Mr. Chasnow

Eco-Friendly Practices

Green Trends: Considerations for Leading Hospitality Companies

By Bob Chasnow, Attorney, Holland & Knight

No doubt about it - from major corporations like DuPont, Caterpillar, and BP are lobbying President Bush to develop mandatory carbon emission caps to Walmart CEO Lee Scott's bold pledge to use 100 percent renewable energy and produce zero waste - companies are taking significant green steps. As Thomas Friedman, a New York Times editorialist states, "Green is ... the [growth] industry of the 21st century."

However, hotel and resort companies have many questions about how best to invest time and resources toward joining the growing green movement. Namely, what exactly is the green/sustainability movement, and how does it relate to the hotel and resort development business?

Sustainability Makes Business Sense

With environmental compliance now a global issue, many companies possess environmental management systems, some developed around international compliance standards (e.g., the International Standards Organization's (ISO) 14001 standards). These formal environmental management systems can yield significant benefits, including environmental compliance, which can reduce legal costs and liabilities.

Environmental management programs that move beyond compliance efforts can yield significant benefit to a company's bottom-line by increasing focus on cutting current costs through reducing inputs and waste. For example, Walmart saved $3.5 million in transportation costs in 2005 simply by eliminating excess packaging on the company's Kid Connection toy line.
See: http://walmartstores.com/GlobalWMStoresWeb/navigate.do?catg=217

Buildings Are the Hotel Industry's Greatest Source of Impact

When analyzing the ecological footprint of hotel and resort development companies, the source of the industry's largest impact on the natural environment is obvious - it's the buildings that house hotels and resorts. The materials and processes used to construct and renovate these buildings impact the environment significantly for two main reasons:

As to locating in environmentally sensitive areas, one resort located in such an area may have a much greater negative impact on the environment than another. Such factors as size of footprint, land planning, landscaping and construction methods can make a big difference.

As to building materials and methods, according to the U.S. Green Building Council (USGBC), buildings in the United States use a significant amount of the country's energy and raw materials, including:
http://www.usgbc.org/Docs/Resources/043003_hpgb_whitepaper.pdf

Construction methods have a great impact on the environment, but breakthroughs in building science, technology and operations are available to companies that want to build green and maximize both economic and environmental performance.

Buildings are not the only component of a resort that can be designed to minimize environmental impact; resort amenities such as golf courses are also becoming more environmentally friendly. On March 6, 2007, Sports Illustrated ran an article on response to global warming that featured an insert on the Cooks Creek Golf Club in Ashville, Ohio, an environmentally sustainable golf course which contains an Audubon sanctuary and a blue-heron rookery. The course also applies nonchemical pesticides where possible, uses partially treated water in its irrigation systems to conserve potable water, and features golf carts powered by alternative energy sources, such as hydrogen cells and biodiese.

Thinking Green Fosters Innovation and Product Differentiation

Certain hotel companies have already incorporated green initiatives into their basic business models. Scandic, part of Hilton, is a market leader in the Scandinavian market. A key component of their success centers on the company's commitment to the environment. As former Scandic CEO Roland Nilsson explains "We are changing from a society that uses resources to a society that saves resources. No company can avoid either taking enivronment responsibility or focusing on environmental issues in all aspects of their operations."

In 1995, Scandic introduced the environmental room. The materials in these rooms are selected with consideration for the environment as wood, wool and cotton replace synthetics, plastics, and metals. In each room, 97 percent of materials can be recycled. All of the company's hotels in Sweden meet the Nordic Eco-label, one of the world's most exacting environment and quality standards criterion. Through this effort, the company has reduced its water consumption by 13 percent, its energy consumption by 24 percent and its unsorted waste by 40 percent, thereby differentiating itself as an industry leader and product innovator.
See: http://www.scandic-hotels.com/corporateinfo/900_CorporateInformation.jsp

Marriott has taken steps to reduce the environmental impact of its hotels and resorts. The company has formed a senior-level Green Council focusing on environmental issues and plans even greater green commitment over the next five years. In January 2007, Marriott announced that the company reduced its greenhouse gas emissions by 70,000 tons since January 2006. Marriott is also the first hotel company to become a member of the U.S. Environmental Protection Agency's Climate Leaders Program and was named as the ENERGY STAR Partner of the Year for Excellence in Energy Management in 2005 and 2006. Almost 200 Marriot hotels already bear the ENERGY STAR certification for energy efficiency, more than any other hotel company.
See: http://www.lohas.com/articles/100126.html and http://www.energystar.gov/index.cfm?c=hospitality.bus_hospitality

Plan Now to Meet Future Legal Requirements

Changing the way hotels are constructed and renovated makes legal sense. Major cities, including Washington, D.C. and Boston, have enacted legislation to require all major private non-residential buildings to comply with green building standards. Most cities are looking to the U.S. Green Building Council's Leadership in Environment and Energy Design (LEED) Certifications as the green building standard.

In Washington, DC, starting in 2010, new and substantially improved commercial buildings of 50,000 square feet or more will have to fulfill or exceed LEED New Construction or LEED Core and Shell 2.0 standards. Other major cities, including New York and San Francisco, are currently considering similar legislation.

Innovative Companies Apply Green Building Standards

Increasingly, companies attain LEED certification for newly developed buildings. For example, Bank of America's Hearst Tower, opened in October, 2006, is the first certified green building in New York City. The 856,000 square foot tower used 20% less steel than a comparable building with a conventional steel frame and is designed to use 25% less energy than the minimum requirements for New York City. Innovative features include polyethylene tubing embedded under the floor filled with circulating water that cools in the summer and provides heat in the winter. Rainwater collected from the roof is in a basement tank for use in the cooling system, irrigate plants, and for use within the lobby's water sculpture.
(See: http://www.hearst.com/tower/facts)

Developers may obtain LEED Certification by submitting an application to the Green Building Council documenting compliance with requirements of the rating system. There are four levels of LEED Certification: certified, silver, gold and platinum; the Hearst Tower earned a gold designation from the USGBC. There are also separate ratings for new construction and existing buildings. The rating system addresses six major areas of environmentally sustainable construction,

See: http://www.usgbc.org/
for a definition of LEED,
see: http://www.usgbc.org/DisplayPage.aspx?CategoryID=19

In 2004, Canada adopted a modified version of the LEED rating system, called LEED-Canada, that is somewhat more stringent than the U.S. standard.
See: http://www.cagbc.org/building_rating_systems/leed_rating_system.php).

Other countries, such as Australia, have their own green building standards.

Operation and Management: Steps to a More Sustainable Resort

Renovating buildings in a resort to meet green standards is a big commitment. Small changes in operations are a simple way to make the resort more environmentally friendly. The following are examples of small changes that can make a resort more eco-friendly:

For more tips on sustainable resort operations see:,
http://www.globalstewards.org/hotel.htm and
http://www.greenhotels.com/grnideas.htm

Carbon offset (also sometimes known as carbon trading) is another important way in which the resort industry is reducing its environmental impact. Carbon offset is the process of reducing an organization's net carbon emissions, by either (a) reducing emissions, or (b) engaging in activities that increase environmental absorption of greenhouse gases, such as planting trees. Walkwire LLC, a leading provider of automated Business Centers to the hospitality industry, recently pledged to offset the company's own energy consumption and also that of every new computer installed in a client's resort (see: http://carbonfund.org/site/more/media/342). In March 2007, the King Pacific Lodge in British Columbia, a Rosewood Resort, committed to offset the carbon emissions of its lodge operations and of guest travel to and from the lodge (including guest air travel) over the next five years.
(see: http://kingpacificlodge.com/press.cfm).

Carbon trading also can involve a company's payment to an environmental intermediary of an amount, currently about $5.50 per ton, based on the amount of CO2 emissions. However, the payment of money, rather than the actual reduction of emissions, is not without controversy.
(See http://www.chicagoclimatex.com/L).

Sustainability Starts at the Top

How does a company encourage its executives and staff to sign on to going green? Experience suggests that a company's commitment to green initiatives must begin at the top, with its chief executives. For example, Walmart's new sustainability projects were initiated by the company's chairman Rob Walton and CEO Lee Scott, despite hesitance from other top executives
see: http://money.cnn.com/magazines/fortune/fortune_archive/2006/08/07/8382593/).

Marriott's new Green Council is led by several of the company's most senior executives. As Brenda Davis, Vice President of Johnson & Johnson, states in the movie "Ahead of the Curve: Business Responses to Climate Change" produced by Sea Studios Foundation, "In 2003 our executive committee set aggressive goals for reduction of greenhouse gasses. In the early days of this effort there were skeptics... about whether it was a realistic goal and whether it would cost us too much money. Many questions were brought to the table. What's exciting is that today we have already reduced emissions in absolute terms 11.5 percent and in that same timeframe our sales have increased 350 percent. The investments that we've made are saving this corporation $30 million a year, and so our conviction that this is good for the long term, good for the business, good for the planet, ultimately of critical importance to human health - we think is being vindicated."

The assumption that going green will inevitably increase costs seems to be the primary obstacle in convincing executives and employees of the importance of going green. Correcting the misconception will be key to educating executives and employees alike about new sustainability initiatives. In addition, sustainability projects also help build and maintain high morale, as employees can feel proud that the company they work for is doing its part to reduce its environmental impact.

Sustainable Development as Competitive Advantage

Leading companies, such as Marriott, increasingly view environmentally sustainable development as a source of competitive advantage. Given Marriott's traditional focus on increasing shareholder value, Marriott may well have sound business reasons for its ambitious green program.

Environmental sustainability is not yet a primary consumer driver and most guests do not seek out luxury hotels and resorts solely because they are green resorts. Increasingly, however, guests are interested in the environmental sustainability of the resort as a secondary benefit and as a way of separating close competitors. Resorts that seriously pursue sustainability initiatives - and effectively publicize these initiatives - can gain a competitive edge in the market. As John Holdren, President of the American Association for the Advancement of Science, states in "Ahead of the Curve," "People increasingly, all over the world, want to buy green. They want to buy products that they can use not only with immediate benefit but in good conscience, and it's increasingly clear that marketing green is a successful strategy."

Robert M. Chasnow is partner in Holland & Knight. He is co-leader of the Timeshare and Resort Community Development Practice Group. Mr. Chasnow practices in the U.S., the Caribbean, Mexico and Canada. He focuses on the legal aspects of development and compliance with government requirements. Mr. Chasnow's group also represent developers and lenders in acquisition, construction and receivables financing, which includes securitization. He represents developers, public companies and financiers on due diligence, mergers, and acquisitions in timeshare and resort real estate. Mr. Chasnow can be contacted at 202-955-3000 or robert.chasnow@hklaw.com Extended Bio...

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