Climate change has the potential to destroy Marriott International’s business as we know it. From its resorts nestled along the beautiful white sandy beaches of the Caribbean to its majestic mountain ski lodges, Marriott is profitable when weather is stable and predictable, infectious diseases are kept in check, and traveler disruption is kept at a minimum. With Marriott’s recent $13 billion acquisition of Starwood Hotels, can the world’s largest hotel company rise to the occasion and curtail the effects of climate change?
What climate change means for Marriott
Science has spoken: there is no longer any reasonable doubt – or at least there shouldn’t be – regarding the formidability of climate change. For Marriott, which features more than 1.1 million rooms in over 110 countries, climate change means extreme, unpredictable weather, decreasing snow cover, and rising sea levels at its global properties – all of which yield decreased profitability.[1] In fact, a study from Cornell University calculates losses from weather-related events to have increased by an average of 2% annually for the past 40 years.[2]
Environmental impact drives profitability
The extreme weather conditions are potentially devastating for Marriott, its customers, and the local community, including enhanced risk of flooding, drought, severe storms, heat waves, and infectious disease proliferation. These unpredictable, extreme weather events result in decreased revenue as guests will be displaced or even require a complete property shutdown. For example, during 2011-2012 revenues dropped 15% at its ski resort properties due to lack of snow.[3]
Furthermore, the Caribbean development report estimates that the cost to replace a hotel that has been damaged by a rising sea levels ranges from $9-80 million, not including costs associated with business interruption.[4] Naturally, insurance premiums are also expected to rise with the additional risks that climate change causes. With rising insurance premiums, Marriott’s bottom-line will shrink.
Consumer preferences drive satisfaction
Customers are also weighing in on the debate of climate change, making purchase decisions based on a hotel’s sustainability practices. Numerous studies of the hotel industry show that commitment to environmental practices improves a hotel’s profitability.[5] Marriott, however, recognizes that although consumers value its sustainable efforts, overall service quality should not diminish.
Regulatory impact
The hospitality industry counts for between 4-6% of greenhouse gas emissions with forecasts expected to increase to 10% by 2025. Research from the University of Cambridge indicates that in response, governments are likely to consider carbon taxes to curtail greenhouse gas emissions.[6]
Marriott’s sustainability efforts
Recognizing the threat of climate change, Marriott established its global sustainability program in 2007. Through its sustainability practices as outlined below, Marriott aspires to be the global hospitality leader for environmental sustainability. [7]
- Reducing energy and water consumption 20% by 2020 (2007 baseline)
- Linen and bedding reuse program, energy savings program, keycard management
- Increasing footprint of “green” hotel development
- Marriott has developed a LEED (Leadership in Energy and Environmental Design) prototype program.
- As of YE 2015, Marriott had 142 LEED certified hotels within its portfolio
- Greening its supply chain:
- Marriott has made sustainability a top priority in vendor selection. For example, Marriott has partnered up with FutureFish, a sustainable seafood program, to avoid serving over-fished species.
- Investing in education of associates, guests, and partners
To date, the culmination of Marriott’s sustainability efforts has led to decreased energy intensity of 13.2%, water intensity of 10.4%, and GHG emissions intensity of 13.2% compared to a 2007 baseline. [8]
Additional opportunities for Marriott
While Marriott has made considerable efforts in response to the challenges posed by climate change, the company’s work is not yet done. Not even close. The following identifies areas Marriott should consider going forward:
- Focus on integration – With the Starwood merger complete, Marriott’s umbrella now spans across 30 brands, each with its own sustainability initiatives. Marriott can benefit by leveraging Starwood’s innovative solutions (e.g., Element brand), but must also ensure alignment across portfolio.
- Enhance sustainable prototype – With less than 4% of its portfolio LEED certified, Marriott should consider re-evaluating its existing prototypes or offering enhanced incentives to developers for achieving LEED certification. These incentives should come in the form of reduced franchise fees, access to financing, or key money.[9]
- Expansion of energy savings programs – Marriott should expand its program globally. By partnering with Siemens, Marriott has reduced energy costs at 20 hotels in Europe by 15% and CO2 emissions by 15%, resulting in $1 million of annual savings. [10]
- Improve sustainability education – Virtual reality is the next new travel trend. Marriott can capitalize by showing its customers and employees the negative effects of climate change through VR immersion.
Marriott was an industry pioneer in 2007 when it established its global sustainability initiatives. While Marriott recognizes that the threat of climate change is real, it must continue to develop innovative solutions and remain committed to stay ahead of the curve.
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Sources
[1] Hofmann, M. A. (April 9, 2007). RMS links weather losses, climate change. Business Insurance, 41(15), 20.
[2] Peiró-Signes, A., Segarra-Oña, M., Verma, R., Mondéjar-Jiménez, J., & Vargas-Vargas, M. (2014). The impact of environmental certification on hotel guest ratings. Cornell Hospitality Quarterly, 55(1), 40-51. 04 Nov. 2016, http://scholarship.sha.cornell.edu/articles/376/
[3]“Physical Risks from Climate Change: A Guide for Companies and Investors on Disclosure and Management of Climate Impacts.” www.calvert.com. David Gardiner & Associates, LLC, n.d. Web. 4 Nov. 2016. <http://www.calvert.com/NRC/literature/documents/sr_Physical-Risks-from-Climate-Change.pdf>.
[4] Sookram, Sandra. “The Impact of Climate Change on the Tourism Sector in Selected Caribbean Countries.” Caribbean Development Report 2 (2007): Http://www.cepal.org/publicaciones/xml/3/38253/LCARL.245part4.pdf. Web. 4 Nov. 2016.
[5] Zhang, J. J., N. Joglekar, and R. Verma. 2012c. Pushing the frontier of sustainable service operations management: Evidence from US hospitality industry. Journal of Service Management 23 (3): 377-99.
[6] “Climate change threatens ski and beach resorts, reefs an (n.d.): n. pag. University of Cambridge Institute for Sustainability Leadership. Web. 4 Nov. 2016. <http://www.cisl.cam.ac.uk>.
[7] “Environmental & Green Initiatives | Marriott Corporate Responsibility.” www.marriott.com. Marriott International, n.d. Web. 04 Nov. 2016.
[8] “2015 Update on Environmental Performance.” Marriott.com. N.p., n.d. Web. 4 Nov. 2016. <http://www.marriott.com/Multimedia/PDF/CorporateResponsibility/2015_Reports/2015_EnvironmentalPerformance.pdf>.
[9] Rodriguez, By Natalie. “For Hotel Deals, ‘Key Money’ Is Back In Play – Law360.” For Hotel Deals, ‘Key Money’ Is Back In Play – Law360. Law 360, n.d. Web. 04 Nov. 2016. <http://www.law360.com/articles/472200/for-hotel-deals-key-money-is-back-in-play>.
[10] “Energy Efficiency Program for Marriott Europe.” Siemens.com. N.p., n.d. Web. 4 Nov. 2016. <https://www.downloads.siemens.com/download-center/Download.aspx?pos=download&fct=getasset&id1=A6V10588544>.