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Hotel Owners: Left Holding the Bag for New Greenhouse Gas Taxes

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If you are an owner or manager of a hotel, sustainability is now your number one business risk factor. Bet you did not hear that at your last hospitality conference. Many forces are going to combine to drive up hotel ownership costs in the next three years. Besides the usual inflation type expenses, energy and employees, the big ones are going to be global warming taxation and new green building codes.

Global warming has been a disputed topic of discussion for decades, championed by most scientists, a few public figures, celebrities, environmental evangelists, and a few progressive companies. Unfortunately, global warming never made it onto the radar screen of hotel owners even though their customers have been telling them in survey after survey for the last five years they want to stay at environmentally friendly places. After a year of the warmest temperatures ever recorded, 1,000-year hurricanes, floods, droughts, diseases, and bug infestations, the United States is beyond the tipping point for global warming. It is here. The issue is not what can we do about it. The issue is how do we survive now and continue to survive in the future.

Global warming has created natural disasters that are more severe and occur at a faster rate. The government, as the de facto insurer of disasters in this country, will need more tax money each year to help rebuild after natural disasters. There are not sufficient funds in the government budget to keep up with the current demand for disaster relief. So how will they get the funds?The same way they always do, pass the cost through increased taxation onto individual taxpayers.

However, in the words of a famous sports announcer, “not so fast.” Surveys show that an overwhelming percentage of the U.S. population now believe the severe natural disasters experienced in the last few years have been caused by global warming. Global warming will soon have the same negative cultural characteristics as tobacco.

Commercial Buildings’ Contribution

Unsustainable commercial buildings produce the 40 percent of greenhouse gases which cause global warming. Historically, the owners of commercial buildings that pollute, through their lobbyists, have been able to deflect their fair share of the cost to remedy the environmental problems they cause. Look at the BP oil spill. They created an environmental disaster and killed 11 people. Their total bill was just under $50 billion. Lobbyists and good public relations campaigns have convinced most individual taxpayers the price was a just and staggering amount of money to pay. In reality it was less than one year’s profits for BP.

So the lobbyists and trade organizations for the hospitality industry will start working on politicians to prevent their clients from getting taxed for operating polluting buildings. But they are in for a big surprise. They are not going to get the financial support from some of the giant companies that historically stood with them. Why not? The smart money saw this problem coming and did something about it. Even Wal-Mart, GE, and several automobile companies have been quietly renovating their old factories and distribution centers. Sustainable! Their new buildings are green.

Regardless of their political persuasion individual taxpayers are going to demand help for paying for disaster relief. They will put tremendous pressure on Congress. The current administration is ready to act either by signing new tax laws or by executive order. Like big tobacco, politicians will have a cause they can use to show the country they are tough on the oil companies. They may lose some funding but not votes. There will be a global warming tax on unsustainable commercial buildings of some kind within the next few years.

Between a Rock & a Hard Place

Most hotel owners are between a rock and hard place. Owners will not be able to pass through increased operating costs from unsustainability to customers because they will not pay them. Customers will go down the street to an environmentally friendly competitor. It will be a public relations disaster for hotel owners to stand up with polluting oil and manufacturing companies to fight the pollution taxes, even through their lobbyists and trade organizations.

If the owners of unsustainable hotels do not act quickly, they are going to have to pay the higher direct costs of natural disasters to their properties through increased insurance premiums and higher deductibles plus pay an additional tax for operating polluting buildings.

If global warming taxation does not ruin a hotel owner’s day, there is another problem sneaking up on most commercial building owners just like global warming. In the United States, state, county, and city governments subscribe to and implement the International Construction Council’s International Building Code. The code is updated on a regular basis. When the new code is published, state legislators automatically approve it with little or no review. It is an administrative process handled by the state agency within each state that regulates building codes and as agents of the state, counties and cities follow suit.

Impact of International Green Building Code

In 2012 the ICC created a new building code called the International Green Building Code. This code establishes the standards for sustainable construction, which means it can also be used by comparison to establish the level of sustainability of a nonconforming building. The IGCC has not replaced the existing International Building Code but most states are using the new green code. Federal and state governments are going to need a standard for levying greenhouse gas emmissions taxes and the new IGCC is the logical choice, which will become a compelling reason for every state to adopt it.

The probability is getting higher every day that the next time a hotel owner considers a capital improvement program, sustainability will not be an add-on expense but a requirement to obtain a certificate of occupancy after the renovation. For hotel owners sustainability is just like global warming. It is not a topic of discussion but a primary risk factor for conducting business in this country.

So what can a hotel owner do? The first thing is educate themselves about sustainability. The easiest way is to personally take a class in the sustainable development process. I can tell you from experience that it is cheaper than hiring architects, engineers, and green consultants to educate you on sustainability while designing your next renovation or new hotel project. An owner needs to be as knowledgeable about sustainability as they are about brand standards. I recommend the United States Green Building Council’s Leadership in Energy and Environmental Design (LEED) process. There are one and two day seminars all over the country and they are inexpensive. Start your research at the Green Building Certification Institute, www.gbci.org, and find a class near you.

Go green now. You cannot afford to wait.

Michael Sayre is a LEED AP BD+C and the president of Sustainable Design Development Solutions and the previous owner of BelonSayre Development Company. He has a BS degree from the University of Colorado in finance and marketing with advanced degree studies in commercial banking, mergers and acquisitions, and real estate development. He has more than 30 years experience in planning, financing, designing, and constructing real estate developments. He has experience developing sustainable hotels, luxury condominiums, timeshare and private residential clubs with amenities like golf courses, equestrian, skiing, and marinas; and mixed use projects with office, industrial, and commercial retail. He can be reached at msayre@belonsayre.com.

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