Sustainability in the European Hotel Industry: Towards a Strategic Orientation
A sneak preview from “Hotel Yearbook 2019: Special Edition on Sustainable Hospitality”
By Demian Hodari, Associate Professor of Strategic Management at the Ecole Hôtelière Lausanne (EHL) and Michael Sturman, Professor of Human Resource Management at Rutgers University and Samrah AlShawi, Project Manager at the Ecole hôtelière de Lausanne
Corporate Social Responsibility (CSR) programs are supposedly useful for helping companies to manage the triple bottom line of Profit, People and Planet. In other words, their impact on the environment (planet), their community and standard of living (people), and their economic responsibility of generating profits. While many studies have examined managerial perceptions about CSRs importance, my fellow researchers and I examined the actual levels and benefits of its implementation at the hotel property level.
We collected the data for this study with the collaboration of the European Hotel Managers Association (EHMA) whereby 85 hotel General Managers (GM) of both independent and HMC-operated hotels, in the European Luxury/ Upscale industry answered our questionnaire. We asked about numerous things, including environmental actions, social actions, level of CSR commitment (divided into compliance, profit and care), strategic orientation, stakeholder impact and level of measurement of activities. Meanwhile, success was by the GMs assessment of success, financial performance measures of ROI, GOP and the assessment of their competitive position.
We found that hotels do undertake environmental actions. While the mean response was above the neutral middle point of the scale, there is a clear variety in what firms do as illustrated in figure 1. On the other hand, socially responsible actions are rarely or only occasionally undertaken (with the exception of locally sourced foods) as illustrated in Figure 2. Our analysis shows that there is no simple dimension of altruism (that is, companies do not engage in all sorts of positive type activities equally). Firms that engage in one set of practices (social or environmental) are not necessarily also engaged in the other.
Figure 1. Environmentally responsible activities in hotels.
Figure 2. Socially responsible activities in hotels.
We found that hotels that undertake socially sustainable actions do so largely out of a sense of care (it is the right thing to do) rather than to generate profit or because of regulatory compliance. With regards to environmental actions, however, all three motives (care, profit and compliance) are were relevant, though the strongest relationships were once again care and profit followed by compliance. Thus it would seem to suggest that hotels are engaging in CS more out of a sense of actual responsibility than for direct profit reasons, and least of all because they must do so due to regulations and laws. Interestingly, it would therefore appear that profit from CSR (which is one way to measure its success) is only a secondary concern for most hotels.
GMs are more likely to pursue social actions when financially incentivized, however, this does not drive efforts regarding environmental actions. In other words, while environmental sustainability is driven my many factors, social actions seem to be largely driven by the GMs financial motivation. This is particularly relevant considering the findings above about care and profit, as clearly social actions, which were only moderately related to profit motivations, may require this extra motivation for GMs to incorporate them into their CSR agenda.
We also found that hotels are more likely to implement CSR policies if they are strategically grounded. In other words, hotels that take a strategic approach to CSR may be more confident in implementing different social and/or environmentally-sustainable practices due to a higher confidence in their ability to add value to the firm. Despite this, hotels were not found to place a high priority in having a strategic orientation towards CSR (see Figure 3) compared to an operational orientation at the lower levels of the CSR continuum (see Figure 4).
Figure 3. Strategic orientation in hotels
Figure 4. Compliance, Profit and Caring-driven issues that incentivize CS implementation in hotels
When looking at how pressure exerted by different stakeholders impacts the level of CSR carried out by a hotel, results indicate that only corporate parents, senior management teams and owners/investors influence were significantly highly correlated to the firms ability to enact social and environmental activities. This is particularly interesting as results indicate that owners/investors are sometimes an obstacle to CSR implementation in properties (see figure 5).
Figure 5. Stakeholders influence on the firms ability to enact social and environmental activities.
The results suggest that on the whole, GMs believe that their hotel has done a better than average job with CSR. However, the wide disparity of answers suggests that there is still much room for improvement in many hotels in order to suggest that such success is an industry norm. There is also a high correlation between the extent to which the hotel implements socially responsible practices and their view on having a successful CS program. This would suggest that GMs regard doing CSR with being successful at CSR, regardless of the possible financial performance implications of such practices.
The data suggests roughly 65% of GMs who do engage in CS report that their CSR actions have either broken even or added to the hotels profit (see Figure10), meaning that the overall view of their return on CSR is positive. Additionally, the more the hotel adopts a strategic orientation to CSR, the more likely it is that CSR adds to its profit. This suggests that a strategic rather than purely operational perspective of CSR may assist the firm in making better choices about which CS activities to engage in.
Results indicate that CSR activities are clearly prominent in the European upscale/luxury hotel industry. It should be noted however that hotels adopted environmental practices to a larger extent than they did social practices. In fact, the two sets of activities are considered to be relatively independent of the other. Despite the prevalence of CSR amongst hotels, considering the large variance across measures, items and hotels, we would not venture to state that CS is a norm.
Our findings suggest that CS is a success factor for hotels when evaluated according to the GMs own analysis, ROI and the firms competitiveness. Important drivers for this success included a strategic orientation, a relatively high level of CSR actions and GM human capital. This may be because of a learning curve as they engage in more activities. CSR is also more likely to be successful with higher levels of CS implementation as the issue becomes more embedded into the firms culture and strategy.
Moreover, results indicate that CS is implemented by hotels primarily because of care. Profits remain to be an important driver for CS, albeit to a lesser degree; in fact, firms that are profit driven are primarily doing so because of competitive pressures. Our findings are suggesting an interesting shift in CS drivers from the compliance and profit levels to care. Given how performance is largely related to a firms strategic orientation, CS will move further up on the continuum of CSR levels from an operational aspect to a more strategic one.
This article is a sneak preview from Hotel Yearbook 2019: Special Edition on Sustainable Hospitality which will be published early 2019.