How real estate firms reimagine the back office
Real estate firms can reimagine their back offices to focus on investing and operating.
Sustainability trends in hospitality real estate
Sustainability is important to the hospitality industry – which continues to be influenced by guests, investors and local regulations/politicians – because it can lower operational costs, improve resale value and enhance hotels’ reputations and lower a property’s carbon footprint. Investors seek a return on their investments and generally want to continue to invest in businesses with positive brand images and reputations. Guests are increasingly more attracted to hotels that can demonstrate their sustainability bona fides.
According to the American Hotel & Lodging Association, in 2020 hotel room revenue fell across the United States by nearly 50%, to approximately $86 billion. In 2021, room revenue rose to about $143 billion; 2022 revenue is expected to be greater than the 2019 level. Adjusted for inflation, revenue per available room (RevPAR) isn’t expected to surpass its 2019 level until 2025; RevPAR is a common KPI in the hospitality industry.1
The pandemic’s impact on the hospitality industry hasn’t been limited only to reducing revenue. Inflation has been steadily increasing, and hotels at all luxury levels and price points have reported staffing shortages. As a result of these various issues, hotel managements have been trying to find more ways to cut costs and maximize profits.
Sustainability is a human-centered initiative that also happens to cut costs. In fact, some hotels have implemented sustainability practices without even realizing it. And managements have found they can turn cost-cutting initiatives into positive marketing messaging in the name of sustainability.
If you’ve been to a hotel during the pandemic, you most likely have experienced not getting fresh linens and towels daily without requesting such service from the property’s housekeeping team. And you must be sure to call during housekeeping’s regular hours; even then, housekeeping still may not be able to get to your room until the next day.
At the same time, you’ve likely noticed signs placed in room bathrooms about the water being saved and the positive environmental impact of having linens and towels changed by request, rather than daily, as has been routine for many years. The American Hotel & Lodging Association identifies housekeeping as the department with the most critical staffing shortages: 58% of hotels surveyed identify housekeeping as their biggest challenge.2
Besides cost-cutting, another significant goal the hospitality industry should aim to achieve is bolstering local economies. Sustainability initiatives help hotels connect with local populations and their businesses.
All the trends mentioned above are simpler changes likely to be seen at most hotels. Several larger hotel groups with larger locations are making correspondingly large investments in the name of sustainability.
The Wynn Las Vegas invested in a 160-acre solar facility that offsets about 75% of the resort’s peak power requirements. The solar facility powers its convention center and meeting spaces with 100% renewable energy. The Wynn Las Vegas also has a golf course where “the soil is monitored with sensors and weather stations that are connected to the central irrigation system so that no water is wasted – the course only receives the amount it needs and at the right time.”
Also in Las Vegas, MGM Resorts invested in a collection of solar panels on the rooftop of its Mandalay Bay Convention Center. These panels supply approximately 25% of the entire resort's power. MGM Resorts also has invested in a more than 700-acre solar farm that will provide up to 90% of the total daytime power needed at its Las Vegas properties.7
Besides the positive impact and beneficial publicity sustainability initiatives create, there’s one other motivator to rethink how your hotel operates. Politicians are jumping into sustainability and creating laws and regulations for the real estate industry to follow. Local governments are enacting regulations to mandate their cities become more sustainable.
Case in point: In New York City, local law 97 is on the horizon. “Most buildings over 25,000 gross square feet will be required to meet new energy efficiency and greenhouse gas emissions limits by 2024, with stricter limits coming into effect in 2030. The goal is to reduce emissions produced by the city’s largest buildings 40% by 2030 and 80% by 2050.”
For reference, a football field is 300 feet long by 150 feet wide, totaling 45,000 square feet. A one-floor building approximately half the length of a football field (150x150) would be subject to local law 97.
The law does list several exceptions, but none indicate that any hospitality sector buildings will be excluded for any reason other than their size. Several other cities have made similar sustainability commitments.8
We expect these municipal efforts to be just the beginning of a growing trend impacting the hospitality industry – and contributing to a greener planet.
Contact your Mazars team member today with any hospitality- or sustainability-related concerns or questions.
Jennifer Safran, Partner
Kevin Lee, Manager
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