Sustainability in Travel 2021: Emissions Benchmark of Six Global Hotel Companies

by Wouter Geerts + Skift Team - Mar 2021

Skift Research Take

Carbon reduction is gaining importance for stakeholder groups, and reporting is getting better amongst the largest hotel companies. Our analysis finds that Accor is the current leader in emissions reduction, but all companies have areas to improve.

Report Overview

Environmental criteria are becoming increasingly important to investors, employees, and guests. As a result, most large hotel companies report on their emissions and targets in filings to the CDP (formerly known as the Carbon Disclosure Project, a non-profit organization that encourages companies to disclose their environmental impact). We have used these filings to benchmark the current performance of six of the largest hotel companies.

This is not as straightforward as it may sound, due to the differences in capturing and reporting emissions information, as well as the different portfolios run by each company. This report sets out the main barriers to cross-comparing performances, and offers some ways to get around this.

Our analysis finds that Accor stands out as a top performer, in the best position to work towards carbon neutrality. Marriott, partially due to its largest portfolio, is by far the largest emitter of greenhouse gas emissions. When taking into account the different sized portfolios Hyatt Hotels is the largest polluter per room, closely followed by Marriott. Wyndham and Choice Hotels need to increase their reporting on emissions. Particularly Choice Hotels’ absence of any targets and reporting are highly disappointing and should be addressed by the company.

What You'll Learn From This Report

  • The hotel company leaders and laggards in emissions reduction.
  • The targets for emission reduction set by the six largest hotel companies, and the shortcomings of these targets.
  • How chain scales have a major impact on company emissions, and how these chain scales can be used to provide a benchmark for company performance.
  • The future challenges of continued emissions reduction.
  • Shortcomings of current reporting standards, and how this could be improved.

Key Takeaways

Accor leads the pack – From our analysis, Accor stands out as the player which is slightly ahead of its competitors, with lower than benchmarked current emissions, and 2030 and 2050 science-based targets to further reduce emissions to become a carbon neutral company.

Marriott and Hyatt are high polluters – Marriott, partially due to its largest portfolio, is by far the largest emitter of greenhouse gas emissions. When taking into account the different sized portfolios Hyatt Hotels is the largest polluter per room, closely followed by Marriott.

Wyndham and Choice need to up their game – Wyndham has not set targets for the large majority of its portfolio, and underperforms on its owned, leased, and managed rooms. Choice Hotels has no official targets and does not report on its environmental, social and governance (ESG) performance at all, which the company should address.

Portfolio setup is the largest determinant of emissions – The higher-end the portfolio, the higher the company’s emissions. The question if it is right that higher-end hotels emit more CO2e per room than mainstream hotels is beyond the scope of this report, but we would like to see higher-end hotels reduce their emissions far more aggressively.

Comparing targets remains difficult – All companies set targets for the reduction of emissions, but directly comparing these is near impossible due to their differing scopes and baselines. A first step would be for all companies to set science-based targets, which today only IHG, Hilton, and Accor do. We would expect that the other companies will follow their lead.

Scope 3 emission tracking is lacking – Scope 3 emissions, the upstream and downstream emissions from hotel activities, are not or only partially tracked by hotel companies. As emissions from hotel franchises are included in this Scope, it is an important segment which needs more attention. Wyndham is the main offender, not tracking franchised emissions at all.

How big is the self-reporting bias? – All the data about emissions is self-audited and reported by the companies. Major discrepancies become apparent in the tracking of certain emissions, like those from waste. Standards and guidelines need to improve to allow for better cross-comparison between companies.

What will happen after the low-hanging fruit is gone? – There are a good number of examples of environmental initiatives implemented by hotel companies to reduce their carbon emissions, which also provide a strong return on investment, but once the “easy” innovations are implemented, how will targets be met?

The Impact of Tourism and Hospitality on the Natural Environment

Does the pandemic provide an opportunity for the travel industry to come back better? It’s a question we increasingly hear. Environmental, social, and corporate governance (ESG) criteria have made steady inroads into the hotel industry, and now form part of many hotels’ performance metrics, investor criteria, and business travel procurement.

A pre-pandemic study of real estate investors by the United Nations Environment Programme Finance Initiative, REALPAC and Bentall Kennedy found that 93% of investors include ESG criteria in their decision making.

Industry and academic studies find increasing support of hotels’ environmental practices amongst guests, although it remains a factor of limited importance when booking a stay, and interest is not always converted to real participation. An internal survey conducted by IHG found that 75% of frequent travellers are interested in its hotels’ sustainability, but according to Accor only 13% of its guests took sustainability into account when booking a room. This figure, albeit still relatively low, is growing.

Marriott, in its ESG reporting, noted that $6 billion worth of proposals by travel buyers required sustainability information, and that $3 billion worth of corporate business contract with Marriott required the provision of carbon and water footprint data in 2019. 60% of IHG’s corporate clients requested sustainability information.

So there seem to be growing reasons for hotel companies to track and report on their ESG achievements.

Reporting around sustainability today is generally framed around the premises agreed upon in the Paris Agreement, where in 2015 195 countries agreed to keep the global average temperature rise below 2°C above pre-industrial levels, with an aspiration to keep it as close to 1.5°C as possible. With its bottom-up approach, the Paris Agreement requested each signatory to submit Nationally Determined Contributions (NDCs) which set out how countries will reduce their emissions in line with the set targets. In the NDCs of 82 countries the tourism industry is mentioned as a priority industry for reducing emissions, although the U.S. and almost all European countries do not.

The Intergovernmental Panel on Climate Change calculated in 2014 that cumulative global emissions (which includes past, present, and future emissions) should remain below 1,000 gigatonnes of carbon. 65% of this ‘carbon budget’ has already been spent, meaning that global emissions will need to be reduced between 40% and 70% by 2050, and to be net zero carbon by 2070, to stay below this cumulative target.

Travel is a considerable contributor to climate change. The UNWTO estimates that travel-related emissions from tourism contribute around 1.6 gigatonnes of CO2 equivalent per year (1.6 billion metric tonnes CO2e), or about 5% of total global emissions. A study by Manfred Lenzen and colleagues (2018), however, found that it could be as high as 4.5 gigatonnes CO2 equivalent. According to Our World in Data, aviation alone accounts for around 2% of global emissions.

Research by UNWTO and UNEP shows that CO2 emissions from the tourism industry are set to grow 161% by 2035, compared to 2005 levels, in a business-as-usual scenario. 2020 has presented a reset of sorts, but there remains a strong expectation that arrival numbers will return to pre-pandemic levels and beyond. Skift Research estimates that international travel levels will be back to pre-pandemic levels by 2024.

Exhibit 1: Travel will likely return to pre-pandemic levels within five years

The accommodation sector plays a significant role at an estimated 21% of total travel emissions. Room capacity and hotel pipelines have registered strong growth over the past decade, adding to the industry’s footprint.

To achieve the Paris Agreement target, research by the International Tourism Partnership (now the Sustainable Hospitality Alliance) found that the hotel industry needs to reduce greenhouse gas emissions per room per year by 66% by 2030, and 90% by 2050 compared to 2010 levels.

Many hotel companies have started reducing their emissions, and now more than ever, as tourism is at a low point, there is an opportunity to reflect on current hotel practices and guest expectations, and make changes where possible.

In this report we set out the environmental credentials of some of the largest hotel operators to provide some much needed comparison between companies and to understand which are best prepared for a net zero carbon future.

The benchmark exercise in this report includes six of the largest hotel companies worldwide: Marriott International, Hilton Hotels, InterContinental Hotels Group, Accor, Hyatt Hotels, and Wyndham Hotels and Resorts. Depending on what metric you use, Choice Hotels also tends to be part of the top hotel company list, but since the company does not release any emissions data or targets, we were unable to include it in our analysis.

Report Parameters and Terminology

There are a few parameters to set out at this point. This report is focusing on the environmental segment of the ESG criteria. We do not focus on philanthropic activities, community commitments, employee engagement and diversity, or human rights.

Within the environmental parameter we further narrow our focus on activities which have warming potential through greenhouse gas emissions only. This narrows the scope of this report to the direct and indirect burning of fossil fuels. Water usage, another key focus for many hotel companies since the average occupied hotel room uses 218 gallons of water per day, is excluded from this report.

Many companies have adopted the Greenhouse Gas Protocol (GHG Protocol), standards put forward by a partnership between the World Resources Institute (WRI) and the Business Council for Sustainable Development (WBCSD).

Per the Greenhouse Gas Protocol, greenhouse gas emissions are divided in three ‘Scopes’:

  • Scope 1: Direct emissions from the activities of the organization including fuel combustion through gas boilers or vehicle emissions. Hotel chains report Scope 1 emissions only for those hotels that are under operational control, which are those that are owned, leased, or managed (OLM) by the company.
  • Scope 2: Indirect emissions from electricity purchased and used by the organization. As with Scope 1, this only includes emissions from hotels under operational control.
  • Scope 3: All other indirect emissions (also referred to as upstream and downstream emissions). For hotel chains all Scope 1 and 2 emissions from franchised hotels are included in this section. Other major contributors to Scope 3 emissions are those emissions from purchased goods, waste, and business travel by employees.
Exhibit 2: GHG Protocol’s scopes and emissions

We focus on all three scopes in this report, although in our data calculations we stick to Scope 1 and 2, unless otherwise specified. One major exception is the Scope 1 and 2 emissions from franchised hotels, which are registered by hotel companies as Scope 3 emissions. Other Scope 3 emissions still see a lack of reporting as they are not compulsory under most protocols, and open to interpretation by each individual company.

The main metric used in this report, and in ESG reporting, is CO2e. There are a number of predominant greenhouse gases, including carbon dioxide (CO2), methane (CH4), nitrous oxides (nominally N2O) and hydro-fluoro carbons (HFC). Each has a different greenhouse warming potential. To be able to compare companies’ emissions from all these greenhouse gases, the industry calculates a single CO2 equivalent (CO2e), which is normally expressed in metric tonnes (MT) per room per year.

In the report we focus on the largest hotel chains. These have the biggest footprint, but also generally the smallest real estate portfolio as a percentage of their total flag reach. Smaller brands tend to be asset heavier, or at least be involved more with managing the hotels, which provides closer control on commitment adherence. The focus of the large companies on asset-light models provides an interesting dynamic, which we will explore more in this report.

Most of the data discussed in this report is from company filings and reports filed with the CDP (formerly known as the Carbon Disclosure Project, a non-profit organization that encourages companies to disclose their environmental impact). Skift Research has made estimates where comparable data was not available.

Environmental Targets by Major Hotel Companies

As mentioned above, to achieve the Paris Agreement target, the hotel industry needs to reduce greenhouse gas emissions per room per year by 66% by 2030, and 90% by 2050 compared to 2010 levels.

The Science Based Targets Initiative (SBTi), a collaboration between CDP, the United Nations, World Wide Fund, and other organizations was established to certify emissions targets set by companies. Targets are certified as “science-based” when they meet the goals of the Paris Agreement.

At the time of writing, IHG, Hilton, and Accor were the hotel companies covered in this report that had set science-based targets. Other hotel companies include NH Hotels, Millennium and Copthorne, Melia Hotels, Las Vegas Sands, and Caesars Entertainment. MGM Resorts committed to the initiative in March 2019, which means that it needs to set science-based targets by the end of March 2021. Hong Kong and Shanghai Hotels (owner of The Peninsula Hotels) has also committed to the program.

While not all companies are committing to the SBTi, still, all six companies have set targets to reduce their emissions as set out in the table below.

Exhibit 3: Emissions targets set by largest hotel companies

Some Companies Exclude Large Parts of Their Portfolios

Hyatt and Wyndham stand out as the two companies that have not included franchised hotels in their emission targets. Hyatt neglects to demand accountability from a quarter of its portfolio, while the impact of this omission is even larger for Wyndham, as the company’s targets only capture 7% of its rooms.

Wyndham owns only two hotels, and manages another estimated 640 hotels. It does not track environmental performance for the estimated 8,515 franchised hotels, and according to its CDP filings has not set any targets for its franchised hotels either. The company notes that it will put targets in place, but hasn’t done so yet because of the “spin-off and our new operations as an independent pure-play hospitality company,” which happened almost three years ago.

Exhibit 4: Wide range of ownership setups among top hotel companies

The other four companies do include targets for their franchised hotels, but in the case of Hilton the target is less stringent than for its owned, leased, and managed (OLM) hotels, and all hotel companies will have to put considerable effort into engaging its franchisees.

Franchisors set brand standards, but there are limits to their control over the activities in these hotels, and the cost of implementing environmental practices and innovations is mostly carried by the franchisee. This means that there is still a feeling of a double standard, with hotel companies more strictly applying targets for their OLM hotels, while “working with franchised owners” to increase franchise participation.

This double standard means that Marriott reports that it only “suggested” energy reduction targets for all franchised hotels for the first time in 2019. Marriott, Hilton, IHG, and Accor all have environmental benchmark products which franchisees are required or requested to use, and in the CDP reports the companies speak of their efforts to increase engagement with these systems and targets.

This two-pronged dynamic is unlikely to change, and the problem might only grow larger as hotels continue to focus on growing the share of franchised properties, unless companies start treating franchisees as they treat OLM properties.

Absolute or Intensity Targets: Which Are Better?

Marriott, Hilton, and Hyatt work with intensity targets, which measure CO2e emissions per room per year. Accor and Wyndham have set absolute emissions targets, while IHG has an intensity and an absolute target. Unlike intensity targets which generally normalize emission reductions relative to square meters, absolute targets set a total emissions amount to be hit at a target year, notwithstanding how large the organization is at that point. Absolute targets effectively take expected room count growth already into consideration in the target.

Both approaches have benefits and drawbacks. Intensity targets make it easier to swiftly compare companies based on square footage, but we would argue that absolute targets are preferred over intensity targets in the case of hotel companies.

This is for the simple fact that we have seen hotel companies aggressively expanding over the past decade. While companies are chasing an asset-light portfolio, the overall room numbers have increased considerably at these companies, especially through mergers and acquisitions. Intensity targets allow hotels to grow, and their emissions with it. As an industry and society, we should strive to reduce absolute emissions, not just relative emissions.

IHG provides a good case study on how intensity targets can be misleading, and why we commend the company for switching to an absolute target moving forward. Between 2016 and 2019 the company had an intensity target to reduce emissions per occupied room, with the successes being reported in its annual reports. However, when looking at absolute emissions, the company continued to emit more CO2e emissions every year during this period. It will now need to drastically reduce emissions to attain its 2030 target.

Exhibit 5: Intensity targets can be misleading

As becomes clear from putting all the different targets in one table, gleaning actual performance from targets, and comparing companies to one another is difficult, as companies use different base years to apply their targets to, and use different metrics to measure their achievements.

Next, instead of targets, we will look to compare actual emissions. This comes with its own issues.

Comparing Hotel Companies’ Emissions

Emissions by Ownership Model

Using CDP filings, we can determine which companies are the largest polluters. Marriott clearly stands out as the top polluter, emitting almost 12 million metric tonnes of CO2e in 2019. Hyatt is the least polluting company at just over two million metric tonnes.

Exhibit 6: Marriott is largest polluting company

Marriott, of course, has a much larger portfolio than Hyatt, which will account at least in part for this discrepancy.

In the CDP reports, hotel companies provide total Scope 1 and 2 emissions, which relate to the OLM rooms, and Scope 1 and 2 emissions for franchised hotels, registered as Scope 3 emissions. Using this data together with room portfolio data, we can calculate the average emissions per room.

Here again is a wide spread in the environmental performance of the different companies, with Marriott registering the highest CO2e emissions per OLM room, and Hyatt the highest emissions per franchised room. Hyatt has the highest emissions per room overall.

In comparison, at almost two-thirds less emissions compared to the highest emitters, Accor is a strong performer in both OLM and franchised room emissions. Wyndham does not provide data for franchised hotel emissions.

Exhibit 7: Average emissions per room by company

We can, however, take this comparison a step further. One of the most important factors is the chain scale of the rooms in each company’s portfolio. A closer comparison can be made when taking this into account.

Using Chain Scales to Establish a Hotel Emissions Benchmark

If we look at the room portfolios of the six players, it is clear that hotels with higher emissions, like Marriott, are reporting on a portfolio which skews towards the higher end.

The OLM room portfolio of Hilton, Hyatt, and Marriott consists almost exclusively of luxury to upscale rooms, where Marriott has the largest concentration of luxury rooms of the three. IHG has a broader mix of OLM rooms, while Accor and Wyndham’s room portfolio skews heavily towards the midscale and economy segments.

All hotel companies have a OLM portfolio which is skewed towards the higher-end when compared to their franchised portfolio. This is particularly pronounced at Hilton, which only owns and manages luxury or upper upscale hotels, but only 19% of its franchised portfolio falls within this selection. At IHG, 80% of its franchised rooms are upper midscale or midscale. In its OLM portfolio this is only 38%, with the majority of owned and managed rooms in the upscale and luxury segment.

This provides an explanation for the major discrepancy between OLM and franchised room emissions as highlighted in the Exhibit 7.

Exhibit 8: Brands with higher-end portfolio have higher emissions per room

In its reporting, IHG provides a further breakdown by brand which highlights that, broadly speaking, higher-end brands have considerably higher emissions than midscale brands.

Exhibit 9: IHG brands largely follow ‘higher standards-higher emissions’ expectation

Overall, InterContinental, Crowne Plaza, and Holiday Inn are the most polluting brands in IHG’s portfolio. Per room, however, the picture looks different.

HUALUXE and Crowne Plaza stand out as highly emitting upscale brands. HUALUXE is the company’s brand focused on the Chinese market, with this geographic positioning seemingly driving underperformance. Crowne Plaza, focused on the business travel market with a strong focus on meeting spaces, also underperforms due to the significant increase in square footage per room.

The Holiday Inn and Holiday Inn Express brands are both categorized as upper midscale brands by industry data provider STR, but there are clear differences in the services provided by each brand. According to IHG’s development brochures, a Holiday Inn Express hotel should have around 563 square feet (52 m2) gross building space per room, while this is 588 square feet (55 m2) for a Holiday Inn, with a greater focus on meeting space. This, plus the fact that Holiday Inn Express hotels tend to be new-build or recently renovated, will account for the differences in emission performance.

Accor, making a distinction between its premium (luxury, upper upscale, and upscale), midscale, and economy brands, shows a similar trend. Its premium hotels emit an average of 6.5 metric tonnes CO2e per room per year. This is 3.9 MT CO2e for the midscale brands, and 2.0 MT CO2e for its economy brands.

Despite a few outliers, then, the greater efficiency of midscale and economy brands is clear. Using this data, we can provide the following chain scale benchmark, which is based on the available data on brand and chain scale emissions from the different companies. We should note that this is a rudimentary exercise, where we are reliant on snippets of available data from a few of the reporting companies, but it should nevertheless provide a guide rail for our analysis.

Exhibit 10: Benchmarked emissions per room show impact of chain scale

The question whether it is right that higher end hotels emit more CO2e per room than mainstream hotels is beyond the scope of this report. We understand the reasons for differences in emissions levels, but would certainly like to see higher-end hotels reduce their emissions far more aggressively. That said, for now we are just setting out the status quo to calculate parameters of expected emissions for each company.

Benchmarking Current Emissions

If we take this benchmark and do a back-of-the envelope analysis based on OLM and franchised room numbers, we can establish benchmark parameters which can be compared with the actual emissions per room as set out above.

This is a rudimentary exercise, but it at least provides a direct comparison of current emission levels.

Firstly, when looking at OLM rooms only, we can see that Wyndham has the largest discrepancy between the benchmarked parameters and actual emissions. Accor is also outside the benchmarked parameters, but at the right, lower end. Hyatt, Marriott, Hilton, and IHG all fall within the benchmark parameters for their OLM rooms.

Exhibit 11: Accor outperforms expectations in its OLM rooms

Secondly, when doing the same exercise with franchised rooms, where we have taken the data about Scope 3 emissions from the CDP reports, we see a different picture. Here, Marriott’s and Hilton’s franchised hotels are both overperforming, registering lower emissions per room than would be expected from our benchmark. Hyatt’s franchised rooms are at the high end of the parameters, while Wyndham does not track franchised emissions at present.

Exhibit 12: Marriott’s and Hilton’s franchised hotels perform strongly

Taking the OLM and franchised rooms together, we have a final picture which highlights Accor as a top performer. The company has also some of the strictest targets and seems currently in the best position to become a carbon neutral hotel company.

Wyndham, where their current emissions are based on OLM rooms only (which, remember, only accounts for 7% of their entire portfolio) seems to have the largest excess in emissions, and has furthest to go to achieving future emission levels in accordance with the Paris Agreement.

All other companies track where we would expect them to track at present, with IHG at the higher end of the parameters, and Marriott, Hilton, and Hyatt all registering emissions at the lower end of the expected range.

Exhibit 13: Accor placed best according to our benchmark

A Note of Caution: Emissions are Self-Reported

All of these comparisons are based on the accuracy of the data provided by the companies themselves, something we cannot check. The optimist would say that Accor is much better than its competition in reducing emissions, but the pessimist might argue that Accor is just worse in tracking all its emissions.

The example of reporting on emissions from waste highlights this issue more clearly. Granted, hotel companies will be better at tracking their Scope 1 and 2 emissions than that of waste (which is a Scope 3 emission and companies are not required to report this yet), but the major differences in the supposed emissions from waste per room show how much of ESG reporting continues to rely on self-reported and self-audited assumptions.

Hilton’s reported emissions from generated waste are 3.5 times greater per room than those of Marriott, and Accor has half the emissions per room of Marriott. Such large discrepancies can clearly not be accounted for by differences in operations or guest behavior. The way the volume of waste is calculated, the scope of inclusion, and which protocols are used to calculate actual emissions from waste determine to a large extent the outcome of this calculation.

Exhibit 14: Are Hilton customers really this much more wasteful?

The waste reporting issue highlights the wider problem with self-reported statistics and basing performance on this. Until a set of legally binding guidelines or a certifying body is established, we are dependent on decisions made by companies on what to report on. The U.S. Securities and Exchange Commission (SEC) for example has come in for criticism as it has so far failed to include ESG into disclosure requirements. At the moment, each company decides independently whether and which ESG criteria it will report on if they believe they are “material” to investors.

Looking Ahead: Are ESG Criteria Good Business?

From reading the CDP reports it is clear that hotel companies are implementing targets and investing in innovations because it makes good business sense, at least for now.

The savings from better ESG performance come from the reduction in mandatory spending on carbon taxes, as well as significant savings through more efficient energy usage.

During the 2018/2019 tax year, for example, Marriott owners spent £1.3 million ($1.8 million) on carbon taxes under the UK CRC Energy Efficiency Scheme. IHG purchased £2.9 million ($4 million) worth of carbon allowances under the same scheme in the 2016/2017 tax year.

The UK has since disbanded its carbon reduction scheme, instead opting to tax companies under the pre-existing Climate Change Levy, but there is a growing impetus around the world to tax companies for their excessive emissions. The $4 million spent by IHG only accounted for its 300 or so hotels in the UK, so the potential of skyrocketing costs if similar schemes were created in other countries is clear.

Savings from operating more energy efficiently are also impressive. Hilton notes that the company has saved $1 billion in cumulative savings since 2008 from operating more sustainably. In 2019, IHG’s entire portfolio saved an estimated $80 million in carbon and energy costs.

Marriott wants 30% of its energy usage to come from renewable sources by 2025. The company believes this can save the company between $13.5 and $26.5 million dollars per year, as it expects energy costs and carbon taxes to increase over the coming years.

One drawback of an asset-light business model is the hotel companies’ reliance on hotel owners to make investments into carbon technologies and innovations. This is why hotel companies publish the success stories of great savings, and why most of the projects adopted have strong returns on investment (ROI) and short payback periods.

In their CDP filings, especially Marriott and Hilton provide a number of interesting projects the company had worked on in 2019, and the expected savings these initiatives will bring. Although it would have been interesting to know, the companies make no mention of the uptake rates of these programs in OLM or franchised properties.

Exhibit 15: Environmental initiatives show strong economic potential

It is important to highlight the high annualized return on investment involved with these schemes. Most investors would be pretty happy with an ROI of 10%, so to have initiatives here that have annualized ROIs of over 50% shows the earning potential of reducing carbon emissions.

We are seeing some steps towards actions which have longer ROIs and require higher upfront investments. In the hotel industry, where at present the main focus of reducing emissions is on its real estate footprint, certifications like LEED are becoming more commonplace. While it’s been around for a few decades, building certification scheme Leadership in Energy and Environmental Design (LEED) forms an increasingly frequent criterion in hotel pipelines. Many hotel companies expect new buildings to be LEED certified.

This is not a cheap undertaking. It is hard to estimate how expensive LEED certification is, but different sources note that construction costs will go up by 1% to 2%, on top of $100,000 to $200,000 in additional costs to attain a LEED Gold certification. According to Marriott, LEED certified hotels save between $38,000 and $57,000 in energy costs per year.

A rough estimate, where we take a newbuild hotel costing $20 million, would spend anywhere between $300,000 and $600,000 on attaining LEED certification. With the savings set out by Marriott in mind, this would effectively have a 10 to 15-year payback period, which is considerably longer than any of the practices set out in Exhibit 15. According to Marriott, 34% of its portfolio has a LEED or equivalent building certification. The company will need to grow this number considerably if it is to continue reducing emissions.

This is where the main stumbling block will lie for hotel companies moving forward. The evidence from the CDP reports tells us that hotel companies are currently focused on schemes with high ROIs, partly because these are the schemes implemented by hotels at great success, and partly because hotel companies need to convince hotel owners to put down the initial investment.

With the hotel companies setting stricter targets, and with the low-hanging fruit quickly disappearing, hotel companies will need to start moving on to initiatives which will require higher upfront investment, or have much poorer ROIs.

This will be a delicate exercise of clear and efficient communication between the hotel companies and their owners. We are interested to see whether ESG criteria will become a more prevalent part of franchise agreements, and whether owners might switch flags if one company provides different criteria or financial support to attain environmental targets.

Main Takeaways

In this report we have attempted to compare the emissions performance of six of the largest hotel companies, setting out the main barriers to cross-comparing performances, and offering some ways to get around this.

From our analysis, Accor stands out as the player which is slightly ahead of its competitors, with lower than benchmarked current emissions, and 2030 and 2050 science-based targets to further reduce emissions to become a carbon neutral company.

Marriott, partially due to its largest portfolio, is by far the largest emitter of greenhouse gas emissions. When taking into account the different sized portfolios Hyatt Hotels is the largest polluter per room, closely followed by Marriott.

Wyndham and Choice Hotels need to up their reporting game. Wyndham has not set targets for the large majority of its portfolio, and underperforms on its owned, leased, and managed rooms. Choice Hotels has no official targets and does not report on its environmental, social and governance (ESG) performance at all, which the company should address.

Here are the main takeaways from our investigation into the emissions performance of the largest hotel companies:

  • ESG targets are increasingly important to investors, employees and guests. Hotel chains are improving the tracking and reporting of their emissions.
  • IHG, Hilton, and Accor have set science-based targets. We would expect that the other companies will follow their lead.
  • The companies effectively track Scope 1 and 2 emissions, but Scope 3 emissions are not fully tracked by most players, and are open to interpretation. From what companies are reporting, Scope 3 emissions are vast, but Hyatt and Wyndham do not track these emissions at all (the only expectation for Hyatt is the emissions from franchises).
  • Wyndham and Hyatt do not have targets for its franchised business. Especially in the case of Wyndham, this includes a major portion of its business. Over the coming years it will become increasingly important for hotel companies to engage with their franchisees. How do hotels engage owners, and who foots the bill for new initiatives?
  • The question whether it is right that higher end hotels emit more CO2e per room than mainstream hotels is beyond the scope of this report. We understand the reasons for differences in emissions levels, but would like to see higher-end hotels reduce their emissions far more aggressively.
  • Emissions are self-reported. Major discrepancies become apparent in the tracking of certain emissions, like waste. It is unlikely that Hilton’s operations generate four times more emissions from waste than those of Marriott. Standards and guidelines need to improve to allow for better cross-comparison between companies.
  • There are enough examples of new initiatives that provide a strong return on investment, but once the “easy” innovations are implemented, how will targets be met?

Notes on Methodology

Most of the data discussed in this report is from company filings and reports filed with the CDP (formerly Carbon Disclosure Project). Skift Research has made estimates where comparable data was not available.

CDP reports were accessed at cdp.net. This report only uses information provided in the Climate Change 2020 reports submitted by the hotel companies.

Accor notes in its CDP filing that it does not include hotels acquired after July 2019 in its reporting. For that reason, we have used its portfolio update for the end of June 2019, instead of the end of year 2019 portfolio. For all other hotel companies, end of 2019 portfolio numbers were used.