The Business Case of Sustainable Hotels

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      Excerpt from Towards the Business Case for Sustainable Hotels in Asia by Yvette Jong, published for Horwath HTL and WWF-US

CASE STUDY 1 : CROWNE PLAZA MELBOURNE

Managed by InterContinental Hotels Group Owned by Eureka Funds Management 1-5 Spencer St, Docklands, Melbourne, Victoria, Australia 385 rooms Originally built in 1989 Rebranded as Crowne Plaza in 2006

In an environment where resources are limited and costs continue to increase, Crowne Plaza Melbourne has implemented operational and engineering initiatives to reduce energy and water consumption and landfill waste.  Sustainability programs reduce utility consumption, but also contribute to annual savings that provide high returns on investment for its owners.

THE SPHERE OF INFLUENCE: Cause or Coincidence

There are several reasons why Crowne Plaza Melbourne has become a centre for new environmentally sensitive business practices for IHG hotels in Australia.  It is the collaboration from various parties that has allowed the hotel to experiment with various resource saving measures that are not only environmentally responsible, but economically viable.

  • Government Influence In light of depleting water resources, rising energy costs and growing landfills in Australia, the city of Melbourne actively encourages its hotels to be more efficient with water, energy and waste.  To expedite this process, the city council partnered with Sustainability Victoria, EarthCheck and the Smart Water Fund to develop toolkits to help hotels reduce resource use and improve waste management.  Although programs are not mandated, the Savings in the City program has provided individual properties with subsidies to install or improve energy and water efficient equipment.  In 2005, the hotel joined Savings in the City as a means to reduce waste, but expanded its commitment to reduce both energy and water use.
  • IHG – Management Company Influence IHG has close to 4,500 hotels and with a rapidly growing portfolio, is in a position to initiate company wide sustainability measures that can have positive impacts on how its hotels operate globally.  In 2009, the group introduced an online benchmarking tool called Green Engage allowing its hotels to monitor, benchmark and manage their energy and water use and waste production.  The purpose of Green Engage is to offer tools to hotels and owners that will reduce operating and maintenance costs as well as the carbon footprint of the property.  Used properly, the system has the potential to reduce a hotel’s energy costs by 15 to 25%.  In 2009, 900 hotels joined the program and collectively reduced their energy use by approximately 10%.  IHG hopes to expand the participation of the program and reduce its group-wide energy use by 6 to 10% on a per available room basis between 2010 and 2012. IHG has a cluster system whereby a designated management team oversees a group of hotels in a region.  Crowne Plaza Melbourne is the IHG headquarters for Victoria and the management team is responsible for overseeing 7 additional properties.  In addition to leveraging scale, the close networking system allows for the successes of one hotel to be easily duplicated in another.  For example, the hotel’s creation of a “Green Team”, recycling program and use of LED light bulbs will now be rolled out to other Victoria properties.  On a wider scale, the hotel’s guest engagement program is now being modified for a national rollout by IHG.
  • Eureka Funds Management – Ownership Influence Crowne Plaza Melbourne was purchased by Eureka Funds Management along with 8 other IHG hotels in Australia and New Zealand in 2005 as part of IHG’s asset disposal program.  Eureka is a fund manager with real estate and development funds and currently owns assets including 9 IHG hotels.  Any measures implemented at one property to improve the bottom line can therefore be duplicated at other Eureka owned properties. Eureka has a strong commitment to responsible investments and is actively involved with Investor Group on Climate Change (IGCC), the Responsible Investment Association Australasia, and is a signatory to the UN Principles for Responsible Investment (UNPRI).  These groups raise awareness regarding effects that climate change can have on the investment environment in Australia.
  • Operations Influence In 2005 and 2006 the operations team at the nearby Holiday Inn Flinders recognised the hotel could operate more sustainably.  Out of personal interest and with the support from IHG and Eureka, the operations team initiated projects that would be resource efficient and yield savings for Eureka.  The programs were shared with other properties including Crowne Plaza Melbourne which later became the focal point for new sustainability initiatives.  At present, the Area Chief Engineer and his green team continue to implement various methods to improve resource efficiency and save costs.

ENERGY

Since 2005, the hotel has reduced its energy usage from 365,000 kWh per month to 260,000 kWh per month despite a higher occupancy in the hotel.

  • 2005 – Energy audit An energy audit on air conditioners ensured that units were operating efficiently.
  • 2006 – Compact fluorescent bulbs Energy efficient light bulbs replace incandescent bulbs following a government mandate that bans the use and sale of incandescent bulbs in 2010. Issues: Although CFL bulbs are often used to replace incandescent bulbs, they contain toxic mercury which makes them difficult to dispose of and can contaminate landfills with toxins that seep into the water tables.
  • 2007 – Staff training Staff training raises awareness and employees become more conscious about turning off lights and air conditioning and are adept at reporting mechanical problems that may result in energy waste.
  • 2008 – Variable speed drives Variable speed drives regulate the speed of pumps and motors during high and low demand periods and are expected to save 30% in energy use.  This project was a joint effort with the Savings in the City program and was partly subsidised by the Department of Innovation, Industry and Regional Development. Although the total installation was USD 156,250, the hotel only incurred a cost of USD 67,000.  The payback based on current energy costs is 7 to 8 years, however the return on investment is expected to improve as energy prices rise (energy prices increased by 15% upon signing a new contract in early 2010).
  • 2008 – Building management system (BMS) A BMS provides centralised temperature controls over various areas based on occupancy.  Energy use is expected to be 60% more efficient.
  • 2009 – Inncom guestroom controls A sensor driven guestroom management system can distinguish when a room is vacant to control lights, adjust temperature and can also sense when guests are asleep to moderate temperature to save energy without compromise to guest comfort.  This system cost USD 44,600 and is expected to result in approximately 30% savings in energy use in guestrooms compared to hotels that lack a guestroom control system.
  • 2010– Dyson Airblade Dyson Airblade dryers in public bathrooms use less energy than warm air dryers by blowing air at a speed of 640 kilometers per hour to quickly dry hands.  Each dryer cost USD 1,250 but uses 85% less power and saves on both paper towel and maintenance costs.  In previous years, the hotel spent approximately USD 6,250 per year to purchase paper towels, which results in a 1 year payback for the Dyson Airblade dryers.
  • 2010 – mySmart EnGauge The mySmart EnGauge monitor is a pilot program that will raise awareness from guests regarding energy use by displaying up to date energy consumption and savings for the hotel in the lobby.
  • 2010 – LED lights After monitoring the development of LED lights for several years, the hotel has started to replace some of its light bulbs with more efficient and longer lasting LED bulbs.  The first area to be converted was the lobby atrium which is expected to save significantly in bulb, energy and maintenance costs.

LED Savings for Crowne Plaza Atrium

Benefits

  • Annual savings of approximately USD 19,000 per year regardless of hotel occupancy
  • 8 month payback period
  • Reduction in 68 tons of greenhouse gas emissions per year, or 391 tons of greenhouse gas emissions per LED lifespan
  • The frequency of mechanical failure is low so general maintenance is reduced
  • Each LED bulb reduces landfill waste by 25 incandescent bulbs
  • LED lights do not contain mercury that can have dangerous effects on the environment when disposed of.
  • LED lights do not generate heat which can reduce the air conditioning load for a hotel in the summer time

Limitations

  • LED lights are still expensive to source
  • Most LED lights can only illuminate from a 3 meter ceiling and are not dimmable
  • LED bulbs that need to illuminate large areas or from high ceilings (like those used in Crowne Plaza’s 12 meter atrium) can cost significantly more than standard bulbs that are used for 3 meter high ceilings
  • The payback period is longer for areas that do not incur high costs associated with additional equipment rental despite the lower cost for standard bulbs that do not require the same luminescence needed in the atrium

 

WATER

With continued drought warnings, stressed water supplies and increasing water costs in Australia, the hotel has implemented changes to reduce water use per guest night from 595 litres per guest night in 2006 to 470 litres per guest night in 2009.

Challenges?

The Crowne Plaza Melbourne shares its water bills with the adjacent convention centre which has resulted in inconsistent meter estimates over recent years.  Now that the convention centre is closed, the hotel will be able to more accurately gauge its water use.

  • 2006 – Methven shower jets Special shower jet heads make flow restricted water feel like 18 litres per minute.  Each shower head cost USD 107 each with a total investment of approximately USD 41,075.
  • 2007 – Flow restrictors Flow restrictors reduce water pressure in guestrooms from 12 litres per minute to 9 litres per minute.  Flow restrictors cost USD 37,500 and have a payback of less than 2 years by reducing water use by an estimated 30,000 kilolitres per year.  Water savings is estimated to be USD 26,785 per year.
  • 2004 – Dual flush toilets Dual flush toilets in guestrooms allow guests to save water by opting to use 3 or 6 litres of water per flush compared to conventional toilets that use 9 litres.  They will be installed in public areas in the near future.
  • 2006 – Staff training Staff training raises awareness and employees become more conscious about leaving taps on and are encouraged to report leaks to expedite repairs.
  • 2009 – Waterless urinals Waterless urinals in public restrooms replace traditional urinals that require 6 to 12 litres of water per flush.

Waterless Urinals

Conventional urinals use large amounts of water and generate equal amounts of waste water.  A waterless urinal uses a biodegradable and non-toxic cube that acts as a microbiological system to virtually eliminate the need for water.  The system utilises a one-way valve which permits urine to pass into the plumbing system but restrict odours from diffusing back into the washroom.  Only 10 litres of water are needed per day to activate the system and to remove degraded matter.

Benefits

  • 10 litres of water per day versus 9 litres per flush
  • Reduces wastewater discharge
  • Biodegradable and non-toxic
  • Eliminates the need to use toxic cleaning agents, sanitizers and acid treatments
  • Yields cost savings due to water reduction, maintenance reduction and the elimination of chemical use


WASTE

In 2005, the hotel participated in a waste audit with Savings In the City Waste Wise program and has since implemented several initiatives to reduce waste production and divert solid waste from landfill sites.

Waste Minimization

  • Bulk purchasing reduces packaging
  • Environmentally friendly packaging for bathroom amenities from Plastarch reduces plastic waste
  • Dyson Airblade dryers in public bathrooms eliminate the use of paper towels
  • The conversion to LED lights will reduce the number of fluorescent light bulbs with mercury content from going to landfills
  • Water served in pitchers for meetings reduces plastic bottle waste

Recycling

Although many hotels have had difficulty enforcing proper recycling programs, Crowne Plaza has successfully implemented programs to encourage guests and employees to separate their waste.  Crowne Plaza now recycles 87% of its non-organic waste compared to only 7% before 2007 and has reduced its waster removal cost by approximately USD 8,500 per year.  In addition, they can earn a small sum of approximately USD 500 per year from selling recyclables to recycling centres in Melbourne.

  • Detailed waste audits can highlight areas where recycling can divert landfill waste and save on waste removal costs
  • An audit in 2008 found that 46% of landfill waste had the potential to be recycled
  • Recycling bins are placed in each guestroom
  • Employee training is conducted and there is a stringent recycling program in the back of house areas
  • The hotel recycles paper, cardboard, plastic bottles and glass
  • Close to 90% of cardboard is currently recycled

Areas for improvement

  • A garbage compactor will reduce the space needed to store garbage and the number of waste pickups
  • The hotel considered composting organic waste, however issues regarding pickup frequency, smell and pest control make composting impractical
  • Additional measures will be taken to improve recycling efficiency in guestrooms and in the back of house

 

CROWNE PLAZA MELBOURNE: BUSINESS CASE OVERVIEW

Key Takeaways

Significant changes can be made to older buildings that can improve efficiency and reduce waste and costs.  Where possible, Crowne Plaza is upgrading the hotel to incorporate resource saving and waste reduction programs that improve the efficiency of the hotel and save costs.

Cost Savings

In an environment where energy costs are rising and water is limited, the implementation of resource saving programs will be the only way to reduce costs.

Brand Positioning

Credible brand positioning cannot be achieved if initiatives are not mainstreamed across all properties.  Crowne Plaza Melbourne does not market its sustainability commitments because initiatives are inconsistent with other Crowne Plaza properties and can cause brand confusion.  However, once similar programs are adopted in other Crowne Plaza and IHG hotels, there is potential to improve a brand’s image in an environment where guests and meeting groups are becoming more aware of environmental sustainability.

Why They Do It?

As water supplies become depleted and less secure as a result of climate change, energy costs rise and landfill charges increase, Crowne Plaza Melbourne recognises that early implementation of resource saving measures can have long term savings that will outweigh investment costs.  The hotel also hopes to lead by example for other urban hotels that wish to save on resources, by showing that savings are automatically reflected in the bottom line.  Sharing data and experiences is an important element of Crowne Plaza’s commitment to this.