After I received my LEED Green Associate accreditation last week, I decided to browse online to see if there were any interesting LEED-certified projects related to hospitality. I came across a great interview video between SAS, a company known for their statistical software, and Dennis Quaintance, president of Quaintance-Weaver Restaurants & Hotels. His company is recognized as an industry leader in green hotels, and its flagship property–The Proximity–is LEED Platinum Certified. I had the pleasure of hearing him speak at the 2010 Sustainability Roundtable two years ago. Check out the video below (skip ahead to 1:46 for the important soundbite).
There are many reasons why more hotels aren’t going green, but this segment deals with the finance part of it. What Quaintance explains very concisely is this: today, properties buyers and owners only hold onto their properties for a relatively short term, so they do not feel financially inclined to invest substantially in green practices.
And what does that even mean? The crux of the matter is explained well by Hospitality Financial Management, a Cornell real estate course that I was required to take this past semester. Owners buy and sell hotels, and the typical owner will either construct a property or buy an existing one. Either way, the average holding time before sale is around 3-5 years. Owners decide whether to buy a property by looking at two things: the initial purchase/construction price and the subsequent cash flows from operations. Low purchase price and high cash flows are ideal. Owners will decide whether a property is worth the investment by discounting the cash flows by some interest rate–and seeing how well it exceeds the purchase price (this is a gross simplification that my professor would kill me for).
So why not buy green? Because, with such a short holding period, owners are unwilling to invest money that would otherwise contribute to their cash flows. These owners work under tight requirements for cash flows and percentage returns. And why not construct green? Because, according to Quaintance, it increases construction cost and adds ambiguity to the construction budget. But Quaintaince’s company is able to construct and maintain green hotels because they own and operate the hotels themselves. That is, Quaintaince holds his hotels for essentially forever, so he doesn’t have to worry about the short-term holding period. The investments that he makes today in his hotels pay off in the long term–i.e., he reaps what he sows.
Quaintaince argues, therefore, that green hotels are not too expensive to build and to buy. He–among many other notable professionals from the industry–label that concept as a myth.
Organikos 
Jokes aside, our ancient hotels were green hotels in India I suppose. They were burning on wood chulla, eating out of green leaves and spending very little for maintenance. I remember in days gone by, “mess” used to serve “sappadu” ‘fiifin” on the floor, with plantain leaves, and the cleaning was done by using dung!
Absolutely: those “ancient” Indian hotels exemplified sustainable hospitality! In many ways, green hotels could be placed into two categories: those that practice sustainability to the core (some would label these as eco-resorts) and those that add green trimmings to their big-box operations (these would be the Marriotts, Hiltons, and Starwoods in the United States). I think it so unfortunate that the chasm between these two extremes remains so wide that few U.S. firms have attempted to emulate the type of green practices you refer to. Fingers crossed…
Great post! I wonder if building green wouldn’t be more appealing to hotel owners/investors if the green approach they took was the kind of “green” that emphasizes energy performance (as opposed to health, local sourcing etc.). A Passive Building saves about 90% of heating/cooling costs, compared to a conventional building. As energy costs are (and probably will continue to) soar, you’d think that that would count for something, and provide a relatively quick ROI – even if turnover is fairly rapid. Construction costs for a Passive Building are said to be about 15% more than those of conventional construction. Your thoughts?
There’s no question that using this tactic in houses and commercial buildings has been successful and cost-effective in the long term. And implementing passive building design in hotels would seem to make sense.
One of the problems, I believe, is with the nature of the hospitality industry. No one in our industry will deny that it is a stagnant one: slow to change and quick to reject new ideas. If an owner were confronted with the idea of doing passive building design for his entire 1,000-room property, he’d probably be hesitant. The sticker shock of the 15% increase in construction cost may be negligible for a house, but we’re talking in the tens of millions for a large hotel.
No need to lose hope! It seems to be gaining traction in smaller properties.
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