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Hotel Owners Increasingly Looking for Sustainability Accreditation

Sustainability

The five-star Kimpton Bem Budapest, due to open this year in Buda’s historic center, is seeking Leed accreditation.

CEE hotel assets are significantly behind the sector in Western Europe concerning ESG as players in the region still tend to be private investors with less ESG-inclusive strategies. In Budapest, only about 2% of hotels were sustainability accredited at the turn of the year.

An exception to the above trend is Poland, where several leading institutional investors are active in the hotel market and, therefore, require ESG-compliant assets as a central tenet of their acquisition policy, according to real estate consultancy Cushman & Wakefield and law firm CMS in their “Hotel Investment Scene in CEE” report for 2023.

“ESG is becoming a liquidity factor for hotel real estate as it affects the pool of potential buyers and [the] ultimate exit strategy. Accordingly, all owners and investors should consider investing in ESG as it is likely to improve the value of the asset and can generate relatively high returns while helping the planet,” the report comments.

ESG features are crucial for more significant institutional and branded hospitality investments. They not only align with existing corporate values but also attract a more conscientious clientele, driving long-term business. For instance, hotels that cater to multiple market segments can benefit as Mice (meetings, incentives, conferences, and exhibitions) organizers, leisure groups, travel agents, and corporate clients increasingly prefer hotels with strong ESG practices.

Nevertheless, the process will be slower for smaller standalone properties until they begin to prioritize it. ESG legislation is in its infancy in Europe, focusing primarily on larger players; however, it is expected to evolve. The question is whether ESG criteria becomes a chapter in management and rental agreements between hotel owners and operators, says Robert Székely, hospitality and leisure expert at the consultants, Newmark VLK.

Wing says it focusing on sustainability throughout the various market sectors in which it works and is seeking Breeam “In-use” and Access4you accreditation for the Ibis & Tribe hotel component of its Liberty mixed-use project. The developer is aiming for Breeam “In-use” and Access4you at the existing Ibis Styles Budapest Airport and Breeam “Good” at the 167-room Tribe Hotel Budapest Airport, due to open in 2025.

It is targeting Breeam “Very Good” for the Hotel Indigo Budapest Andrássy, due to open in Q2 2028 with 103 guest rooms, and the Holiday Inn Express Vágóhíd, set to open in early 2027 in Pest’s District IX, with 162 guest rooms.

Getting Certified

Several other hotels in Hungary are already certified or going through the process with the U.S.-based Leed (Leadership in Energy and Environmental Design) or U.K.-based Breeam (Building Research Establishment Environmental Assessment Methodology) third-party accreditation systems.

These have already become the norm in the higher strata of the CEE and Hungarian office and industrial sectors. The expectation is that they will also be increasingly utilized in the top level of the CEE hotel markets as operators are increasingly cost-conscious and concerned with energy and materials use. Further to that, ESG issues are impacting the practices of hotel operators, developers and investors.

In Budapest, the five-star Kimpton Bem Budapest, the first Kimpton branded hotel in the region, located in the historic center of Buda and due to open this year, is in the process of obtaining Leed accreditation. Outside of Budapest, the Hilton Garden Debrecen City Center, due to accept its first reservations in October, is doing the same.

Other green certification systems focus on the sustainability of the hotel operation. For example, the InterContinental Hotel Budapest has achieved Green Globe Solutions accreditation. Another IHG hotel, Crowne Plaza Budapest, part of the Westend shopping center, was recently certified by Green Globe for designing and implementing a Sustainability Management Report. In the countryside, the five-star boutique Minaro Hotel Tokaj MGallery, in the UNESCO World Heritage wine-making region, has been awarded Green Globe certification.

Founded in 1992, the sustainability awards system has grown to become the world’s leading certification for the sustainable operation and management of travel and tourism. Based in Los Angeles, California, Green Globe Certification has a network of auditors covering more than 80 countries.

Remaining Relevant

“ESG features are increasingly central to hotel development, but they rarely point further than focusing on environmental sustainability. Adopting green building practices, energy-efficient technologies, and waste management systems is becoming a standard expectation to remain relevant for a wider buyer pool in the future,” concludes Attila Radvánszki, principal director at Horwath HTL Hungary.

Some Hungarian hotels are undergoing Well Certification and Well Health Safety Rating, but these projects remain private until the targeted certification is achieved. Adapted from features in the Well Building Standard that focus on facilities maintenance and operations, the health and safety rating is designed to guide and empower the actions of large and small businesses alike in taking the necessary steps to prioritize the health and safety of their staff, visitors and stakeholders.

It also serves as an annual process that supports efforts to promote people’s long-term health and safety, says Regina Kurucz, an architect and certifications advisor.

“The Well Health & Safety Rating supports implementing Hungarian regulations for a hotel’s facility maintenance, for example, legionella management, regular water quality assessment, cleaning and emergency preparedness,” she explains.

“The rating includes more than 20 features across five action areas. To earn the rating, projects must achieve 15 points across multiple themes: cleaning and sanitization procedures, emergency preparedness programs, health service resources, air and water quality management, stakeholder engagement and communication,” Kurucz adds.

ESG Regulations Impacting Office Markets

As many as 1,255 ESG regulations have been introduced worldwide since 2011, Colliers says in its report “ESG in your Office. A Guide for Tenants.”

“A sustainable development policy in office real estate also means keeping existing buildings and rental space in the best possible conditions. It is also important to create optimal conditions for occupants. These goals should be pursued using available resources and materials sourced with the least possible harm to the environment and people, with a balance between cost and effect achieved. It is worth remembering that changes can be made in buildings of all ages,” the report says.

Even small changes in office space can make it easier to implement sustainable policies such as water efficiency, lowering water consumption, waste management efficiency and impact employee comfort, health and wellbeing, says Colliers.

This article was first published in the Budapest Business Journal print issue of June 28, 2024.

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