Cutting carbon to cut costs

The pandemic has seen a two-pronged attack on energy efficiency. While hotel operators have been forensically examining their costs, lockdowns have also promoted a debate about environmental damage, and carbon footprints, both at a personal and corporate level.  

A recent webinar held by the Energy & Environment Alliance pointed out the hotel sector’s relatively poor performance on carbon reduction, and explored ways that performance could be improved.  

Among speakers was veteran hotelier Sir David Michels, who admitted: “Before lockdown, it was never top of mind – and it’s not top of mind, because we don’t consider ourselves polluters, nor do our customers. But we are – no question.”  

Michels called on those with solutions to offer them to a sector that he believes is more ready than ever: “I’m sure on the whole, they’ll be a willing audience.” But he warned that, in his experience, claims of improved experience rarely deliver as promised.  

Michels also noted that chambermaids at the Savoy today service the same number of rooms per hour as they did in 1874. “The advance of technology hasn’t touched the hotel industry – and it needs to. We have grandchildren – we’re generally keen.”  

He worried that hotel operators can sometimes see energy saving as a low priority, behind more immediate issues such as guest satisfaction, and staffing costs. Energy bills, he suggested, are sometimes such a small part of overall running expenses, that savings appear small.  

But while Michels professed to having struggled to successfully implement carbon reduction initiatives in the past, there are some with more vertically integrated hospitality businesses testing new strategies.  

“We’ve explored many, many things”, said Mark Anderson, MD for property at Whitbread. “And what we have done over the last five years, is accelerate those activities.” The activities sit within a Force for Good initiative that has committed the company to a series of sustainability initiatives. In 2018, for example, Whitbread set itself a publicly stated target to halve its energy consumption by 2025, “and we’re well on the way”. The company started installing solar PV to generate its own electricity from hotel roofs in 2015, and has consistently designed new hotels to reduce costs. 

“The costs of utilities to us are significant,” said Anderson, at more than GBP70m a year. “If I can reduce that by 10%, that’s worth having.” 

Investment has included building management systems, which automatically minimises usage by spotting unoccupied rooms, for example, and turning down air conditioning. “The BMS is a great success, and on average it saves us just under 10%.” 

In the group’s Beefeater restaurants, low gas grills have been installed in kitchens. As well as chefs being happy using them, there has been no impact on guest scores at upgraded restaurants.  

The group adopts a three stage process for innovations, first running a trial, followed by a pilot implementation and – should the case be proven – move to a rollout across the portfolio. “Ultimately, there’s a commercial benefit.”  

Among new items being trialled is battery storage, which allows one of the group’s Scottish properties to buy cheap overnight electricity, and timeshift its use.  

Anderson said quick, easy wins come from converting lighting to low energy, and tackling heating and cooling controls. “Aircon is an area where we’ve worked very hard.”  

“But there’s a lot that we’ve done, that doesn’t need money,” he added. A “hearts and minds programme” gets staff buy-in to switch off appliances and taps when not needed, and to report problems. “Staying on top of maintenance helps us,” by acting quickly on such issues as broken fridge seals, and doors that no longer close properly. Simply replacing worn equipment with the most efficient new model you can afford, will also deliver an effective return for minimal additional outlay.  

And Oliver Winter, CEO at European hostel brand a&o, says the demand for action is not just about saving money. “Half of our guests are school students, and these guests are much more sensitive about the topic – they are pushing us.”  

Amongst his group’s reported credentials is the fact that “out of our 39 hostels, 35 buildings are recycled” – an environmental saving of 25-30 years of emissions, compared with new build. “When we convert, we do what we can,” he added. That includes upgrading the energy efficiency of external cladding and glazing, and designing in air exchange systems rather than air conditioning – which is costlier to install and operate.  

“Over the last two years, we have changed all the water items – taps, showers and so on. And we’re now investigating smart heating for the rooms,” to avoid warming empty space.  

HA Perspective [by Chris Bown]: There’s lots to go at here – but the key driver is that customers (and younger team members) are increasingly interested in green matters. And that means so much more now, than a card in the hotel bathroom about washing less towels.  

How to tackle this? Well, the first thing is to start. Take a look at what can be improved, in the name of reducing carbon. Even for a luxury hotel operation, there are steps that can be taken to demonstrate a commitment – how about an electric courtesy car or bus?  

As Whitbread’s approach shows, this is not just about being responsible, it also generally is good business financially too, and not just on reduced electricity bills. The company recently launched two green bond issues, to help fund some of its new initiatives, and build greener hotels – and it reckoned the strong investor appetite for the bonds enabled a 10 basis points saving on the coupon.  

Additional comment [by Andrew Sangster]: Last November, Baron Turner of Ecchinswell, better known as Adair Turner, the former head of the Financial Services Authority, delivered a speech about sustainability for Keele World Affairs, associated with Keele University. 

It was called “Techno-optimism, behaviour change and planetary boundaries” and gives one of the best overviews of the current environmental debate I have heard. (Download here: 

Techno optimism behaviour change and planetary boundaries Nov 2020.pdf (kwaku.org.uk)). 

Turner links the climate change threat – which has the capacity to have a “catastrophic impact on human welfare” – with biodiversity. He argued it was clear that a radical change of action is required: reducing greenhouse gas emissions and stopping the destruction of critical ecosystems in rain forests, the ocean and similar. 

There are two broad approaches, he argues, one he calls techno-optimism and the other the end of consumerism. The first sees technological progress enabling us to reach zero carbon while continuing to enjoy existing living standards; the second sees current living standards as unsustainable and requires us to “get on our bicycles, stop flying and give up red meat”. 

The distinction between the two approaches is personified in Tesla boss Elon Musk and teenage environmental campaigner Greta Thunberg: buy an even more expensive car or adopt a spartan lifestyle. 

The controversial aspect of Turner’s speech came with his suggestion that many economic activities and forms of consumption will, shortly, thanks to technological advances, have almost no relevant planetary boundaries. 

If we are to hit targets for climate change, which most countries have signed up to, then we will soon, in perhaps less than three decades (the UK is committed to net zero carbon by 2050) be producing near limitless amounts of electricity in a carbonfree way. 

This means there are no limits to heating buildings or transport, including, if we can make the technological leap, flying. 

Where there will be planetary boundaries are things related to food and textiles. This will require behavioural change, but it is a change that is rather different to what is being discussed at the moment. 

At a practical level, this somewhat questions the benefits of green buildings. Why, if we are going to have near limitless electrical power, do we want heavily insulated homes and workplaces in the long-term?  

Green buildings are rubbish at getting warm or cold quickly, a significant disadvantage in climates like the UK’s which can see temperature changes of 10 degrees in 24 hoursWe can ditch the obsession with eliminating draughts which, if they are from unpolluted outside air, are a good thing (as Covid is proving) for health. 

Short-term (by which I mean under a couple of decades) changes are definitely needed but beyond this time horizon, the advantages of green buildings go into rapid decline. This is going to play havoc with valuation metrics for assets that endure for centuries. 

The prospect of carbonfree travel is good news for the travel and tourism industry, which is increasingly being cast as one of the villains of environmental destruction. The challenge is what to do over the next few decades in which the pressure to de-carbonise is going to grow and grow. 

The biggest technological challenges to a carbon free future are the production of steel and cement plus shipping and aviation in the transport sector. But Turner believes carbon capture and bioenergy can play a role along with hydrogen in getting us to carbon-free by 2050. 

Importantly, getting to this carbonfree world is already technologically possible and once we have arrived, the hit to living standards is trivial and “quite possibly less than nil”. 

What remains crucial is getting to this carbonfree world as quickly as possible to prevent wider environmental disaster than is already baked in. Even when achieved, there remains a different set of challenges. 

This revolves around our use of land and oceans for food, textile and other organic material production. Turner makes an interesting distinction between inorganic – energy production – and organic – mostly food but also clothes. 

Turner foresees three elements where change is needed: a non-radical shift in food production technology such as more efficient fertiliser; a switch in diets, particularly away from meat; and then a radical shift in food production, such as vertical farming, breeding insects to feed humans or fish, or synthetic production of food including meat. 

Turner concluded his lecture with four action: getting to zero carbon as fast as possible; getting emissions down fast over the next 10 years by making responsible consumption choices now even if that won’t matter in 50 years; develop new food tech as quick as we can; and finally motivate the flow of investment needed to support ecosystem restoration, reforestation and better, less destructive land-use. 

For me, the points made by Turner are as significant as the Stern Review Report on the Economics of Climate Change back in 2006. Hotel Analyst reported extensively on this as it was the first serious attempt by the British Government to quantify the challenges of climate change and stick a monetary value on the impact. 

The Review was met with a mixed reaction but it marked the entry of environmentalism into serious policy discussions at the highest level of Government. The 15 years since have seen climate change become a huge policy arena for global governments and an unavoidable requirement of corporate management. 

Expect biodiversity to climb into the same prominence over the next 15 years. 

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