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Sustainability Is Overall Revenue Neutral for Hotel Industry.
By Howard Chong Ph.D. and Rohit Verma Ph.D.
Wednesday, 30th October 2013
 
Hotels around the world have risen to the challenge of improving their sustainability and reducing their carbon footprint.

Although many groups and customers are demanding sustainability, hotel operators are concerned about whether sustainable hotels increase or decrease their rates and bookings.

To answer the question of whether going green hurts or helps revenues, this study used data provided by Sabre to determine the effect on bookings of widespread advertising of eco-certified hotels. Sabre's Travelocity site uses an eco-friendly hotel label to flag hotels that have earned any of a dozen environmental certifications, including LEED and EnergyStar.

Based on an analysis of millions of individual bookings in over 3,000 eco-certified hotels (and a comparison group of 6,000 properties), the study finds that, on average, booking revenue neither increased nor decreased for the certified hotels.

While this study doesn't address the situation of any individual hotel, we can conclude that going green is compatible with existing quality standards of hotel service, and that advertising green status doesn't hurt a hotel's revenues.

Earning a green certification does not automatically result in a large revenue bump nor a revenue fall. In short, green is not a "silver bullet" strategy. Finally, although the average effect is revenue neutral, individual properties have widely varied experiences with eco-certification, depending on their individual situation.

"The hotel industry has moved ahead with sustainability," said Chong, an assistant professor at the School of Hotel Administration, "but there's a nagging question about whether installing green programs interferes with the hotel's quality standards and its ability to provide guest luxury. Some hotels have been reluctant to go green because they might lose business. This study shows that, on average, the hotel industry doesn't lose sales or rate from sustainability."

Verma, who is a professor at the School of Hotel Administration explained that some individual hotels may see a drop in revenue from going green, while others may improve their sales. "We are indebted to Sabre for providing its database," he said. "Using that database of millions of individual bookings we could see the overall effects of a green label."

Added Chong: "It was not possible to address the situation of any individual hotel, but we can conclude that going green is compatible with existing quality standards of hotel service, and that advertising green status doesn't hurt a hotel's revenues. But it may not help either. In other words, green is not a 'silver bullet' strategy."

The study, "Hotel Sustainability: Financial Analysis Shines a Cautious Green Light,"by Howard G. Chong and Rohit Verma, was published by the Cornell Center for Hospitality Research (CHR) and presented at the 2013 Sustainability Roundtable, at the Cornell School of Hotel Administration. The study is available at no charge from the CHR. The roundtable, held on October 18, 2013, brought nearly three dozen international industry executives and researchers to Cornell to discuss the status and prospects of future sustainability efforts.

About The Center for Hospitality Research
A unit of the Cornell School of Hotel Administration, The Center for Hospitality Research (CHR) sponsors research designed to improve practices in the hospitality industry. Under the lead of the center's 77 corporate affiliates, experienced scholars work closely with business executives to discover new insights into strategic, managerial and operating practices.
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