Hotels in Asia Face Mounting Pressure to be More Sustainable
5 July 2022
Hotels in Asia-Pacific are way behind Europe and North America in sustainability but changing consumer expectations, pressure from global shareholders, an “avalanche” of new regulations and additional sustainable metrics requirements are forcing change.
Majority (73 percent) of hotel investors surveyed in April by JLL’s Hotels & Hospitality Group consider ESG (Environmental, Social, Governance) as important, very important or deal-breaker.
That leaves a good 27 percent that see ESG as slightly or not important. And despite the majority seeing ESG as critical, 75 percent said they have not accessed sustainability-linked loans in the last three years. These loans are the “crux” for hotels to try and meet governments’ ambitious carbon neutral targets, said the research.
Accessibility could be a reason. JLL notes that green loans and sustainability-linked loans (read the difference between the two in this short explainer) are more available in countries such as Singapore, in line with the republic’s Green Plan 2030. Major banks such as UOB, Maybank and OCBC are among financial institutions that offer the loans. Ascott Residence Trust recently became the first Singapore-listed real estate trust to issue a sustainability-linked bond of $145 million (S$200 million).
The city-state also boasts a Hotel Sustainability Roadmap, launched recently by the Singapore Hotel Association and Singapore Tourism Board with two goals: get 60 percent of hotel room stock to attain internationally recognized hotel sustainability certification by 2025, and get hotels to track emissions by 2023 with a view to reduce emissions by 2030 and achieve net-zero by 2050.
The report also singled out the International Finance Corporation, a member of World Bank Group, as supporting companies doing business sustainably. In Thailand, for instance, it grants Asset World Corporation a green loan of up to $143 million (4.5 billion baht) to finance new green projects and decarbonize existing assets. It also works with the group, the largest hotel owner in Thailand, to receive the Excellence in Design for Greater Efficiencies certification for at least five of its hotels including retrofitting, refurbishing and new constructions.
With projects in the region comprising mostly new-builds, developers have the opportunity to build sustainably and ultimately sell these assets to funds, with lower return requirements of sustainability-focused equity and debt, according to the research.
Most respondents say the focus of their sustainability journey currently is on operations, followed by construction of new assets.
Mounting pressure
The report believes positive changes are afoot in Asia-Pacific, citing “mounting pressure” from governments and other authorities.
Sydney, for example, has set tougher energy saving requirements for new developments from January 2023 to meet its net-zero emission targets by 2035.
US-based Uniform System of Accounts for the Lodging Industry is planning to add Energy, Waste and Water metrics in monitoring sustainability in hotel operations from 2024. “Hotels in Asia-Pacific would then ultimately face the industry’s requirements,” said the report.
The hotel industry is the biggest consumer of energy and water among all real estate classes, according to the Urban Land Institute in its Hotel Sustainability Report 2019. Hotels in Asia-Pacific are producing more emissions per occupied room than those in Europe or the Americas due to the climate and the greater need for air conditioning.
However, according to both investors and operators in Asia-Pacific, their top challenges towards being carbon-neutral and net-zero are a lack of consistent and validated data, difficulty in determining KPIs to measure success against goals and a lack of in-house sustainability expertise.
The full report can be downloaded here.