LEED Design: You Can't Afford Not to Do It
By Timothy E. Osiecki, President of Design & Construction, Concord Hospitality Enterprises
LEED certification. For some in our industry, the mere mention causes a reflexive reach for wallets amidst protestations about ROI and guests who don't care, don't understand and won't pay for it.
In 2008, we at Concord Hospitality Enterprises had many of those same concerns about incremental costs and value to consumers when we embarked on our first LEED (Leadership in Energy & Environmental Design) project, the Settler's Ridge Courtyard by Marriott in Pittsburgh, Pa., And indeed, it did cost over $500,000 more to build, but the annual savings exceeded our expectations so we persevered in figuring out how to minimize cost to maximize our returns and make sustainability as much a part of our company's culture as any of our cornerstones.
Since that first hotel, we've made it our mandate to figure out how to make LEED designed hotels affordable. Working in tandem with Marriott, our Settlers Ridge Courtyard provided the design template that assisted Marriott to develop a LEED prototype to take much of the cost and pain out of LEED design for others. Now there is the option to use Marriott's Volume Build prototypes so developers can attain LEED certification for less than $350,000 over non-LEED certified prototypes.
Since 2008, we have committed that all Concord new builds we develop will be LEED designed. We've put our money where our mouth is and have invested $2 million to date and have another 18 hotels in our pipeline either under construction or in design.
But why bother? Why spend more? Does LEED certification mean anything to customers?
At Concord, we asked those questions, and here's what we found out:
We started on this venture because it's the socially responsible thing to do. Our planet's natural resources are limited, and there's no reason to squander them when our own ingenuity is in infinite supply.
Along the way, we also found that being green introduces us as a responsible neighbor before we've even put the first shovel into the dirt. That goes a long way with the community and local building officials. We also know many corporate companies have adopted green practices into their company cultures and now look for LEED hotels when booking associate travel. We are confident that it also plays a role in our being able to attract and retain top talent. You can sense the esprit d 'corps at a green hotel. Associates are proud to work at an environmentally friendly hotel, and our guests appreciate the same.
Mark Laport, Concord's President and CEO, in tandem with our company's leaders, decided they wanted to do just that - lead. All we needed to do was invest the brain power into figuring out how to make it affordable.
Why Spend More?
We don't. The LEED-design choices we make for a 125-150 room hotel typically cost between $300,000 - $350,000 more than conventional construction and pay for themselves in five years or less through energy cost savings in the 20-25 percent range. We know this because we have actual comparables. We have both LEED-designed and conventional hotels in the same city. They are similar in size, scope of service and operating climate. (When it's 20 degrees on Main St., it's also 20 degrees on First Ave.) We save between $50,000 and $75,000 per year in utility bills at the LEED-designed hotel.
Do Customers Care?
I think it's safe to say that the general public is starting to learn about LEED certification, and what impact a LEED-designed building has on the community in which it operates or the planet as a whole. There definitely is an opportunity for better communication in this area that could eventually lead to greater public awareness and transient travelers actively seeking out LEED certified lodging.
When it comes to corporate and government sales accounts, however, LEED-certification gives a hotel a distinct advantage. There are literally thousands of companies with established or burgeoning green cultures that are now directing their travelling employees to stay in LEED-certified hotels whenever possible. A hotel's 'green cred' now plays a part in the hotel selection process, and with very few hotels currently qualifying, those of us who are LEED-certified have a significant sales advantage. When we are the first LEED-certified hotel in market, those four letters give our hotels a significant LEAD over the competition.
Won't Lenders Balk at Spending More?
It's no secret that capital for new builds has been in short supply. For many reasons, Concord has been in the enviable position of having ready resources for debt and equity, due in part to our commitment to only build LEED-designed hotels. An additional $50,000 - $75,000 in NOI provides a nice boost in your project's proforma projections.
Lenders often question the utility projections on our proforma, and I particularly enjoy telling them why our numbers are correct and most likely better than the other projects they'll consider.
Will The Hotel Retain its Resale Value?
When it's time to part with the asset, LEED certification adds real value to the hotel. That $50,000 in utility savings turns into a $500,000 increase in sales value at a 10 CAP. So, with a five-year hold on a new build, you'll recoup your initial investment in operational savings and be further rewarded at the closing table.
How Do We Get Started?
To qualify for LEED certification, a project must earn 40 points from the USGBC's large list of point options. There is a multitude of expensive points but there are plenty of low-cost items like low-flow shower heads, or simply buying energy from a green energy provider that can help add up to certification
A developer could make the leap to LEED by using Marriott's Volume Build prototype. The prototype was designed to work in any location, and because it was pre-approved by the US Green Building Council (USGBC), adopters can save themselves significant time and design costs associated with LEED design process. For the uninitiated, or developers with limited human resources, taking advantage of prototypes is a great option.
Even though we helped create the prototype, we haven't yet employed it, because we can often find ways to achieve the requisite LEED points in even more cost-effective ways.
For example, a project could qualify for one LEED point by using drip irrigation and drought resistant landscaping, two features that would have no cost impact at all. That's a point we routinely design for whenever the climate warrants, but that feature is not part of the prototype design because it is location dependent.
In colder climates, we employ a heat recovery system to reduce heating costs. We spend a lot of money heating our hotels, and it all goes right up the chimney every time an exhaust fan is turned on. A heat recovery system uses the out-going warm air to pre-heat the incoming fresh air, thereby reducing the amount of energy it takes to heat it to the desired temperature. On a cold day, turning 20-degree fresh air into warmer 40-degree air before it hits the HVAC system reduces the overall energy consumption.
At Concord, we have found a way to earn a LEED point for water savings without sacrificing a refreshing shower by apportioning total water savings across several areas. An environmentally friendly, 1.5 gallon-per-minute shower head leaves guests merely damp and often unhappy, whereas a two gallon-per-minute shower does the job and still achieves significant water savings over the conventional 2.5-gallon-per-minute standard shower head. A lower-flow toilet can help make up the difference and achieve the total water savings needed for a LEED point.
Outsulation, wrapping the building in an insulating foam blanket rather than insulating the stud cavities, yields a tighter, more efficient building and moves the condensation point beyond your walls, thereby reducing the probability of mold.
Over the years while developing our hotels, we've worked hard to look into the future and consider newer technology, changing times and the ever growing demands of travelers. We realized early on that WIFI was going to quickly surpass wired internet, and so we spent an additional $10,000 to build hotels with both wired and wireless service. Then we provided it for free. It helped grab market share in the beginning. Now it's a brand standard, but for a few years, we were way ahead of our competitors.
While I don't pretend to have a crystal ball, I do believe that today's basic LEED-certification standards soon will be local building code standard, and it won't be long before conventionally built hotels will have to plead their case to obtain corporate travelers.
Before government regulations and big business practices compel you to get on board, consider your NOI, your investors, your end game and your kids, and then ask me, why bother to LEED?
Timothy Osiecki and Concord CEO Mark Laport were custom home builders before Concord Hospitality was founded in 1985 with a vision of developing and managing high quality hotels to become industry leaders. Mr. Osiecki led the design team responsible for the first LEED-certified Courtyard by Marriott prototype hotel, and received Marriott’s first Icon Award for smartly creating new innovative ways to enhance brand design without additional cost. In 2012, he reprised his role as brand innovator by leading the design of the Gen IV SpringHill Suites prototype in Latrobe PA and received a "Design Excellence" award for his efforts. Mr. Osiecki can be contacted at 919-455-2900 or email@example.com Extended Bio...
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