Financial Impact of LEED and Energy Star Certifications on Hotel Revenues

Abstract

This study examines the topline performance of a cross-section of hotels in the United States from 2009 to 2013 to test whether eco-labeled (LEED or Energy Star, in particular) properties generated revenue performance premiums over noncertified hotels. In other words, does it pay to acquire these labels? Regressions included regional, class, chain scale, size, and location controls. Custom comparable clusters were also separately tested. Results show that LEED-labeled hotels experience higher average daily rate but lower occupancy rates, resulting in a statistically insignificant difference in RevPAR. Energy Star-labeled buildings consistently showed higher occupancy.

Notes

¹ For example, see Elkington (1997), Simons, Robinson, and Lee (2014).

² Studies are discussed in the following section.

³ For example, Branwell and Lane (1993).

⁴http://www.energystar.gov/buildings/about-us/energy-star-certification

⁵http://www.concretethinker.com/solutions/LEED-Certification.aspx

⁶ REVenue Per Available Room.

⁷ Leadership in Energy and Environmental Design; a green building certification.

⁸ Singh and Houdré (2012).

⁹ Eco-labeled hotels, if any, from the set of comparables were removed.

¹⁰ Smith Travel Research lists geographic region definitions on its website.

¹¹ For example, see Voith and Crone (1988).

¹²e^1.09 = 2.98.

¹³e^1.2 = 3.32.

¹⁴ Detailed findings for each region are available upon request.

¹⁵ See: http://www.ecolabelindex.com/ecolabels/?st = category,tourism. Green Key is Canadian based self-reported and focuses primarily on management techniques; they do state they have a 20% building audit rate. Bio-Hotels has a comparatively small footprint exclusively in Europe and primarily focuses on organic food with some energy requirements such as the use of green energy. Earthcheck, an Australian nonprofit maintains a tourism certification that appears to focus on management. Steinbock has a five-tier “Capricorn” system that is based on operational criteria.