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The hotel real estate sector has its work cut out to fully decarbonize until 2050 – here is some help.
Professor of Hospitality Management at the IU International University of Applied Sciences, Germany
Ahead of the UN Climate Change Conference COP26 in Glasgow this November 2021, a series of breakthroughs can be observed in terms of climate actions. Governments are aligning policies towards a carbon neutral future; advances in technologies are making solar and wind energy cheaper to produce compared to fossil fuel in many markets; and development of construction techniques makes it possible to build high-rises from timber in an increasingly urbanized world.
Against the backdrop of wide scale decarbonisation, five sectors are bound to see major changes in the years to come: transport, industry, agriculture, power production and buildings. The latter is of relevance to the hospitality industry and the hotel sector in particular. The hotel sector invests, owns, manages and operates buildings across the globe. With an ageing hotel building stock, there is a real threat of stranding those real estate assets as extensive retrofitting is required for 500,000+ hotel buildings worldwide (and probably a few million buildings in the broader accommodation sector) to achieve greater energy efficiency on the path toward full decarbonisation by 2050. Additionally, there is an imperative to ensure that the 14,000+ hotels in the pipeline are designed and constructed as zero-carbon-ready buildings to keep up with increased regulatory and consumer demands.
Prof. Dr. Willy Legrand and Berkeley Capital Group cooperating on White Paper Series on Sustainable Hospitality
In cooperation with Berkeley Capital Group, we discuss a tool to make that carbon neutral future happen. The Marginal Abatement Cost Curve (MACC) was originally developed by consultants at McKinsey over a decade ago. In this White Paper, we present examples of investment costs geared towards energy efficiency at a hotel, discounting the savings over the expected lifetime of the investment (Net Present Value) and factoring in the overall carbon emissions saved over that timeframe. The results provide investors, owners, executives and managers with a sound financial and environmental fact-based decision-making tool, combining financial payback with carbon emissions avoided. This is particularly relevant now with the hotel sector coming out of a pandemic facing major capital constraints and with a strong focus on stabilizing cash flows - this tool enables decision makers to honor the commitment towards decarbonisation by abating the most carbon emissions for the lowest cost.