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Research Article: Green Certified Hotels Do Not Perform Better Financially Than Their Non-Certified Counterparts

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Glenn Hasek

An article published in the International Journal of Hospitality Management caught my attention this past week. Its title: “Narrowing the intention-behavior gap: The impact of hotel green certification.” I highly recommend reading it. The research, which included three studies, was well-researched by the authors: Christina G. Chi, Oscar Hengxuan Chi, Xun Xu, and Ian Kennedy. Data for the article was pulled from a survey conducted at a major U.S. university and from STR.

It would be impossible to highlight all the findings in this article, and the article is indeed worth numerous columns by yours truly, but here is a list of some conclusions that jumped out at me:

“Study 1 suggests that hotel green certifications lead to a higher level of perceived green value and green brand image. This clearly demonstrates that, from the marketing perspective, green certification can be used as a tool to enhance a hotel’s reputation and competitive advantage.”

“…hoteliers should not overlook the positive effects of green certifications. Especially considering that green practices are invisible to the customers upon booking, while green certifications are tangible evidence for hotels to show customers their commitment to the environment. In other words, green certifications lend credibility to hotels’ sustainability endeavors and provide assurance to customers.”

Certification a Bad Investment?

“Study 2 alludes to hoteliers the financial impact associated with green certifications. This study finds that green hotels in the U.S. do not yield a higher financial performance in terms of ADR, occupancy, and RevPAR, compared to non-green hotels.”

“The absence of higher financial outcomes for green certified hotels points to a significant intention-behavior gap, which impedes customers’ actual purchase behaviors. This suggests that green hotels need to take measures to more effectively convert customer intention into behavior.”

“Study 3 examines how providing customers with relevant information contributes to closing the intention-behavior gap. The results clearly demonstrate that hotels benefit from making their green information more visible and accessible. This means that green hotels should publicize the hard-earned green certification and their green practices both online (e.g., in the online booking webpage) and offline (e.g., signage at the front desk, green information on the lobby TV and guestroom TV). In addition, green hotels should practice comparative pricing strategy as commonly used in the retail industry by displaying comparable pricing information on the booking webpage. In this way, customers would know that being green does not necessarily mean that the hotels will charge a premium, as commonly believed.”

The Reasoning Behind the Research

I asked Christina G. Chi what prompted her team to conduct this type of research, and this is what she told me: “The green movement in the hotel industry started decades ago, however, there’s a surprisingly low number of hotels with green certifications, considering the sheer size of the industry. Another baffling fact is, those hotels with hard earned green certifications do not actively advertise their accreditation and it’s difficult for green-minded customers to find who is green when making hotel reservations. Is it because of an intention-behavior gap in green consumption causing such phenomenon? Is the myth true that customers prefer to stay at a green hotel and are willing to pay more? Are the green hotels (like other green products) more expensive as commonly believed? What can hotels do to encourage green consumption? These questions prompted us to conduct a study to find the answers.”

I also asked Christina what finding, or findings surprised her the most. She told me: “The finding that green certified hotels do not perform better financially than their non-green counterparts. Previous research conducted by certification organizations and academic institutions implied higher consumer demand, higher room rate and revenue associated with green certifications, but this study found that not to be true. This may help explain why not more hotels would pursue green certifications, and why those being certified green do not more actively promote their green features.”

Finally, I asked, “In what ways can hotels that are green certified do a better job to ensure that they are more profitable enterprises than non-green certified hotels? (Certified hotels should be inherently more profitable given the efficiencies that come with operating in a more energy, water, and waste-efficient manner.)

Christina’s response: “Our study found that providing customers with relevant information helps to turn customer intention into actual booking behavior, which help boost hotel revenue. Green hotels should practice comparative pricing strategy as commonly used in the retail industry by displaying comparable pricing information on the booking webpage. In this way, customers would know that being green does not necessarily mean that the hotels will charge a premium, as commonly believed. Hotels also benefit from making their green information more visible and accessible by prominently displaying the hotel’s green certification icons on the booking webpage (just like during the COVID-19 period, hotels put their hygiene credentials front and center in the booking page), incorporating links to hotels’ green practices and quotes from customers testifying hotels’ green initiatives. Hotels should also work closely with third party online travel agents (OTAs) and green certification programs to develop a green hotel directory, flagging green hotels in the booking sites so that customers can easily find and select green hotels.”

Say It Is Not So!

Wow, definitely food for thought and I was also caught off guard by the conclusion that green certified hotels do not perform better financially than their non-green counterparts. Could it be that some or many of the hotels said to be non-certified are really implementing green practices…or what I call smart practices when it comes to construction design, energy, water, and waste? But prefer not to get certified? Operations-wise, going green and getting certified for it should lead to greater profitability. Perhaps, as Christina says, green certified hotels are not doing a good enough job telling their green story and marketing it. Or perhaps there were other factors that came into play but invisibly—degree of meetings business, management style, newness of the property, strength of sales team, natural events, or other factors that led to a non-certified hotel having a better bottom line. Certainly, more research needs to be done here.

Your thoughts? I can be reached at greenlodgingnews@gmail.com.

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