For quite some time, hotel investors and others have been trying to determine whether or not spending money on smart “green” building and efficiency can lead to a higher average daily rate (ADR) and more revenue per available room (RevPAR). This discussion has particularly taken place when involving hotels that have been put through the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) certification process. Is it really worth the time and money to get a building LEED certified? From an efficiency standpoint there is no doubt that it is but what about from an ADR or RevPAR standpoint? Some researchers at Cornell University have finally taken the time to find out.
A new study has found that hotels do gain a revenue benefit when they are certified under the LEED program—and a substantial one at that. By comparing LEED certified hotels with a competitive set of non-certified hotels, the researchers found significant increases in ADR and RevPAR for the LEED hotels. The study, “The Impact of LEED Certification on Hotel Performance,” by Matthew Walsman, Rohit Verma, and Suresh Muthulingam, compared the performance of 93 LEED certified U.S. hotels to that of 514 comparable competitors. For the year prior to certification, the 93 hotels that were eventually certified had an ADR that was on average $10 higher than the non-LEED hotels. For the two years after obtaining LEED certification, the mean ADR for LEED hotels was $20 higher than that for non-LEED hotels.
The authors completed this report by analyzing hotel performance data provided by STR, a Partner of Cornell’s Center for Hospitality Research. Research was based on data pulled from the U.S. Green Building Council’s LEED database in 2012.
‘Surprising’ Findings in Study
“This difference is surprising considering the importance of cost competitiveness in the U.S. hotel industry,” the report’s authors said. “Many hoteliers have difficulty justifying higher rates to price-conscious customers, and yet these LEED hotels were able to collect a substantially higher rate than their non-LEED competitors.”
“Academics and practitioners have debated the merits of LEED certification in various industries since the establishment of the program in 2000, but we have seen few empirical studies that measure its impact, particularly on the hotel industry,” the study’s authors added.
The LEED hotels outperformed competitors for two years following certification. “Due to insufficient data, it is still too early to know the effects of LEED certification beyond the first two years,” the researchers concluded.
Appeal of LEED Hotels Makes Sense
Why might LEED hotels be getting a higher ADR and more RevPAR? My take is that hotels built to LEED standards just offer a higher value to consumers. Those with F&B tend to have hip eateries that offer local, organic choices and they tend to be more upscale, urban or suburban properties in established or up and coming markets that have an easier time getting a higher rate. There is also the perception—and justifiably so—that LEED certified buildings are healthier buildings than others in their markets. LEED hotels appeal to meeting planners, millennials and others tuned in to sustainable hospitality. Of course most LEED hotels are either brand new, newer, or recently renovated as well.
Interestingly, the study’s authors spend a fair amount of time stating that from 2011 on there has been a decline in the number of newly certified LEED hotels and that the number certified per year seems to have peaked in 2010 in the United States. While my most recent list does not show a year-to-year increase in recent years, the numbers are steady and definitely not in decline.
The researchers conclude by discussing where future related research opportunities exist. For example, might those properties that go through the LEED certification process but that never get the certificate also benefit from a stronger ADR and RevPAR?
Be sure to check out the entire report by clicking here.
Who is Your Sustainability Champion?
Green Lodging News is always looking to profile sustainability champions in our Personnel Profile section. If you would like to nominate someone for this section of Green Lodging News, contact me at (813) 510-3868, or by e-mail at editor@greenlodgingnews.com.
Looking for Guest Columnists
Every two weeks Green Lodging News posts a new guest column on its website. (Click here for examples.) The guest column also appears in the weekly e-newsletter. Green Lodging News is currently in need of industry experts to contribute occasional guest columns. Experts may include consultants, architects, designers, suppliers and those who own or operate green lodging establishments. Columns may be articles that take a stance on a particular subject or be strictly educational in nature. Columnists benefit by having their photo included along with a one paragraph description of their company. Interested in writing a column? Contact Glenn Hasek, publisher and editor, at (813) 510-3868, or by e-mail at editor@greenlodgingnews.com.
Planning Advertising for 2014?
Green Lodging News is accepting reservations for advertising spots for 2014. Many excellent spots are available on the website and in the weekly e-mail newsletter. Many Green Supplier Spotlight dates are also available. Interested in receiving a 2014 media kit? Be sure to contact me as soon as possible at (813) 510-3868, or by e-mail at editor@greenlodgingnews.com. Media kits can also be accessed by clicking here. Thank you to all of those companies that consistently support Green Lodging News.
Green Lodging News & Social Media
Green Lodging News now has 1,498 Twitter followers. Thank you to all of those who follow our tweets. In addition to following us on Twitter, be sure to bookmark the Green Lodging News Blog in your browser. More importantly, participate with your comments. Green Lodging News is also on Facebook. Be sure to “Like” us there. Green Lodging News now has 582 Facebook followers.
As always, I can be reached at editor@greenlodgingnews.com.
