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Paying for Green

Is it possible to invest in green with a guaranteed ROI?

Thursday, March 04, 2010
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From budget-busting solar panels to costly cleaning chemicals, choosing to run an environmentally sustainable hotel has often been a tough financial decision to make.

Now, a combination of lower prices and better calculations of long-term savings has made it easier.

"It's tough when you're talking with owners and asset managers who are basically accounting people," said Jim Milkovich, corporate vice president of purchasing for Hyatt Hotels Corp. "They're looking at the dollars and cents. There's a return on investment that's not necessarily dollars right away, but down the road if you're in this operation for the long haul, it's the right thing to do."

It turns out, though, that there are ways to make green pay off. Milkovich and others shared their insights at the Buyer Interactive Trade Alliance and Conference at the Bellagio Las Vegas this week. The event, with its best attendance ever, brought together top suppliers with hotel buyers.

One way to pay for big-ticket energy-savings items is through government rebates. From the federal government to local utility companies, incentive programs can make green affordable, according to Ray Burger, president of Pineapple Hospitality. He pointed to the Web site dsireusa.org, which is a database of programs for renewable energy.

"There are as many rebate programs out there now as there ever have been," he said.

The Hyatt Regency Grand Cypress, in Orlando, uses energy-efficient LED lighting in its lobby and corridors. Since these lights are on 24 hours a day, the energy savings are significant, but LED is expensive.

"We couldn't pencil out an ROI without an incentive rebate from the utility company," Milkovich said. "Once we got that it was a no-brainer."

Not everyone is taking advantage of incentives, though. In a real-time poll of BITAC attendees, 43 percent said they have heard of such programs but haven't taken advantage of them.

Now may be the time.

Meeting and event planners already are taking sustainability into account on RFPs. Milkovich said Hyatt has won group business to its convention hotels in part because of its green initiatives.

"If you can show a meeting planner how you are reducing, recycling and reusing products throughout the hotel and how your associates are engaged in the process -- it's not something you're doing for this meeting, but it's in your culture -- that's what really is evident to those meeting planners," he said.

Tulalip Resort Casino and Spa Executive Vice President Brett Magnan said planners are going so far as visiting his property to audit its green practices before signing a contract.

"That shocked us at first because we're not as green as we would like to be," he said. "We've also not lost business because of it yet. There are a lot of questions about it, but ... people are making decisions that are smart for their business, not necessarily that they're insisting they are going green if it will cost them."

That soon will change, Burger said. The meetings industry, working with the federal Environmental Protection Agency, is developing a green meeting industry standard. The goal is to be able to set common benchmarks that all hotels must meet to win group business. The buy-in from meeting planning associations as well as the government sets this effort apart, Burger said, and hotels should take notice.

Before that effort is finalized, hotels can start by publicizing their programs on their own.

"Some of the most successful properties that we work with have done a good job on their Web sites with branded programs," Burger said. "I find a lot of hotels and hotel companies tend to want to hide their green initiatives down in fine print at the bottom of the page. I think you should have your green initiatives up in the main menu and let people know what you're doing."

Branding the program -- like the "Seaport Saves" green initiative at Boston's Seaport Hotel -- is another way to publicize environmental efforts to guests.

Just don't "greenwash," or give the wrong impression.

"Be virtuous about it," Magnan said. "First, if you're really are doing it, be honest about it. If you're not, don't [misrepresent it]. Second, take baby steps. We don't have to be 100 percent sustainable overnight or green overnight. Turn off the lights. Do a little bit, and you're doing a bit to save the world."

The same goes for suppliers. Donald Lee, manager of sourcing and procurement for Disney Parks and Resorts, said Disney created a green scoring guide to rank suppliers. Then Disney can weave a supplier's green efforts as part of its own green story. Lee gave the example of a vendor providing reusable packaging rather than cardboard or other materials that are simply thrown away.

Suppliers also are helping bring prices down, Milkovich said. Take cleaning chemicals. When some of the first sustainable cleaning products came out, costs were at a premium, he said. But now, as distribution has improved, costs have come down and they are a more viable option for hotels.

Sometimes companies simply choose to forgo to ROI. For Disney's California Adventure "World of Color," a nighttime light and water show opening this spring, Disney worked with the Orange County Water District to recycle and purify the 500,000 gallons water it drained from Paradise Bay, instead of releasing the water to the ocean through storm drains.

"This took a lot more time and a lot more resources," Lee said, "but it was the right thing to do environmentally."

Even with a return, it may take years to recover. For companies with a long-term view, the investment can pay off.

"When we look at investing in green and the ROI, sometimes you may have a larger upfront cost," Lee said. "But over time you may not consume as much energy or you may have a lot more conservation, so you have to look at that."
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