News Brief

LEED Helps Hotels Book Quickly and Charge More

Continuing its series of investigations into the outcomes of greening hotels, Cornell finds LEED hotels benefit from higher revenues.

Hotel Revenue Boost from LEED Certification

Revenue per available room (RevPAR) figures show LEED-certified hotels quickly make up for lower occupancy rates prior to certification and continue to outpace their competitors.

Credit: The Cornell Center for Hospitality Research
Contrary to an earlier study on consumer behavior suggesting that sustainability certifications do not increase booking revenues, a second Cornell report identifies the opposite trend by directly analyzing financial performance and narrowing its study sample to LEED-certified hotels.

The Impact of LEED Certification on Hotel Performance” compares the booking and occupancy rates of 93 LEED-certified hotels (the total number of hotels that had been certified by 2012) to 514 comparable competitors based on revenue data tracked by the firm STR. The researchers found that even though LEED-certified hotels are likely to either be new or have recently undergone renovation, they quickly attract clientele and typically match competitors’ occupancy levels within a year of certification. After two years, they still have an average daily rate $20 higher than that of non-LEED hotels. Longer-term studies are needed to determine if that revenue boost continues past year two and to be sure the higher rates are not simply a consequence of the hotels being new, researchers say.

The study differs from a previous examination that found hotels marketed on Travelocity as “eco-certified” achieved booking rates that were on average no better than their competitors’. “That showed customers are not willing to pay more just for sustainability,” according to Rohit Verma, Ph.D, who was a co-author on both studies, but the more recent study shows that the LEED subset of those hotels still benefits from significantly higher financial performance.

Taken together, the two reports suggest that the LEED label itself might not matter to customers but that the design strategies used to achieve certification make the hotels more attractive and thus more lucrative for owners. Along these lines, another study in which Verma participated found guests who stayed in hotels certified to ISO 14001 (a standard for environmental management systems) consistently reported higher satisfaction ratings.

Published October 6, 2014

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