Mark Carney, the Bank of England's outgoing governor announced on Tuesday: "We have to work out how to bridge this period. We don't want viable firms to go out of business because of the necessary steps that have to be taken to protect the British public."

He added that the BoE was looking at ways to ensure that banks could use their balance sheets as effectively as possible to lend to businesses in need of working capital to stay afloat: and could also look at facilities to support lending to small businesses.

Although the economic shock of this outbreak could be large according to Carney "in contrast to the financial crisis of 2008 the prospect with this situation is that we will have disruption not destruction"

In Germany the National Association for Hotels in Germany' DEHOGA' is expecting the state to offer financial compensations for damaged hospitality businesses, given the volume of cancellation of trade shows and conferences the impact here for hotels has been huge already.

So could we give the entire situation a 'silver' lining or indeed use this time of crisis in a constructive way to future proof hotel businesses more and deal with issues we are usually too busy to address?

Sustainability and Environmental Social Governance topics being one of those issues!

Martin Whittaker, the CEO of Just Capital, which ranks companies by how they treat their stakeholders told Andrew Edgecliffe-Johnson from the FT yesterday: "We always get the question: in a downturn, does the ESG keep going? In a riskier world, some people are not going to think long term" he warns, predicting a shake-out that will expose "Those that are in it for the marketing".

Here a few facts to remind you of the current status quo:

  • According to a study released by ITP- the hotel industry must reduce its absolute CO2 Emissions by 66% by 2030 and by 90% by 2050 in order to achieve the two-degree target of the Paris Climate Agreement of COP21
  • According to Hilton's CEO Chris Nassetta* an internal guest survey showed that 88% of their guests appreciate and actively look for sustainably managed hotels and 66% are willing to pay more for this feature
  • Approximately 50% of all employees want to work in companies that have an environmental strategy

Schroders' Bank Global Head of Stewardship stated in her outlook for 2020 on Sustainability "There are three main reasons driving climate change's move from simply "interesting" to actually impacting investments":

  1. Rising regulatory pressure
  2. Increased demand for corporate disclosure
  3. Growing public concern"

Investors ploughed a record $20.6bn into US sustainable investment funds, almost quadrupling the $5.5bn of net inflows gathered in 2018, according to Morningstar, the data provider.

For the hospitality sector specifically, we would like to add another few driving forces for future-proofing a business:

  1. Better operational and financial performance
  2. Improved profitability
  3. Lower employee turnover/better employee engagement
  4. Reduced regulatory threat/scrutiny
  5. Lower risk premium and improved property valuation
  6. Increasing focus from investors and lenders

Our experience over the last years have shown that hotels addressing their resource consumption (on average, energy consumption is the 2nd biggest cost for any hotel following payroll) in a serious and coherent way, can make up to 20% of savings in the first year alone. For example a big business hotel with approx. 400 rooms can end up with annual energy bills exceeding £300k, so using this time to analyse consumption, change behaviours and control outgoings could end up saving such a hotel around £60k p.a. in an ideal scenario which flows straight through to the bottom-line without making any major capital investments to upgrade equipment.

Additionally and importantly, of course, this achieves the goal of lowering CO2 emissions, we so need to get a cap on - so there is a double win in addressing this issue.

There are a plethora of other topics, which need to be addressed when integrating sustainability at operational levels and having a strategic implementation plan. Many of these do not need huge financial commitments but are still guaranteed to establish a hospitality's ESG credentials and therefore future-proof it more effectively.

Continued commitment to ESG and sustainability is in your interest!

*As per an interview conducted at the WTTC's Climate and Environment Action Forum during UNGA in NYC September 2019- full session can be watched here

Xenia zu Hohenlohe
Partner/Founder of Considerate Group
Considerate Group