ESG considerations for hospitality and short-term rental premises

There are many facets to the environmental, social and governance (ESG) responsibilities placed on businesses. It can seem like a minefield when trying to ensure that your business is compliant with an ever-growing ‘avalanche’ of ESG-related law and regulations. Attendees and panellists in the hospitality and short-term rentals sector at the recent Urban Living Festival discussed how they are tackling various ESG challenges.

In this article, our hospitality and ESG partner Nadia Milligan recounts how attendees and panellists are being more strategic in meeting their ESG goals.

The benefits of adaptive reuse

Developers, landlords, tenants and operators are becoming increasingly creative with adaptive reuse of buildings. Adaptive reuse is the process where existing buildings are reused in a different capacity to their original purpose.

Key themes include:

1. ‘Recycling’ buildings – embodied carbon is reduced by the reuse of existing buildings which may have reached their former shelf life in the offices, retail and manufacturing sectors.
2. They are often cheaper to construct than new-builds.
3. Adapting buildings in underused areas can not only reduce new-build construction on greenfield land but can also breathe life into unused buildings, stimulate local economies and revitalise neighbourhoods.
4. With a growing demand from guests for unique experiences and authenticity, adaptive reuse projects often embody these values. One panellist discussed one of their projects in Spain, being the adaptive reuse of a historical convent into a boutique lifestyle hotel. During the renovation process, ancient artefacts were found, which are now on display throughout the hotel, making it a truly unique and immersive experience for guests, connecting them to the rich history and cultural heritage of the property.

The UK Net Zero Carbon Buildings Standard

The pilot of the UK Net Zero Carbon Buildings Standard has just been released, providing technical details on the standards, limits and targets buildings need to meet, the technical evidence required to demonstrate it, and how the data should be reported. The standards should provide a single, agreed methodology to assess whether a building can be defined as ‘net zero’. With developers now seeing tangible uplifts in value over their sustainable hospitality assets, developers are eager to ‘badge’ their buildings.

Certifications: these demonstrate a property’s commitment to environmental responsibility and sustainability, which not only appeals to eco-conscious travellers but also helps with attracting investment and discounts on debt finance. For example, lenders are now giving discounts of as much as 30 basis points to companies who obtain a high level of B-corp status.

Data: data is essential to measure ESG performance, allowing organisations to track progress, identify areas for improvement, and assess risk. It is reported that as much as 40% of energy is wasted in hotels. Data helps operators monitor their energy use in real time, identifying inefficiencies and efficiencies, enabling better management decisions with resulting cost savings. Many operators are working with third-party experts who have automated systems in place to collect and analyse data.

Advancing waste-reduction strategies: operational efficiency focuses on doing more with less. Being ‘sustainable’ does not necessarily mean an increase in costs; on the contrary, clear waste-reduction strategies are significantly cutting expenses whilst contributing to broader sustainability goals. Many are used to track and analyse food waste and reduce overproduction and technology to sort through recyclables, compostables and non-recyclable materials to divert waste from landfill.

Circularity: related to waste reduction is the concept of circularity – an economic and design model designed to minimise waste and make the most of resources, where products, materials and resources are reused, refurbished, remanufactured, and recycled to extend their lifecycle and reduce environmental impact. Upcycled Furniture, Fixtures, and Equipment (FF&E) has become increasingly popular, as are durable and reparable products which can be repaired and maintained to promote longer lifecycles.

Supply chains: generating around 60% of all carbon emissions (through the manufacturing, transportation and distribution processes), supply chains are critical to a net zero transition. An increasing number of operators are asking their suppliers to provide Environmental Product Declarations (EPDs). Operators are prioritising sourcing (i) eco-friendly products which have a minimal impact on the environment, and (ii) locally produced, sustainable materials for construction, renovations, furnishings and food, which not only supports the local community but also reduces emissions which would otherwise result from transportation.

Guests driving sustainability: guests (deservedly so) want to relax – but do not want to feel guilty about their travel. Sustainability has become an increasingly key decision maker for guests, giving eco-friendly assets a competitive edge. Hospitality businesses need to be better at helping their guests live more sustainably.

Guest wellness: some hotel chains are now ensuring their properties are all entirely non-toxic, with beds made from wool, paints made with non-toxic materials, and using ozone to clean their linen.

The “S” in ESG: many hotels are going a step further and involving the local community in their operations, for example, hiring local and supporting local charities and sustainability projects in their communities.

ESG messaging: a hotel which attracts guests who value sustainability and social responsibility should tell their story in an ‘easy’ way. This could be using upcycled materials for décor or having notes dotted around the hotel explaining their activities.

If you have questions or concerns about ESG and your hospitality premises, please contact Nadia Milligan.