better operation, maintenance and removal – in other words a complete building life cycle.

In the last ten years the property and facilities industries have been slow to implement, on a large scale, real initiatives in either construction, refurbishment or in ongoing property management as many would have liked.  The property owners, for the most part saw no real gain in asset values if a building was built with a green focus in mind.  But this has all changed. We are starting to see the impact on asset values accelerate, where property values will be directly linked to the amount of greenness they attain.  The managers of these assets will need to maintain the values not just for their staff, but for the guests that choose their hotel over competitors.  Care for the environment will become an operational KPI that must be reported upon and proven with systems and measurements that are indisputable. 

New construction now has to meet Green Star ratings, and that only makes up for about 5% of our building stock.  But improving the environmental performance of Australia’s ageing commercial buildings is the key to greening our cities and leveraging them. That 5% figure will rise very swiftly, and with it the competitive and financial gains from openly chasing the sustainability bandwagon.

For more information please contact FM Innovations