We believe that being active stewards of our environment and our communities makes good business sense. Through EarthView, Hersha is able to drive incremental value by implementing efficiency initiatives with measureable returns. This approach creates value via expense reduction in the short term and increased real estate valuation in the long-term. Initiatives implemented as part of EarthView’s comprehensive program have, to date, achieved net savings of $9.1 million.
Our sustainability commitment has been recognized by the National Association of Real Estate Investment Trusts (NAREIT). EarthView has repeatedly been awarded the prestigious “Leader in the Light” award amongst Lodging & Resort companies for superior portfolio-wide energy use practices and sustainability initiatives. In 2017, Hersha also participated in the Global Real Estate Sustainability Benchmark (GRESB) for the sixth consecutive year, and ranked in the top 4% of GRESB participants globally.
Our recently completed capital recycling campaign, in which we sold over $850 million of hotels, presented opportunities to reap the rewards of Net Operating Income (NOI) improvements driven from sustainability initiatives. Additionally, the ability to integrate value-add opportunities into newly acquired hotels contributes to our competitive advantage and acts as one of our levers to continue driving our industry leading EBITDA margins.
Utilities are one of the largest controllable operating expenses at our hotels. By implementing measures that increase efficiency in energy and water, hotels can increase their margins and drive strong NOI, leading to increased valuation. For example, by installing guestroom energy management systems, we can reduce heating and cooling costs in our guestrooms by 25-30%.
At Hersha, EarthView is integrated across the company as part of our overall business strategy. Senior leadership takes an active role in ensuring we are meeting our company’s impact objectives, executing on savings opportunities, and sharing our accomplishments and lessons learned to help drive the industry forward.
Hotels that reduce their reliance on natural resources by increasing their energy efficiency, conserving water, or purchasing products with recyclable content are less susceptible to the effects of resource shortages and price volatility.
According to the National Aeronautics and Space Administration (NASA), the five warmest years on record all happened since 2010. Changes in the planet’s climate have the potential to impact our business as well as the communities in which our hotels operate. Furthermore, resources that we use to heat our hotels, light our lobbies, and fill our pools are essential to our everyday operations. Therefore, it is prudent that we act not only as responsible stewards of the environment, but also are proactive regarding potential future risks to our hotels and communities as we continue to grow our business.
According to the World Travel and Tourism Council, in 2017 the travel and tourism industry accounted for 6.5% of total exports, one in ten jobs globally, and 10.4% of the world’s GDP. Our position as leaders in our industry means we recognize the importance of fostering open dialogue with our stakeholders about our sustainability practices and highlighting areas of improvement.
We recognize that moving the industry forward can only be accomplished with the commitment and collaboration of key stakeholders. As part of our ongoing partnership with NAREIT, we have the opportunity to connect with many of our peers from leading REITs across the U.S. and around the world. This past year, we hosted a meeting at our Pan Pacific Hotel in Seattle for our fellow sustainability leaders to discuss best practices and identify opportunities for future collaboration within the industry.
Additionally, working with local city governments and business partners helps create meaningful impact for our local communities. As changes in our climate become more prevalent, so do regulations in many of our core markets. Through EarthView, we are able to comply with evolving energy, water, and waste regulations, as well as help mitigate risk as active partners in the cities where we do business.
Pictured: NAREIT’s Sustainability Committee at the Pan Pacific Hotel
We have partnered with the City of Philadelphia’s “2030 Districts” program, a collaboration of property owners, local governments, and utilities to achieve reductions in energy and water usage, and transportation emissions by the year 2030.
In recent years, we have seen a notable increase in sustainability interest and awareness from our stakeholders – including our management of key environmental, social, and governance (ESG) topics. Increasingly, shareholders are interested in these metrics as they either align with shareholders’ own values or are indicators of short and long-term growth. As Hersha has an advanced sustainability program, we are in a prime position to provide data on ESG metrics to interested stakeholders. This is an evolving field in sustainability and we are paying close attention to the frameworks that stakeholders are using.