HOTELS

Roger Hill

A Return On Green
September 17, 2008

Will your sustainable project be profitable on your timeline?

Attractive, compelling and on-brand design is significant, but diminished if it doesn’t produce P&Ls that are in the black.

Then came the sustainability movement – beginning its ascent from trend to tipping point two to three years ago. 

Everyone knows that Green is good. It means “go.” It means “healthy” (as in: eat your leafy greens!) and now it means “sustainability.” It’s almost an inarguable statement that sustainable design is the right thing to do. It’s right for the environment and right for the health and well being of staff and guests. For today, however, let’s take a different tact. The truth is, many struggle with the cost implication of green design and the quiet undertone of “is it worth it?”

Building sustainably involves a series of supplementary costs. Naming only a few:

• Added due diligence cost in site selection and cost estimation with LEED® consultant involvement.
• Sophisticated HVAC, Lighting and Control systems.
• Added consultant costs, particularly in engineering, enhanced commissioning and LEED® consulting.
• Added architectural and interior design fees for LEED® research and documentation.
• Added material costs, however these are coming down as more consumers demand these products.
• Added construction indoor air quality management.

After reading a list like this and merely imagining the addition to the bottom line, it becomes easy to imagine how vital ROI assurances become to would-be green developments. Unfortunately, the assurances can still be fuzzy, with so many of the statistics proving the economic value of green hotels with years still to emerge.

This is where being as educated and as thoughtful as possible when considering sustainability is paramount.  There are no promises, but when weighing the value of greening your property, some simple considerations will help you decide if green is right for your project and if the chances of a return are in your favor.

For exactly these purposes, I asked one of Gettys’ resident LEED® specialists, Dan Welborn, to weigh in with some of his recommendations for those among us who are considering green design and want to better understand the cost associations and benefits. Dan is a member of the USGBC LEED for Hospitality Advisory Group and was among the first in our offices to acquire his LEED® accreditation back in 2007. 

Here, please find a list of considerations that Dan recommends when determining whether your investment into sustainability will result in short term or long term ROI.

Green Consideration #1: What’s your Exit Strategy?
Are you looking to sell this property in 3-5 years, or make this a flagship location with no immediate plans to turn over? Any increased investment that you make in sustainable materials during the building phase will be made with the expectation that long-term savings in energy costs will result. Therefore, the longer that the ownership who invests in the sustainable build retains the property, the better chance they will have to recoup their costs and benefit from their investment.  There may also be an increased property value for those owners who do want to sell the property in a shorter time frame as evidenced in the Commercial Office Building market, as many of those properties have sold for more than the average. However, this information is based on a small set of properties and jury is still out on the true added value for re-sell.

Green Consideration #2: Instead of New Build, Consider Adaptive Re-Use
If you’re developing a new-build project that relies heavily on an excellent centrally-located piece of real estate for its success, then think about greening a property that already exists. The case for adaptive reuse is that, often, it is among the best ways to get a hold of prime downtown real estate while also being cost conservative. Moreover, it is an opportunity to re-shape some of the world’s great architectural gems that have outgrown their usefulness in their current states for current times but can be restructured for a new purpose – which is an enormous public relations opportunity that will broaden awareness of your property when it is open.

Is this prime real estate centrally located in an Urban Center with plenty of public transportation surrounding it? If so, you are sitting on points that will put you on the path to LEED® accreditation at no added cost to you – further making adaptive reuse a terrific opportunity to see a return on your investment in green that much faster.

Green Consideration #4: Who is your guest and how much of your business plan relies on meetings and events?
One of the common theories supporting the return on sustainable design is that consumer demand will justify the investment that you make in sustainable design. That is likely true, but there are no official statistics to support that. Let’s take that concept one step farther, though. Meetings and private events are the bread and butter of most hotels.

Many of the companies that are buying meetings and events have made sustainable practices a part of their mission… even making it a part of their pledge to their internal and external guests. That means everything from the paper that they use in their offices to the team-member holiday event that they are considering at your establishment must be sustainable in order to be in line with their corporate mission. More and more event planners are seeking sustainability in the properties that they do business with – and not offering a property that’s green might well mean that they do business elsewhere.

More and more hotel event planners are finding that if they want the business, it is important to offer their guests what they’re asking for – these days is very verbally, sustainability!

Green Consideration #5: How quickly do you want to open?
By building a LEED® certified building, building permitting in some cities can be granted as many as three months faster than traditional building permitting. That’s a three month jump on opening the doors to your property and taking that ever-important step to being profitable. Check your local building planning office to see if your project is in one of these cities. 

There are Choices in Sustainability
All in all, while sustainability and the level to which each one of us wants to participate is a very personal choice, it would be uninformed to forget that it is a business decision and should be treated with the same weight as all business dealings. 

At Gettys, we very much believe in building sustainably when possible and to that point, have had two wonderful opportunities to develop LEED® Silver Certified projects of our own this year. 

To that point, however, there are always choices when it comes to sustainability. If building sustainably and energy efficiency is ethically important to you, but economically unfeasible, then I urge you to consider making sustainable contributions in other realms. For instance, raising a million dollars through guest and associate donations could allow you to put up a megawatt of wind power on a family farm out west, thereby producing more than you’ll ever need for your property! Or, simply install a “living roof” of grass and vegetation on the roof of your property…helping to purify storm water and provide natural air conditioning.

When it comes to sustainability, don’t be discouraged by the black and white… there are shades of grey everywhere.

Posted by Roger Hill on September 17, 2008 | Comments (2)