Climate Change for Global Travel and Tourism
Global travel and tourism industry has experienced rapid growth over the past years, accounting for 9.8% of global GDP in 2016 . While the sector is expected to grow 4% annually over the next decade, concerns arise regarding the impact of climate change on the future of global travel and tourism industry landscape.
Hospitality sector, in particular, is highly susceptible to changes in climate patterns and ecosystems—crucial factors when people make their travel decisions. This directly has direct economic implications on hotels’ profitability. As climate change escalates, hotels are faced by increasingly serious business threats. Rising sea levels is one of the major threats to hotel real estate assets, in particular resort hotels located near coastal area. According to UNEP, a 1-meter rise in sea level could submerge almost 60% of resort hotels in the Caribbean region . Faced by pressing climate change concerns, leading global hospitality companies have come up with various operating procedures and project initiatives aimed at reducing the level of GHG emissions at hotel properties across the globe.
Ambitious Environmental Vision
Hyatt is a leading global hospitality company with more than 600 properties with especially strong footprint in the upscale and luxury hotel segments. In the past few years, the company has shifted its growth strategy from a previously capital intensive model to a more asset-light approach, similar to those of competitors, in order to diversify its cash flow streams and grow more quickly. It was not until a decade ago or so that Hyatt had begun to aggressively franchising its brands, mostly in the upscale segments, where Hyatt is not directly involved in the day-to-day operations and where operation models are less complex compared to those of luxury hotels. Majority of Hyatt’s luxury hotels are still either owned or managed by Hyatt .
Recognizing the extent to which climate change can adversely impact the global travel industry, Hyatt has incorporated environmental sustainability initiatives into its overall business strategy. In 2014, it announced environmental sustainability vision for 2020 for all of its hotels. The mission, which combines both short-term and long-term strategies, will focus on 3 major areas , :
- Use Resources Thoughtfully
- Build Smart
- Innovative and Inspires
Use Resources Thoughtfully: Hyatt aims to optimize amount of resources use per guest at its hotels. In doing so, Hyatt has implemented a system to keep track of how much resources are consumed and wasted in order to adjust its purchasing decisions accordingly. In addition, Hyatt sets targets for its operation teams to reduce level of energy consumption, GHG emissions, and waste production at its hotels. For example, Hyatt targets to reduce water use per guest night by 25% from 2006 and 30% in water-stressed areas.
Over the past few years, Hyatt’s efforts to make its hotels more energy efficient have already materialized; majority of Hyatt hotels have been able to significantly reduce energy consumption, GHG emissions, and water consumption [Exhibit 1]. In addition, Hyatt aggressively pushes recycling efforts, setting 40% diversion rate global target. So far 12% of hotels has exceeded the target diversion rate.
Build Smart: In addition to optimizing energy usage at the hotel-level, Hyatt focuses in developing more environmental friendly and energy efficient hotels. From 2015 onwards, managed hotels must adhere to enhanced sustainable design guidelines for any new development and major refurbishment projects. From 2015 onwards, Hyatt’s owned full-service hotels must be certified for LEED, one of the most prominent green-building certification program. As of April 2016, 24 of Hyatt’s hotels are LEED-certified.
Innovate and Inspire: To raise more awareness around environment sustainability, Hyatt provides hotels with funding dedicated to environment sustainability projects. Furthermore, Hyatt will continue to experiment different solutions to address climate change in order to derive at the most effective solutions to address climate change. For franchised hotels, Hyatt will introduce EcoTrack, a data monitoring system that tracks hotels’ different environmental performance. Hyatt expects that by 2016, all of Hyatt-franchised hotels will be able to monitor and review their hotels’ environmental performance , 
Although Hyatt has made robust progress towards achieving its environmental sustainability vision by 2020, what else can it do?
As millennials are putting more emphasis on environmental sustainability when making lodging decisions, it seems that typical towels-and-linens reuse programs and recycling efforts are no longer sufficient . Going forward, Hyatt should integrate more sustainability features and green technologies in its hotel designs.
In addition, most of the existing environmental initiatives have been focused on Hyatt owned and managed hotels. Should Hyatt push its environmental sustainability initiatives more at its franchised hotels? With hospitality industry becoming increasingly competitive, will mandating franchisees to comply with Hyatt’s environmental initiatives hinder its efforts to compete with other hospitality giants like Marriott?
- World Travel & Tourism Council. “Economic Impact Analysis”. November 2016. http://www.wttc.org/research/economic-research/economic-impact-analysis/
- United Nations Environment Program. “World Heritage and Tourism in a Changing Climate”. November 2016. https://wedocs.unep.org/rest/bitstreams/11317/retrieve
- Hyatt Hotels Corporation. November 2016. http://investors.hyatt.com/investor-relations/news-and-events/Presentations/2015/default.aspx
- Hyatt Hotels Corporation. November 2016. http://newsroom.hyatt.com/2014-08-28-Hyatt-Unveils-New-2020-Environmental-Sustainability-Strategy
- Adams, Lawrence. “Sustainable Hotels: A Futuristic Outlook”. November 2016. http://hotelexecutive.com/business_review/3819/sustainable-hotels-a-futuristic-outlook
- Hyatt Hotels Corporation. November 2016. http://thrive.hyatt.com/content/dam/Minisites/hyattthrive/2016-Images/29-2020-Vision-Graphic.pdf