Going green increases hospitality industry profitability

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Photo by Tamara Malaniy on Unsplash
June 28, 2021

 

Hospitality firms with an environment strategy centering on reduce, reuse, and recycle (the 3R’s) increase their profitability and market value, shows research led by Alexis Ionnadis of the University of East Anglia’s Norwich Business School.

The hospitality sector is energy and water intensive  and uses single-use materials.The 3R’s strategy in the context of the hospitality industry can be focused  on  water, energy, and waste efficiency, for  a reduction in emissions and resource use.

The 3Rs is a hierarchy of effort for the best results. First, Reducing eliminates the need for reducing and recycling. Examples of reduction practices can mean installation of better insulation, better energy management, and food, packaging, or paper waste; and fertiliser and pesticide use.

Second, Reusing a product or part of it contributes towards reducing. Examples of reusing practices include reusing linens/towels, reusing furniture, crockery, and cutlery, and using products made from recycled materials.

Third, Recycling converting materials into new products. It focuses primarily on waste management practices. Examples of recycling practices include recycling shampoo and soap and their containers and separating-out waste on site.

The study, published in the journal of Business Strategy and the Environment, looked at 143 firms with  environmental data available: hotels, resorts,and cruise lines; restaurants; casinos and gambling; and leisure activities. The study looked at the firms’ green corporate governance, quality assurance policies,  and financial slack (extra money that a company has on hand) and human resources slack (having an adequate number of employees engaged in green strategy) vis-a-vis their net profit and stock value.

Alexis’ findings show that hospitality firms that implement 3R’s can increase their profitability in different ways. First, they can be more efficient in decreasing energy and water in their operation costs which will also decrease their utility expenses. Second, they can reduce the volume of their inventories and expenditure when equipment and machinery are used. Third, they can increase their customer base with eco-friendly consumers.

Additionally, firms that implement a 3R strategy can lead to positive valuation from the market. This is a result of cultivating a green brand image, gaining recognition of investors, and thus achieving higher financial valuation. They are kept away from legal fees or fines imposed by their governments, protecting their reputation.

However, in order for hospitality firms to successfully implement a 3R’s strategy they would also need to be committed to a sustainability agenda, adhere to environmental standards and certifications, and financial slack -- extra money that a company has on hand.

Reuse, reduce, and recycle in the hospitality industry can be applied practically in the following different areas: