Is LEED certification the key to succeeding in the hotel business? Probably, considering LEED-certified hotels generate more money than their non-efficient competitors.
So says Cornell University, in The Impact of LEED Certification on Hotel Performance, the first study tracking financial performance of LEED-certified hotels across the United States.
But while Cornell urges caution in jumping to conclusions about consumer preferences, the new data may mean sustainable hotels are about to boom, considering half of all U.S. hotel projects will be green buildings by 2015.
Poorly Understood Sustainability Benefits
Even though LEED certification has grown exponentially across America to include tens of thousands of green building projects with hundreds of millions in cost savings, the specific financial results of hotels going green hadn’t been benchmarked.
Cornell researchers set out to discover the truth by comparing the performance of 93 LEED-certified U.S. hotels to 514 comparable (but less efficient) hotels, using financial data through the university’s Center for Hospitality Research.
93 properties may not seem like a large sample size, but it represents the total of LEED-certified hotels from 2007 to 2012, and Cornell suggests their findings apply to the industry as a whole – showing strong evidence that for hotels, going green means making green.
“Superior Financial Performance” For LEED-Certified Hotels
Based on raw data, Cornell researchers reported “a general trend toward superior financial performance” for LEED-certified hotels. Even though LEED hotels had a lower occupancy rate of 63% on average compared to 67% for non-certified hotels, people staying at the LEED hotels paid more – an average daily rate of $169 per night compared to $160 at less-efficient hotels.
However, given time, the advantages of LEED certification become greater. After two years, the average daily rate paid by travelers at LEED hotels jumped to $20 per night more than non-certified hotels – a “substantially higher rate than their non-LEED competitors.” In addition, hotels that renovated their properties to obtain LEED certification increased occupancy rates not only past previous levels, but even or ahead of their competitors.
Considering how often average daily rates and “under-construction” status play into consumer decisions, the LEED advantage stands out to Cornell. “Considering these challenges, it is remarkable that LEED certified hotels match competitors’ occupancy levels within a year of certification.”
LEED Certification Grows To Meet Consumer Demand
It’s also remarkable considering that just one year ago, a similar Cornell study of 9,000 hotels found only a net-neutral impact for sustainability efforts, including LEED certification. However, that study suggested revenue impacts would increase as travelers gained experience and comfort with sustainability efforts.
This upward trend tracks with a 2013 Navigant Research survey showing 72% of Americans were unfamiliar with LEED certification, but once it was explained, approve of green building by a 4-to-1 ratio.
And in addition to increasing revenue, green building investments also boost property value and customer satisfaction. A 2013 McGraw Hill Construction survey reported sustainability features increased hotel asset values 11% and customer satisfaction 69% – no wonder people are paying more for LEED hotels!
As time goes on U.S. consumer demand for green business products and services keeps rising faster than conventional goods, meaning businesses need to stop thinking about sustainability as a public relations move, and start thinking about it as a way to hedge against economic downturns and grow well into the future.
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