TED Case Studies Number 741, 2004

R o l l i n g  i n  "G r e e n"  L u x u r y

by Daniel Zlatev

General Information

     I. Identification

1. The Issue

      Perhaps because it sees itself as environmentally "clean" and “smokeless”, the hotel industry has been relatively slow in acknowledging the changing reality of environmental requirements, unlike some of its “brother” industries like airlines. "Recycled," "green," "sustainable." These familiar buzzer words created in the marketing dawn of environmentally conscious design are leaving hotel business owners bewildered to understand and fearful that such a process may result in more time or money. Although sustainable measures may require upfront costs, they will cut down on the operating costs over the lifecycle of the building. In the hospitality industry, the urge to provide guests with luxurious accommodations often translates to wasteful design and operational practices. Nevertheless, except the towel change options, environmental friendly practices hardly affect the guests experience. In addition, well-thought and consistently implemented saving standards (like solid waste management and composting) could provide a hotel with a lot of alternatives for cutting costs and improving the property’s image.
      The bulk of tourism investment is dedicated to developing accommodation facilities and the hospitality industry falls under the categories of many regulations, however environmental management is rarely one of them. Certainly there have been some managers who paved the way to environmental excellence. Hoteliers in resort areas, especially those operating in biodiversity hotspot areas have developed an increased awareness of the terms “environmental management” and “sustainable development” on account of the fact that their business performance depends on preservation of the natural resources in the area of operation. But by and large, city-based hoteliers - and that is the vast majority in terms of number of properties and number of rooms - are still struggling to fit environmental management up there with the other vital management issues like occupancy and revenue per available room.

2. Description

      After a comprehensive evaluation, Green Seal, Inc. has determined that Hyatt Regency Washington complies with the environmental and performance requirements of the Green Seal Environmental Standard for Lodging Properties and has recognized the hotel as Green Seal Certified. Hyatt Regency Washington's recycling and conservation efforts have produced significant results for over 10 years. Initiatives such as energy and water conservation, recycling programs and environmental practices are the core programs for which Hyatt Regency Washington has earned the title of Green Seal Certified.
      As most changes in a status quo occur, the hotel’s resource saving initiative has started because of the dedication and innovative thinking of one individual. Hyatt’s chief engineer Kevin Anderson, who drives Toyota Prius and manages the waste of his own household, acknowledges that after all good intentions the potential for saving money was the No. 1 consideration. Hotels, motels, bed-and-breakfast establishments and convention centers are competitive businesses. He described measures that cumulatively have saved millions of dollars at his large hotel -715,000 square feet-in the nation's capital. Electricity was the costliest commodity and water the second costliest for the building, so both became the targets of efficiency campaigns. The changes at the Hyatt Regency Washington had to be correspondent to a few ground rules. The retrofits could not reduce the comfort of guests, and they needed to save money to justify their implementation.

Photograph courtesy of Hyatt Regency Washington
      The hotel opened on April 1st 1975. Back then, it had incandescent bulbs, one-piece toilet requiring 6 gallons of water per flush, boilers burning oil and electricity consuming kitchen appliances.
      Rebates from local electric utility Pepco for the installation of energy-efficient lighting helped initiate a phase lighting improvements back around 1993-94. The changes included replacement of incandescent bulbs with compact fluorescent lights, replacement of T-12 fluorescent tubes and magnetic ballasts with T-8s and electronic ballasts, and replacement of old exit signs with new ones lit by light-emitting diodes (LEDs).
      LED exit signs can pay for their capital costs almost immediately. Anderson noted that some of the old exit signs had two 40-watt incandescent bulbs for illumination, white the LED signs installed a decade ago required only 9 watts. The money-saving value of such a change has only increased in the intervening years as the cost of electricity has risen while the cost of LED signs has dropped significantly, perhaps to half of what it was a decade ago.
      Next was the installation of variable-frequency drives for any motor over 10 horsepower, which included motors for most of the air handlers and pumps in the hotel.
      Then, in 1994, another rebate offer from Pepco allowed the Hyatt outlet to replace a pair of chillers that were almost 20 years old with a pair of chillers that are about 35 to 40 percent more efficient. Because the lighting retrofits had reduced waste heat in the building, less air conditioning was needed, which meant less chilling. So two 675-ton chillers replaced two less-efficient 770-ton machines, 'and we've never had to start more than one at a time," Anderson said of the new chillers. The hotel’s boilers and kitchen appliances utilize natural gas as an energy source instead of oil (which is now only a back-up for the boiler room) and electricity. Apart from the inarguable advantage in terms of cost, natural gas is much cleaner compared to burning oil.
      The variable-frequency drives on motors also allowed systems in the building to be adjusted to slower speeds appropriate for the lower demands being put on air and water cooling systems. Savings on electricity from the retrofits amount to about $200,000 a year, according to Anderson. The building's energy consumption dropped to 83,400 British thermal units (BTU) per square foot in 2002 from 105,900 BTU per square foot in 1992.
      Relocating positions on the loading dock, introducing balers for managing the biggest waste abuser – cardboard, and electronically monitoring the compactor’s state had contributed to the waste management award that Hyatt has earned.
A number of things have to be done in order for the hotel to build on that basis and be as environmental friendly as an inner-city business hotel could be. Most of these actions require a change in the corporate culture of the mother company as procurement of alternative cleaning materials and dedicated personnel for recycling guest room waste.
      Nevertheless the significant efforts dedicated to cost savings through electricity and water consumption efficiency and waste management have had the pleasant side effect of “greening” the Hyatt Regency DC. With this thought in mind, the environmental friendly practices in the hospitality industry and perhaps in all other industries which are not “heavy” can be summarized as appreciating the scarcity of resources and shrinking their consumption to the lowest level possible for the business to operate adequately to its purpose.

Environmental Checklist:

Energy Conservation

Over 95% of lights are energy efficient
All fluorescent lighting ballasts are energy efficient
Centrifugal chiller cooling equipment is some of the highest efficiency available
Energy efficient variable frequency drives are installed on all motors over 10
horsepower
Replacement motors are all of the high efficiency type
Motion detector light switches are installed in all Hotel administrative offices
All guest rooms are equipped with programmable digital thermostats
All exit signs are energy efficient light emitting diode type
Energy Management computer for optimum starting stopping and setting of
temperature control equipment
Water
Water conserving 1.6 gallons per flush toilets were installed in 1991
All guest floor ice machines use recirculated water for heat rejection
All major kitchen refrigeration units use recirculated water for heat rejection
All kitchen and banquet ice machines use recirculated water for heat rejection
All showerheads are 2.5 gallon per minute maximum discharge
All guest room faucet aerators are 1.5 gallon per minute maximum discharge
These measures have resulted in a 60% reduction in annual water consumption
since 1989. (69K MGAL vs. 28K MGAL)
Recycling
Cardboard and corrugated paper                                                               Photograph by author
Office paper
Newsprint
Metal cans
Glass bottles and jars
Plastic bottles and jars
Computer monitors
Electronic parts
Lighting ballasts
Fluorescent lamps
Batteries
Hazardous wastes
Paint, paint thinners and waste oils are properly disposed with Safety Kleen
Purchasing practices
Hyatt Regency Washington uses recycled copy paper
Environmental practices
Refrigerant reclamation and recycling
Hotel information is disseminated via E mail instead of paper distribution
All mechanical equipment is covered by a preventive maintenance program to
ensure top operating efficiency
Reuse of guest room towels for multiple night stays
Reuse of bed sheets for multiple night stays
Main Chiller Plant is HCFC

Source: Hyatt Regency DC’s Chief Engineer Environmental Checklist

3. Related Cases

     Another good example of environmental management could be the Canadian chain Fairmont Hotels&Resorts – luxury properties where the management has introduced perhaps the most comprehensive program for resource conservation, recycling and waste disposal in the hospitality industry. Unlike other chains Fairmont does not have only two or three exemplary properties; it focuses on the leveling off the basic “green” standards for all their hotels and resorts.

4. Author and Date:

Daniel Zlatev
Bulgarian Fulbright student
Master of Tourism Administration Candidate 2005
SBPM
The George Washington University
April, 2004

II. Legal Clusters

5. Discourse and Status/Policy Issue

      Standardization in the services sector which is the biggest GDP contributor and employer in the highly developed countries is knocking on the door. The International Organization for Standardization (ISO) is focused mainly on transport and traveling as closest intersection with the tourism industry. However, The European Committee for Standardization (Comité Européen de Normalisation= CEN) which develops standards for voluntary technical harmonization in Europe in partnership with international entities is currently focusing and working on standards for the service sectors, including “tourism services (travel agencies and tour operators, hotels and other tourist accommodation, and recreational diving services)”(Blind, 2003, p.43). In developing typology for standards in service organizations environmental management comes second place, right after quality management (De Vries, 2001) in terms of importance.
      Like financial management, marketing management, or human resources management, environmental management requires hoteliers to consider it as a cost of doing business, an opportunity to do better than the competitors, and to undertake a program of continuous improvement. Foreseeing managers should look at what effect environmental issues have had on the commercial and legal infrastructure in Europe and the United States, as well as in Japan, and will then anticipate how that will likely translate into their own situation in the coming three to five years. To be successful will require them to begin now to build the framework which will give a competitive advantage when a similar set of legislation arrives on their own doorstep.

6. Forum and Scope/Existing Policy Framework

• International

      There exist voluntary certification standards which cover energy, waste, water, and wastewater management; hazardous substances; and environmentally preferable procurement. Some of these requirements contribute to the hotel’s bottom line, others have more obscure financial benefit, but all of them reduce the property’s impact on its surroundings. All researchers recognize “certification as a procedure that assesses, audits, and gives written assurance that a facility, product, process or service meets specific standards”(Honey, 2003). They differentiate the standardization methodology as process-based (in the case of ISO 14001 standard for environmental management compliance) or performance-based (such as Green Globe, the biggest common effort so far for sustainable operations in the tourism industry). The consensus is that process-based certification standards are suitable mostly for large companies and they represent only the intent for sustainable operations, rather than the more affordable for SME’s yes/no performance estimates, that could be easily compared and audited; however most of the existing certification schemes are beginning to be a mixture of both process and performance checkpoints.

• National

      Green Seal, ECOTEL, The Vermont Green Hotels Program - these early birds of “green hotel” certification that blossomed after the UN international year of ecotourism 2002 should be the urge for accommodation facilities’ managers to predict and preempt true legal requirements for environmental responsibility in the tourism industry.

•  Local – The Washington, D.C. based property of Hyatt Regency was chosen as a suitable example of huge inner-city business hotel that has implemented environmental quality control practices. Resort properties are more often aware of the need to keep their natural surroundings in a good shape, and exemplary ecolodges are not ones in need of “green” certification.

7. Decision Breadth/Stakeholders/Policy Actors

      The hospitality industry has a good experience in marketing its “greenwashing” innovations as environmental reforms. Dedicated eco-labeling certification programs impose standards that are too rigid (although certainly beneficial for a hotel’s natural surroundings) for a company to implement without a negative impact on the primary goal of business – improving the bottom line. Therefore environmental management standards and legislation originating from international bodies and/or the public administration need to take into account the vision of all stakeholders involved and stress on the social responsibility aspect of business operations.

8. Legal Standing/Legal Regulatory Framework/Suggested Policy Intervention

      The International Hotel Environment Initiative (IHEI), founded by some of the leading multinational hotel companies, notes, “The tourism industry is probably more aware than any of the inevitable increase in environmental regulation at a national and international level.” By “taking a lead on self-regulation”, IHEI argues, “the hotel industry can prepare in advance and avoid expensive remedial measures. It can also position as leading the field on responsible environmental practice and maybe even help to shape new legislation”.

III. Policy Impacts

9. Social

      As an industry that is extremely susceptible to the human aspect of operations and human perceptions, hospitality should acknowledge its responsibility for the well-being of its customers and their successors. The start should be from building materials’ procurement (non-toxic, preferably recyclable) and building orientation (for alternative energy sources like solar cells) for new properties; energy, water consumption and solid waste management practices for existing ones. These are the basic requirements for a hotel to be called if not “green”, at least environment and resource responsible. Since the main portion of investment money in tourism goes to hotels, implementing EMS within the industry would ensure that tourism, which as a sector relies on human well-being and interaction not less than medical services, for example, is aware of its role to provide the sustainable and philanthropic experience by people for people, that have made it the world’s largest industry.

11. Economic

      Energy saving and water management, as well as waste management procedures would not be impossible to implement through tourism policies, since they contain an element of economic viability for the entities involved. However, a more strict approach encompassing well-thought “green” architectural and building standards as well as sustainable operation with vague marketing benefits for the investors will require environmental legal requirements towards hospitality projects.

12. Other

      There is a myriad of interrelated tourism policy clusters regarding the “greening” of the hospitality industry. Voluntary certification schemes mergers, government environmental legal systems development and grading/classification schemes requirements all affect now and will increase in the near future their influence on the accommodation business.

13. Suggested Interventions

      From their nascence until now the governments have mainly used the public hotel classification systems as reference schemes for price fixing (especially in command economies), levying taxes, imposing building codes and granting licenses in addition to the information purpose of grading.            However a statutory categorization system can prove extremely useful for development of restrictions and incentives in coherence with the objectives of a national tourism policy implementation. One such policy could be ensuring the optimum environmental impact of hospitality facilities and the research should be geared towards exploring the suitability of grading schemes (both statutory and proprietary) for integrating environmental management standards in their set of criteria.

IV. Trade Clusters

12. Type of Measure

      The General Agreement on Trade in Services (GATS) is the first international effort to liberalize the service sector and it includes negotiations in the sector of tourism services.

13. Relation of Trade Measure to Environmental/Tourism Impact

     According to the World Trade Organization (WTO) Secretariat tourism is currently the most open service sector: more than 100 WTO Members have commitments in tourism under the General Agreement on Trade in Services (WTO NEWS, Press Releases 2001, Press /211). The press release follows:
    "However, presentations by development agencies and others showed that tourism is highly dependent on other services such as air and road transport, financial services and health services. In the poorest countries, the lack of such infrastructure constrains the development of tourism services.
    Speakers raised a number of problems related to tourism in developing countries including the high air transport fares to developing country destinations — which were said to be due partly to low air traffic density but also to aviation protectionism — and anti-competitive practices of tour operators."

     In the expected outcomes of its Negotiating Proposal on Tourism and Travel-Related Services regarding GATS Cuba states “The liberalization of tourism services should not give rise to contradictions with national policies with regard to environmental preservation.”(Communication with Cuba, WTO, 2002). Similar objectives of a national tourism policy might have an impact on international hotel chain operators willing to invest in particular area. Under negotiated rules between the respective tourism destination country and WTO the hospitality operators could be browbeaten to implement corporate environmental management system which optimizes the impact on the environment and the communities in their areas of operation.

17. Industry Sector: Tourism and Hospitality

18. Exporters and Importers

      International tourism is exemplified as a viable means of the developing countries to gain a competitive advantage without having to export natural resources or provide cheap manufacturing labor. The main “exporters” of tourists are developed countries and international hotel chains are a huge chunk of the “import” investment in tourism destinations. Therefore they will be affected by GATS on par with the airline and tour operator sectors.

V. Macro/Environment Clusters/Tourism Policy Clusters

19. Environmental Problem Type/ Environmental Aspects

      Needless to say we are living in a world where resources like water are scarce, and wasting them for the sake of “hospitality”, when this could be avoided with planning and hard work is pointless.

20. Resource Impact and Effect

     Savings of more than 50 per cent in energy and water consumption could be achieved through using present and emerging technologies. Regardless of the pragmatic goal set by a hotel company (cost savings, improving its image, gaining a competitive advantage, etc.), while implementing environmental management practices, the process should be encouraged and even forced-upon with the necessary legal framework, especially in fragile ecosystems or cultural heritage hotspots.

21. Urgency and Lifetime/Urgency and Policy Review

      Despite the fact that the hotel industry is not an immediate threat to the environment like oil or chemical plants, the human aspect of its operations determines the urgency measures to be undertaken in caring for the future generations’ well-being.

22. Substitutes/Alternative Policies:

VI. Other Factors

23. Culture

      International tourism is to a great extent performed by, encompassing, and after all – dependant on the demand of travelers coming from the developed countries. The price paid for a sound and leading global economy is competing in a ruthless psychological environment for numerous working hours, resulting in shorter periods of rest, in stress and anxiety. In a highly urbanized society even spending a day out in a forest is considered an adventure.
     Due to the loss of habitat and growing environmental problems the consciousness about the environment and the craving for the “untamed land” is occupying more and more the minds of people who live in the leading industrial societies, because on this stage they already can afford to think outside the “bring home the bacon” frame. Moreover the urge for sustainable tourist behavior and the appreciation of a resort’s or hotel’s contribution to resource conservation is exactly on account of the fact that the wealthy travelers are aware of the opportunities their societies overlooked, missed or simply destroyed on the way to industrialization and urbanization.
      Developing countries now have the opportunity to build upon the mistakes of the tourism industry and to implement sustainable development practices so as to ensure preserving the competitive advantage of the area as a tourist destination. National stereotypes and psychology as well as cultural differences play a huge role for the variances in achieving these goals from country to country.

26. Relevant Literature

Anderson, Kevin, Interview with author, April 07, 2004

Blind, K. (2003), Standardization and the Service Sectors – An explorative study, report by the Fraunhofer Institute granted by the European Commission

Font, X. - Environmental certification in tourism and hospitality: progress,
process and prospects. Tourism Management 23, 2002, p 197-295.

Hollenkamp, G. (2003). Understanding the Practice of Sustainability for Cost-Effective Design, National Hotel Executive Magazine, Iss. 2
Honey, Martha (2002), Ecotourism&Certification – Setting Standards in Practice, Island Press, 407 pp.

USDOE/Energy Efficiency and Renewable Energy/Rebuild America (03/15/04), Eyes on the Bottom Line in the Travel Industry, retrieved 04/06/2004 from http://www.rebuild.org/news/newsdetail.asp?NewsID=2092

Vries, H. J. de, Systematic services standardization from consumer´s point of view, contribution to the ISO Workshop in Oslo May 2001.

Weissman, Arthur, 2003 Resources available to green your property or chain, National Hotel Executive magazine, Iss. 10

WTO/Sevices/Tourism Services/Negotiating Proposal on Tourism and Travel-Related Services Communication with Cuba, 2002, retrieved 04/01/2004 from http://www.wto.org/english/tratop_e/serv_e/tourism_e/tourism_e.htm

VII Conclusion

27. Policy Implications

      Provided the trend towards sustainable development and ecotourism initiatives continue to be focus of attention on the side of international organizations and local governments, environmental requirements and ecotourism certification will receive enough publicity and critical mass of participants so as to be considered as another regulatory framework for the hospitality industry to operate. For developing countries minimizing the impact of the tourists flow on the sensitive and often fragile natural surroundings that comprise tourism destinations preserves their competitive advantage as tourism continues to be a viable economic alternative, offsetting the downsides of globalization.

28. Recommendations

      In the future, the “green” regulations and certification phenomenon might become main stream for the tourism industry, and the process could be enhanced if rating and classification systems (both statutory and proprietary) for hotels set obligatory environmental standards as a categorization requirement for the lodging industry.