Sustainability in the Australian hospitality industry
Abstract
This essay will examine the concept of sustainable development in the hospitality industry in Australia, in order to address the following questions:
How the concept of Sustainable Development / Sustainability is applied to the Hospitality Industry in Australia?
Have this concept been modified according to the Brundtland definition?
The general objective of the essay is to assess the concept of “Sustainable Development” used by hospitality organisations in order to articulate a constructive criticism and provide potential directions in their corporate social responsibility (CSR) strategies.
I am choosing this industry because I have some experience in the Hospitality Industry and I have seen the quantity of waste that they produce, I also think this is a good example to illustrate how companies can improve their systems and processes throughout sustainability practices.
Sustainability in the Hospitality Industry Overview
By definition, Hotels and resorts are establishments that are licensed to operate a public bar and provide accommodation on a room and/or suite basis, with a bath and /or shower and other facilities in most guest rooms.
According to IBIS world report the hospitality industry in Australia is dominated by six (6) international groups that control 24.3% of the national market: AAPC Limited (Accor Hotels) with a 8.1% of the market share; Mantra Group Holding I PTY, with a 4.1%; IHG Hotel Management (Australia) Pty Limited, with a 3.1% ; Thrakal Holding Group (Sofitel) with a 3.1% ; Hilton Hotels of Australia Pty with a 2.5%; and tourism asset Holding Limited with a 2.4% of the market share.
In order to keep this essay within the words limit, I will examine some of the CSR strategies of the main groups to understand what is the meaning they give to sustainability and /or sustainable development in their organisations, considering they are the market leaders and represent a benchmark within the industry, in order to evaluate, compare and critique them.
According to the 1987 Brundtland report, Sustainable Development is a holistic concept based on a simple principle, “ It is development that meets the needs of the present without compromising the ability of future generations to meet their own needs”. Sustainable Development is also explained by the Triple Bottom Line concept, created by John Elkington in the book Cannibal with Forks: “In its broadest sense, the triple bottom line captures the spectrum of values that organisations must embrace economic, environmental and social. In practical terms, triple bottom line accounting means expanding the traditional company reporting framework to take into account not just financial outcomes but also environmental and social performance – economic prosperity, social equity and environmental protection”.
The Dow Jones Sustainability Index (2005) website defines corporate sustainability as follows: “Corporate sustainability is a business approach that creates long-term shareholder value by embracing opportunities and managing risks deriving from economic, environmental and social developments. Corporate sustainability leaders achieve long-term shareholder value by gearing their strategies and management to harness the market’s potential for sustainability products and services while at the same time successfully reducing and avoiding sustainability costs and risks.”
Recently the hospitality industry has taken many steps towards sustainable development and it has coined the term of Sustainable Hospitality to summarise the significant and encompassing role hotels and the hotel industry will take in what has commonly become known in the corporate realm as Sustainable Development. (Herve Houdre, et al. 2008).
Hotel companies are increasingly encouraging environmentally friendly practices and embracing sustainability through both developmental and operational strategies. With initiatives such as education programs, reforestation programs, eco-resorts, the implementation of energy- efficient practices, and the development of buildings that comply with government-defined standards, the “greening” of the industry is a trend that it seems to be here to stay. Over the last decade, the movement towards ecologically friendly tourism has expanded across the world; and the practices being implemented are as diverse as the different geographies. Hotel companies are being prompted by rising energy costs, government pressure, consumer expectations and the competitive landscape to increasingly make sustainability a top priority.
According to the 2010 Ernst & Young Industry report, “Oceania, therefore Australia, keep leading as a world leader in sustainability, particularly in ecotourism. There is in increase in new conservation policies from both government and operators, particularly to address diminishing water supplies as a result of climate change and to protect native habitats, shifting from traditional ecotourism to even broader sustainable initiatives”.
In Australia ecotourism remains strong and marketing and green initiatives appear at every level of the industry. At a national level, for instance, The Sustainable Tourism Cooperative Research Centre released its first comprehensive measure of carbon emissions for the tourism industry, The Carbon Footprint of Australian Tourism report. This report identified that transportation is by far the greatest contributor to tourism’s carbon footprint and accounts for 82.2% of tourism’s GHG emissions. (Sloan , Chen & Legrand, et al. 2009). At a private level, “the industry has developed a greater emphasis on social responsibility that is influencing business to initiate environmentally friendly designs in hotels and conference venues and to implement water, waste and energy minimisation initiatives.” (Ernst & Young Industry report, 2010)
Another important belief that has become a strong focus for the Australian Market and It is a vital component of sustainable development is the Fair Trade concept. Fair Trade was originally a partnership between non-profit companies and retailers in the northern hemisphere and producers in the under-developed countries who were fighting against low market prices and their dependence on intermediaries who were taking advantage of them. It became rapidly a business model and many Alternative Trade Organisations (ATO), were created to develop the concept. Trading standards stipulate that traders have to:
Pay a price to producers that cover the costs of sustainable production and living.
Pay a premium that producers can invest in development, partially pay in advance, when producers ask for it.
Sign contracts that allow for long-term planning and sustainable production practices.
These are probably the main Sustainable Development trends in the Hospitality Industry in the Australian context as we observe today. Following I will examine some of the CSR strategies developed by main industry operators at a national and international level.
The Market Benchmark
AAPC Limited is the Australian subsidiary of French Company Accor SA. Accor is the fourth world largest Hotel and tourism group, with more than 4,100 hotels and resorts in 90 countries with a total of 500,000 rooms and 145,000 employees. In Australia, AAPC Limited has over 150 hotels and resorts covering all prime business and holiday destinations, with many new hotels to be opened over the next few years. The company offers a comprehensive choice of hotel styles and locations in Australia. Its hotels brands include the upmarket Sofitel, the business-class Novotel, The variety driven All Seasons, and the value-driven
Mercure and Ibis Hotels.
In relation to their sustainability strategy, as a part of a global group, Accor Australia follows its corporate international standards developing some specific local initiatives, such as education programs for its employees or supporting some charity organisations depending on the brand and their own context. On the global Context, according to Gilles Pellison CEO of Accor Group, this organisation is involved in two key areas of corporate responsibility:
Society and the Environment. Accor’s brands and businesses are increasingly integrating sustainable development concerns into their products and services, in fact Accor appear to be one of the most advanced hotel companies in Sustainable Development (SD). Their Environment strategy started in 1994 building a network of 53 environment correspondents throughout the world. Sustainable Development was officially embedded in the strategy of the company in 2002 with the appointment of a Director of Sustainable Development, member of the Management Board, the creation of a group-wide SD committee and the development of an comprehensive SD strategy. That strategy includes all aspects of the concept. A scorecard has been developed that checks Accor’s involvement throughout the world with all stakeholders: Shareholders, Customers, Employees, Suppliers, Environment and local communities. Accor’s Mercure hotels have partnered with the Carbon Reduction Institute for the first national carbon neutral offering from a major hotel chain in Australia. Emissions produced from conferences, specifically, heating, cooling, lighting, projectors, AV systems and food and beverage (cooking and refrigeration) are calculated and the Mercure Hotel then pays for these emissions to be offset. Currently the offsets being used are sourced from a waste facility that diverts the organic part of domestic waste from landfill and into compost. The decomposition of organic waste in landfill produces methane, which is 21 times more potent than CO2. (Ernst & Young Industry Report, 2009).
The IBIS network has embarked on an ISO 14001 environmental accreditation process in 2004 and Novotel announced it was pursuing Green Globe environmental certification in 2007. (Sustainable Development, Accor 2009)
Accor embrace the idea that “one employee can make a difference” and one of the main aspect of their strategy is education. Consequently they have published a short document highlighting conservation tips, a comic book about environment conservation, and an environment guide for hotel managers to train their employees about all aspects of environmental protection. The company’s development criteria include biodiversity and architectural integration, and its corporate philanthropy focuses are on child sponsorship and aid to local communities.
One of Accor’s major initiatives is “Plant for the Planet: Billion Tree Campaign,” through which the company has pledged to donate 50 percent of the savings on laundry costs resulting when guests keep their bath towels for more than one night. Already tested in 52 Accor properties, the program is being rolled out in all of Accor’s 4,000 hotels. Customers are personally encouraged to take part in the program through a message posted in their bathrooms informing them that “Here, your towels plant trees”.
The research also indicated the company was one of the first ones to sign the Global Compact initiative in 2003 launched by the UN, which is a commitment to follow strict guidelines in terms of Human rights, labour, environment and anti-corruption initiatives. In an effort to show their commitment to the Global Compact, Accor provides a “management chart” that lists their shareholders, objectives and how these comply with the ten articles of the United Nations Global Compact. In 2009, Accor updated its ethical policy, and published The Accor Management Ethics Guide. The guide is organised into three interconnected sections: Management principles, respect for laws and the integrity policy, and social and environmental responsibility. Accor also has established a committee to follow the United Nations Global Reporting Initiative, which provides a framework of 90 sustainable development indicators for hotel companies to use as a guideline for CSR reporting practices.
Although the Accor hotel group does not provide a separate CSR report (information is included in their annual report), they provided a great amount of information on their web site regarding their CSR activities. The CSR section of their web site is labelled “Sustainable Development” so I can conclude that for this organisation Sustainable Development is a more holistic concept. The section contains the six major subsections of shareholders, local communities, suppliers, environment, customers, and employees.
Mantra Group
Mantra Group was created out of a restructuring of Stella Group, which was a subsidiary of global Voyager Holdings, and owned by private equity firm CVC Asia Pacific. Stella Group has two divisions: Stella Hospitality Group was renamed Mantra Group in mid 2009. Private equity company, CVC Asia Pacific, holds the majority interest of the group. In the period of 2009-10, Mantra Group reported revenue of $379.7 million, with assets of $597.3 million and a loss of $121.9 millions. The company had 3,100 employees for the year and operated 140 hotels and resorts across Australia and New Zealand.
Mantra Group recognise its responsibility to minimise their environmental impact by “a continual development of its environmental platform. Its sustainability committee, CSR leaders and Team Members are encouraged to work locally to implement measures aimed at improving its management of energy, waste, water and biodiversity”. According to their website a number of Mantra properties have achieved AAA Green Star accreditation exploring ways to become a more sustainable accommodation provider. However no evidence of these achievements was established.
In order to get more information I contacted Miss Shani Lomas, corporate social responsibility officer at Mantra Group, who explained to me that this organisation operates in a ‘strata environment’ so they can own the management of each property, letting rights rather than the buildings themselves. This is the reason why they don’t control a lot of their outputs and the body corporate; the developer or the independent unit owners hold this responsibility. Mrs. Lomas said that it is very difficult for the company to have a “blanket approach” given the diversity of their portfolio. However many of their properties have green measures and initiatives in place, but they are restricted with making any grand statements because of the inconsistency across the business. However, Mantra has opted for a localised approach, guiding their properties with information on best practice and leaving their CSR Champions and committee members to work on the ground at their own pace.
Perhaps the most interesting initiatives of the Mantra group are the ones that have been thought through anticipating for future reporting requirements such as, external auditing and benchmarking of the group’s environmental practices including the purchasing of carbon credits to offset carbon emissions; development and implementation of an environmental Management System and Green conferencing, dinning and accommodation options.
In my website research Mantra appears to be one of the weakest and less developed in terms of CSR and Sustainable Development reports and strategies, I couldn’t manage to find a PDF file or a proper document that could explain in detail their plans, reports or strategies. There is a lack of information and no evidence of education programs for their employees. There is no a clear definition of sustainability or sustainable development concept although environmental sustainability is recognised as a key business priority.
Inter Continental Hotels Group
Inter Continental Hotels Group plc Is a UK-based hotel group that was formed in April 2003 with the merger of six Continents plc into a separate hotel company and a separate restaurant and pub company. Six continents Hotels was renamed InterContinental Hotels Group (IHG). In Australia IHG Hotels Management (Australia) Pty Limited had 170 employees in 2009. In August 2005, Eureka Funds Management paid $385 million for 10 properties associated with the Intercontinental Hotel groups. However IHG continued to manage theses properties.
IHG appear to experience a major shift toward a complete Sustainable Development strategy in the last 3 years. The basis is there to make it the industry reference in the coming years. According to Houdre, et al. 2008, the group is aiming to not just be the largest hotel company in the world but as well, become the most admired one.
Many actions toward social responsibility and environmental protections have been certified throughout the years by various divisions or hotels and coordination is now taking place. IHG created the position of Senior Vice President Global Corporate Social Responsibility position in September 2006. In 2008, IHG’s Hotel Management Group, Americas Division, received the Cause Marketing Forum’s Gold Halo Award for Best Environmental or Wildlife Campaign for its 2007 “Chase the Extraordinary” program. This program reached more than 12 countries including Australia and incorporated employee rallies to launch new company initiatives for 2007 and beyond. The cornerstone of the program was an initiative to replace more than 250,000 incandescent light bulbs with compact fluorescent lights in guest rooms at company-managed hotels. This environmental initiative will have the impact of removing carbon dioxide emissions equivalent to that of more than 17,000 cars. The CFL lamps also are expected to save over $5 million in energy costs. A particularly innovative part of the program distributed an additional 15,000 CFLs to employees of company-managed properties for use in their homes.
Intercontinental Hotels also had a section on their web site dedicated to CSR actions. The content of these pages focused on innovation, collaboration, environment and community. Each of these categories has at least one page of reporting dedicated to it. In an effort to show their commitment to CSR, Intercontinental Hotels have also provide a dedicated page that outlines their efforts. One such statement that seems to capture the essence of their stance on socially responsible behavior is:
Through volunteer and education programs, diversity initiatives, environmental protection and in scores of other ways, we help the world become a better place, one community at a time. Wherever we are, we’re people taking care of people.
In addition, the information reported on their web pages, Intercontinental Hotels provided a link to a CSR report called “Corporate responsibility report”. This report is a comprehensive, 78 pages summary of their CSR activities. As an indication of their social responsible behaviour, Andrew Cosslett, Chief Executive states:
We are building a culture at IHG that’s focused on driving returns for our owners and on doing the right thing. This means concentrating on areas that fulfil our business objectives and also create social benefit for the communities we work in”
“We are focused on developing better ways to design, build and run our hotels. Our approach isn't about offsetting carbon: it is about green hotel innovation that lessens our negative impacts, whilst enhancing the guests' hotel experience. This is why we introduced our online tool Green Engage in 2009 to help hotels operate in a more responsible and cost effective way. We have also introduced a CR Committee at board level to drive Green Engage and other CR initiatives from the top of the organisation.” (Intercontinental Hotel Group, 2010).
For this company Sustainable development is clearly a very holistic concept that includes not just the environment but also on the social and economic context. In this sense the company seems to embrace more the triple bottom line concept of sustainable development than the Brutland report definition. Specific interests of this group have been noticed in areas such as; children, education, employee involvement, hotel support and supporting humanitarian efforts.
Thakral Holdings Limited
Thakral Holdings Limited owns 8 hotels on the east coast of Australia as well as commercial and residential properties. 70% of its revenue is from Hotels, which are mainly managed by AAPC Limited. In 2010 these hotels had over 2,500 rooms and included The Menzies, Sydney; Hilton on the Park in Melbourne; Sofitel, Brisbane Central; Sofitel, Goldcoast; Novotel on Collins in Melbourne; Novotel Brighton beach, Suydney, Novotel Northbeach, Sydney; and Novotel Pacific Bay resort, Sydney. Thakral hotel revenue declined in 2009- 2010 as the domestic and global economic environment continued to hinder industry and segment growth. However operating profit for the company’s hotels division increased slightly due to cost cutting by Thakral and its hotel operators. The company also rescued the values of its hotel properties by 25% in 2009.
The Group’s properties and operations are conducted under a wide variety of Occupational Health & Safety (OH&S) and Environmental Protection Acts and Regulations. According to this report “the group maintains an OH&S and Environmental Policy Charter and uses its best efforts to ensure its properties and operations comply with all applicable laws. The Group’s properties and operations hold all relevant OH&S and Environmental licences and permits and have implemented monitoring procedures to ensure that they comply with licence and permit conditions.”
Throughout Australia, the Group’s properties and operations have implemented OH&S and Environmental Risk Management Systems designed to minimise OH&S risks and Environmental pollution and impairment. This program aims to ensure that employees within the Group are fully capable of meeting their OH&S and Environmental responsibilities. All properties and operations undergo a regular OH&S and Environmental survey and audit. These are conducted internally by senior management and/or annually by the Group’s independent risk consultants. Property development projects are carried out in accordance with relevant State Government legislation including development approval and the associated environmental planning requirements. It is the Group’s policy that major breaches of OH&S and Environmental Protection Acts and Regulations are immediately reported to senior management and directors.
This company does not have much information on their website and apparently they have a similar approach to sustainability than the Mantra group which is a more localised style, guiding their properties with information on best practice and leaving their staff and committee members to work on the ground at their own pace. Their environmental strategy is contained in their OH&S and environment report; this clearly means that they see sustainability as a legal obligation to comply rather than as an integral part of the core business.
Hilton Hotels Corporation is developing a strategy for introducing three of its brands into Australia. Implementation of the Hilton Garden Inn, Hampton by Hilton and doubletree by Hilton Brands will lead expansion of the group into Australia, which is considered on of the Hilton’s priority markets. There are several other buildings under construction or in development across the country. In 2006, Hilton rejoined with London based Hilton International. In April 2009, a new Hilton Hotel was opened at Southbank, Melbourne, in close proximity to a major new convention centre, which opened mid year.
Hilton Hotels Corporation announced in June 2008 its short and long term goals and objectives towards building sustainability into the core fabric of its businesses worldwide. Christopher J. Nassetta, President & CEO, outlined targets for improvement in the company’s sustainability performance systemwide for the next five years. By 2014, goals for the Hilton Family of Hotels are are follows:
Reduce energy consumption from direct operations by 20 percent;
Reduce CO2 emissions by 20 percent;
Reduce output of waste by 20 percent; and
Reduce water consumption by 10 percent.
Their Environment policies are based on a tagline: Reduce - Reuse – Recycle. The company was the first in the industry to be awarded the EnergyStar award in US, for its involvement in reducing electrical energy consumption –fluorescent bulbs in all areas-, water conservation – towel program-, recycling. It encourages its employees to be involved in various community services. Hilton International (now bought by Hilton Corp) has started a program called We Care, which is addressing mostly environmental issues and community service. They have included it in their balance scorecard system. Hilton Hotels has developed an interesting program to help improve relationship between people: Be Hospitable.
According to our research Hilton Corporation is relatively new to the sustainability concept and has not yet embraced a holistic approach to Sustainable development. They communicate mostly on Corporate Social responsibility (CSR) and environment concerns. According to Hilton Worldwide, “sustainability means continuous improvement and action. Our objective is to lead our industry with products and programs that not only deliver great guest experiences, but protect the world we live in.” In this case we could state that Hilton approach to sustainability is in line with the Burtland report definition of sustainable development and it is just related with environmental issues.
Conclusions
This research shows that in general the hospitality industry have become increasingly active in implementing sustainability practices. Some hotel companies such as Accor and IHG are more progressive in their definition of sustainable development including social, economic and environmental aspects in their core business. Therefore their definition of ‘sustainable development’ is more in line with the triple bottom line concept created by Elkington. On the other hand some organisations such as Mantra or Thakaral take this concept as a moral responsibility or just to comply with some legal obligations, their approach is more aligned with the Burtland report and it is focus mostly on environmental issues. Hilton is a different case and their approach is more likely to be related with the Dow Jones Sustainability index definition of sustainable development, as a part of the core business to create economic value and provide a better experience for their guests. In any case most of the companies share the view that sustainable development and sustainability represents an opportunity for the industry to become more efficient in the use of their resources.
According to the Ernst& Young industry report “the emergence of mandatory greenhouse gas and energy reporting across Australia and New Zealand and the development of emissions trading schemes is likely to continue to raise the profile of sustainability and climate change issues for the hospitality industry in the Oceania region. Government regulation is likely to impact the supply of new developments through minimum energy efficiency standards while greater disclosure will influence existing developments and operating practices”. In this context sustainability programs can provide a competitive advantage. However, everything indicates that over time, green practices will become a compulsory requirement to doing business in the hospitality industry, particularly as the cost of nonrenewable energy continues to increase. Thus, those companies with business models that rotate around green practices will have the strongest opportunity of achieving a “sustainable” competitive advantage.
References
IBIS world Report H5711. Hotels and Resorts in Australia. Accessed by RMIT catalogue website.
Philip Sloan, Joseph S. Chen, Willy Legrand (2009). Sustainability in the Hospitality Industry: principles of Sustainable operations.
Herve Houdre, (2006), Sustainable Hospitality: Sustainable development in the Hotel Industry. http://willarddc.com/sd/docs/willardwhitepaperproof.pdf
Global Hospitality Insights. Hospitality Going Green. Ernst & Young report, 2010.
Sustainability Toolkit – Hospitality. NSW Business Chamber (2009). Australian Government. Department of Environment, Water, heritage and the Arts.
David Kirk (1995) Environmental Management in Hotels, International Journal of Contemporary Hospitality Management, Vol. 7 Iss: 6, pp.3 – 8
Sustainable Tourism CRC - www.crctourism.com.au
www.crctourism.com.au/WMS/Upload/Resources/bookshop/10072%20Carbon_Footprint_SUM.pdf
Accor Group, Sustainable Development - http://www.accor.com/en/sustainable-development.html
Mantra group, Corporate Social responsibility http://www.mantragroup.com.au/AboutUs/CorporateSocialResponsibility.aspx
Intercontinental Hotels Group http://www.ihgplc.com/index.asp?pageid=740
Green Movement grows in Global Hospitality Industry: report http://www.greenbiz.com/news/2008/12/17/green-movement-grows-global-hospitality-industry-report
Dow Jones Sustainability Index (2005), available at:
www.sustainability-indexes.com/html/ indexes/overview.html
"Water efficiency". "In your business" >>"How to save water" >> choose the Hotels, clubs, restaurants and pubs link to find fact sheets and other resources. www.sydneywater.com.au
"What a waste" by David Baker - www.foodwise.com.au