Green appears to be good for hotels

A new study of U.S. hotels from The Center for Hospitality Research at Cornell University examines the impact of LEED certification on revenue performance for a substantial sample of U.S. hotels and finds that LEED certified hotels demonstrate a clear advantage in revenue per available room over their non-LEED competitors for at least the first two years after certification. Most hotels’ certification is so recent that there is insufficient data at this time to gauge whether the revenue advantage continues after two years.

The study compares the performance 93 LEED-certified hotels (representing the population of such hotels in 2012) to that of 514 comparable competitors. Among the findings of the research:

  • in the U.S. the number of hotels certified to the LEED standard showed an increasing trend that seems to have peaked in 2010, when 29 hotels were certified.
  • from 2011 on, there has been a decline in the number of newly certified hotels.
  • this trend suggests that although the LEED standard has gained increased acceptance in the hotel industry the potential benefits from LEED are not clear to the industry.
  • many large hotel companies have adopted LEED certification as part of their development programs. Marriott, for example, has created a “LEED Volume Program” with a pre-certified prototype that they can build all over the world. Many independent hoteliers have also adopted LEED to differentiate their properties.
  • 31% of certified hotels are luxury hotels and 84% are upscale or above. 42% of LEED hotels are franchised properties, and the remainder are split evenly between chain operators and independents.
  • most certified hotels are in suburban or urban markets (71%), which is consistent with what the certification criteria of LEED would suggest (e.g., points given for serving densely populated areas with public transportation options). Smallish hotels seem to be best suited for LEED certification, as 46% of the sample’s certified hotels fall in the range of 75 to 149 rooms, with another 28% between 150 and 299 rooms. These statistics could also be simply because these are the most common hotel sizes in the U.S.
  • there is a general trend toward superior financial performance for LEED certified hotels. As a group, the 93 LEED certified hotels had a somewhat lower occupancy rate (63% for the LEED group versus 67% for the non-certified hotels), but a higher average daily rate ($169 vs. $160).

The 13 page report The Impact of LEED Certification on Hotel Performance can be found at https://www.hotelschool.cornell.edu/research/chr/pubs/reports/2014.html . Registration (free) is required to read the report.

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