Coming out of isolation: the sustainable rebuild of hospitality. Thinking critically to redefine the hospitality industry’s approach to environmental responsibility
For research development, PACE Dimensions conducts a number of interviews with industry leaders who share insights into the latest sector and market trends. The below is a recent interview with Wolfgang Neumann, chair of the Sustainable Hospitality Alliance. He discusses the challenges the industry faces in becoming more sustainable and shares insight into how brands can build competitive environmental and social strategies.
Chair of the Sustainable Hospitality Alliance, Wolfgang Neumann, has one clear goal in mind: to help the hospitality industry realise its ambition to be net positive. As part of this, he’s passionate about providing the tools, resources and support for finding a clear pathway for hospitality brands to achieve this. His words are stark, “No one is in isolation. Future success and sustainability are two sides of the same coin.” The phrase ‘build back better’ has been much used for business and politics coming out of the pandemic, however Neumann is very clear that actions are needed much more than words.
“Covid has been a wake up call,” he explains. “The hospitality industry is often referred to as being very traditional and built on past practises. But equally there is appetite to innovate and to redefine business models in order to strike a balance between rebuilding to profit, and ensuring that the stakeholders of people and planet are truly embedded in the values and purpose of any corporate strategy. Business success is directly dependent on sustainable practices and taking greater responsibility. The hospitality industry has a critical role to play, and business leaders are embracing the need to do more and act faster.”
While Covid has been an inflection point and a pause where new values have been firmly established, there are multiple forces driving a change towards greater sustainability, Neumann highlights, “Hospitality businesses increasing have no choice. Their guests are demanding and even scrutinising what a hotel does and how they look after their employees. In particular the younger generation – who are future workforces – are very clear that they will not let corporates get away with box ticking, and that plans need to be meaningful. They want to see traceable actions and commitments fulfilled successfully. To attract and retain both guests and good people, hotels need to get this right.”
Two further forces are driving no alternatives for hospitality brands. “Corporate customers are pushing hotels to have a credible and robust approach to sustainability. They need to report effectively, and have ramped up the pressure in this area. Plus, there are increasing government and legal requirements coming into play very soon affecting the Environmental, Social and Governance (ESG) agenda,” adds Neumann. He is very clear that good leaders are embracing the opportunity and see how a strong approach to sustainability will make their business more successful in many ways. This includes making their operations more valuable, achieving brand differentiation and attracting the most talented people to work with them and for them. As Neumann puts it, taking sustainability seriously is a ‘no brainer’.
It is important to note that Neumann repeatedly stresses that a sustainability strategy is about both environmental and social concerns. Businesses must embrace social challenges as much as the planet, and must not forget their stewardship here either. The key realisation for the industry here is that no one business can do this alone. “We must collaborate in order to be successful,” outlines Neumann. “When we work together we can do more. Getting our approaches to sustainability right is not about being competitive, we need to align. There are faster and better ways to achieve our goals when we learn from each other,” He adds. This is where the Sustainable Hospitality Alliance aims to play a key role, to bring together small and large organisations that are at different stages of their sustainability journey, and to provide them with a clear pathway of how to improve.
“A crisis is defined by the ambitions that come out of it,” says Neumann. He adds, “We have a real opportunity to achieve a mindset change in the hospitality industry. By doing it together, we make it more achievable. Mankind is capable of many breakthroughs, and with the collective energy, knowledge and resources of the hospitality industry we can set standards for other business sectors.”
But what about the barriers, and is the hospitality industry in the right place after two years of the brutal impact of the pandemic? Neumann is resolute that the industry is both ready and engaged. He states, “Change takes responsible leaders, those who walk the talk and set out the cultures they want to build clearly. The hospitality industry has those in spades.” It is also important to point out the challenges that comes with how complex business models are in the industry, with multiple stakeholders involved who need to be engaged throughout.
“The commitment to taking a more sustainable approach starts as soon as there is a decision to build a hotel, far before the spades go in the ground,” outlines Neumann. “In order to act in a way that supports local communities and environments, planning for a new hotel has to consider not only the construction process but also factors such as the Modern Slavery Act. The business model for the proposition needs to outline how a building will be created sustainably, and how that ethos will continue into the full life-cycle of the building. Woven within this are the suppliers and a complex value chain. As well as the building owners, there is the operator, the brand and there also needs to be a plan for if the building might be sold or refinanced. It’s a highly complex landscape,” he continues.
Neumann is passionate that this is not an insurmountable challenge. In his role at the Sustainable Hospitality Alliance he is working to make the industry more coordinated in this area, and to ensure that they branch out into affiliate options for the many elements of the hospitality value chain. He is very clear that this is only possible due to the high levels of commitment from the hotelier members themselves, and that they are providing the momentum for the Alliance to successfully evolve into this area.
He explains, “Both the members of the Sustainability Hotel Alliance and I are very clear that addressing sustainability is not happening fast enough across the world. Governments and businesses have been talking about a tipping point for some time, and the inaction to date is shocking. Of course, Covid has not helped at all. For the past two years all businesses in the hospitality industry have been fighting for survival and have had to make difficult decisions to scale back some initiatives. We need a stable business environment in order to get this right, and yet we also need to strike the balance and ensure sustainability isn’t lost in the bid to survive.”
There are a heavy mix of factors driving change, all forcing hospitality businesses to take sustainability seriously as part of their recovery plans. While Neumann acknowledges there is not yet an industry-wide large scale piece of research into consumer behaviour in this area, there are multiple sources of evidence all pointing to how important this subject is to people’s day to day lives. Insight to date suggests guests are looking at sustainability much, much more than pre-Covid, and changing their booking behaviours accordingly.
With his Hotel School The Hague hat on – Neumann is chair of the board of trustees of the prestigious hospitality university – there is a stark warning for hospitality businesses not taking sustainability seriously. “Our students are very clear that they are not working for a business that doesn’t mean what they are saying, and doesn’t take sustainability seriously. And they absolutely mean it,” Neumann says.
Pressure from the corporate travel industry is also heightened with RFP’s demanding clear evidence of sustainable practises from hotels and applying their own data to rank how different brands perform around specific meetings and larger scale contracts. Neumann adds, “These factors are pushing changes in other areas too, with digitisation supporting hospitality businesses in their quest to track, monitor and report their sustainability. In fact, making the right digital investments is a huge opportunity. We already see that the investment community and fund managers need to see tangible evidence of how their portfolio is tracking against ESG commitments, and technology helps to make this easier and more transparent.”
Law changes are coming thick and fast too, in particular across the EU. “Publicly listed companies will be the first to have to carry out comprehensive ESG audits and reports, but soon they will be common practise across all areas of industry,” Neumann explains. “Hotels who don’t begin to think in this way will have a very hard time catching up if they don’t take the right steps now. In fact, the regulatory requirements coming up could stifle some businesses if they do not address sustainability as a core component of their operations sooner rather than later,” he adds.
While the big changes are impacting larger corporations first, Neumann is clear that the responsibility for behaviour change sits with everyone. “Change like this also requires a bottom-up approach, and absolutely everyone has a role to play. At the end of the day, sustainability boils down to the decisions and actions that every single one of us makes. Businesses with responsible leadership can help to set the agenda, but it is going to be more than a tough time for everyone if we all don’t make our own changes,” Neumann sums up. While change can be tough and unsettling, for Neumann facing change head-on is exciting. He is motivated and fascinated to be part of the hospitality industry’s journey towards being net-positive, and clear that there is a highly successful future for the brands who get the mix of people, planet and profit right.
To delve into trends across different sectors of the travel and hospitality industry, PACE interviews effective business leaders who share their insights and expertise on the opportunities and issues facing their sector and how to build competitive strategies in today’s environment. For further information on PACE Dimensions research capabilities please click here.