Why sustainability will become an even bigger priority for the global hospitality industry

Conscious consumerism is in, in 2024. Companies that fail to get the memo will be left in the dust by those that do.

Consumer choice is a powerful force. It shapes markets, generates demand, impacts product design, drives innovation and influences pricing and trends. When it comes to sustainable travel and hospitality choices, it is typically consumers who lead the charge.

Environmental and corporate social governance (ESG) is not new, but until recently, many businesses have ticked boxes – doing just enough to prove themselves as ‘sustainable.’

Consumers are much more likely to factor sustainability into their decision-making, with criteria including carbon-reduction policies, energy efficiency, the provision of EV charging points and proven reductions in emissions and food waste among the key considerations.

Am I doing enough?
As consumer’s call for brand transparency increases, chances are your business might find itself asking this question. And the answer is possibly not.

Over the next decade, sustainability considerations will hugely impact hospitality businesses. Full transparency, with demonstrable real-time data, will become a business imperative for companies looking to attract new and retain existing customers. Put simply, greenwashing won’t wash. Hospitality businesses will need to walk the walk and talk the talk  – by communicating what they are actively doing for people and the planet

Of course, with challenge comes opportunity. Sustainable hotel choices can be a powerful branding tool. There are plenty of opportunities for managers, travel procurement professionals, corporate travel managers and meeting planners to make a positive impact while harnessing demand.

According to KMPG: “Studies have found that consumers are more likely to buy from purpose-driven companies and are considering sustainability in their decisions. The increasing body of evidence that indicates that companies can both do good and do well financially is contributing to a record number of retailers setting out on their own ‘ESG journeys.’”

Driving the bus – not running after the bus – is what all businesses should be aiming for. By driving change, consumer confidence and trust will follow. 

With the right information, and the right tools, sustainability and growth needn’t be incompatible. Businesses that can demonstrate an understanding of consumer values and priorities will not only have a competitive advantage, they will also be shaping their product and securing future success.

To help hotel companies make smart decisions, PACE Dimensions has partnered with a leading research company, BVABDRC and carried out the largest global research program of its kind to provide comprehensive insights and advisory services to help brand, marketing and commercial leaders innovate brands and their go to market approach to maximise the benefits from their company’s investments in sustainability.   Our research provides the tools you need to stay ahead of the sustainability curve. Want to be sustainability smart? Read on.

Knowledge is powerful
Here at Pace Dimensions, we approached our research with three core criteria in mind. What are the biggest markets and customer segments when it comes to sustainable travel? To what degree do sustainable values influence consumer choice and for what (and to what extent) is a customer willing to pay more?

We conducted online interviews with adults intending to travel and book a hotel in the next 12 months in the 10 largest geographic source markets of demand. In the USA, the UK and DE, phone interviews were also conducted with corporate travel buyers and meeting planners.

General attitudes towards sustainability
Perhaps not surprisingly, travellers in each of these markets have taken steps to reduce their environmental footprint – whether that’s reducing food waste (63%), cutting down on the use of plastics (57%), or buying locally produced food (43%). 

Generational attitudes towards sustainability also come into play. Intriguingly, it’s Gen Y (millennials) and not Gen Z who are more vociferous when it comes to expressing attitudes towards sustainability – a useful indication of how consumer behaviour will shift among the core hotel guest demographic over the next five to 10 years.

New sustainability segments
After surveying the biggest source markets, we created a new sustainability segmentation for the hotel sector based on many attitudinal statements, their sustainable behaviour, and the importance of ESG initiatives when making hotel bookings.

The inclusion of behaviour is an important distinction from other segmentations. Across the six segments we identified, 38% of the 10 largest markets are significantly influenced by sustainability decisions and almost 48% are proactively considering sustainability as part of that decision.

What do consumers want?
Our research shows that customers (59%) think governments and big businesses should be doing more to help environmental causes and support communities. Importantly, more than a third claim they will pay more to be ‘environmentally friendly’ – a significant find in a time of high inflation. Sustainable travel is important for 41% of respondents, and 35% said they will assess the environmental considerations of accommodation before deciding whether to stay.

What will this research help you to address?
Perceptions of your brand(s) and your competitors’ brand(s) are central when it comes to consumer decision-making. What attributes – ESG and others – do customers care about and how does this change by customer segment? How do customers perceive the strengths and weaknesses of your brand(s) and how is it positioned in a crowded marketplace? And consumers will have a benchmark by which to measure your brand against your competitors.

The role of choice modelling
Our research data shows that when choosing a hotel or buying a product, consumers will consciously select brands that place value on ESG and sustainability. And by replicating real-world decision making we can simulate new, targeted hotel offers. Among five-star travellers in Germany for example, a sustainable hotel option can charge more than a 25% premium and still receive the same share of preference as the same category of hotel, customer satisfaction rating and loyalty program benefits, but without any overt sustainability characteristics.

How does it translate to my brand?
Choice modelling allows consumers to make real-world choices. By simulating the impact of ESG measures, we can calculate how important the different alternatives they are trading off against one another are to each guest. This becomes an important planning tool.

In summing up, the hospitality industry is changing how it thinks about and addresses sustainability in response to consumer demands. In an uncertain and complex world, it is essential to gather and evaluate consumer sentiment and work past surface-level processes to truly make a lasting impact. Our message:   Investments in improved sustainability used to innovate the brand positioning and go-to-market approach increase brand appeal and performance.  

>>PACE Dimensions is an expert in opportunity identification and prioritisation, business architecture and design, operating model design, transformation delivery and change management. Find out more about how PACE Dimensions can help your hospitality business excel at www.pacedimensions.com