For some hotels, green is the colour of bigger profit

This story first appeared in DNA Money edition on Monday, January 7, 2013.

Efficient eco-friendly practices have meant two Mumbai hotels – Meluha and Rodas, both located in Powai – save Rs1 crore and Rs29 lakh every year, respectively. Both are Ecotel-certified, a breed that’s increasing these days.

Ecotel is an environment certification administered by HVS, a hospitality-focused consulting and advisory firm. HVS claims Ecotel helps hotels enhance profits. By integrating efficient equipment and operating measures into standard business practices, Ecotel hotels enjoy reduced consumption of resources like energy and water; emissions and wastes, too, are lower.

Besides, some waste material is converted into wealth in the form of biogas. Despite initial costs, alternative energy resources like solar and windmills are encouraged. All this enhances overall performance, boosting both revenues and operations, says HVS.

Ecotel involves the entire value chain: owners, architects, operators, employees, suppliers and hotel guests. It even encompasses development of the local community. Hotels can apply for Ecotel at any stage of development, not just during construction.

Ecotel’s cost is Rs5 lakh, valid for two years. Later, hotels are re-certified (some for over ten years), provided they meet Ecotel standards and clear the property audit.

Ecotel, initially viewed as a mere marketing and branding exercise, has started gaining traction among hotel owners as the boost to profitability becomes clearer. “Fiscal benefits of operating sustainable hotels is becoming more and more known to the industry,” said Manav Thadani, chairman, HVS India.

The three upcoming Ecotel hotels will be operated under the Fern brand managed by Concept Hospitality, Asia’s largest operator of Ecotel-certified hotels.

According to Param Kannampilly, CMD of Concept, hotel asset owners are keen on Ecotel as it makes them stand out from the crowd. “Since the conversation on the environment has increased manifold, an increasing number of people want a differentiated product and want to do the right thing.”

What’s more, Ecotel norms increase the per-room cost by 10-15% at the most — something clients don’t mind paying. “A guest selects the hotel based on location and then brand. If an Ecotel hotel is in their location and if that facility and service quality are comparable, then most guests would opt to stay in an Ecotel hotel rather than a non-Ecotel hotel,” said Kannampilly. “At three years, the return on investment is much faster than non-Ecotel hotels.”

All the same, higher initial cost has kept the industry from adopting Ecotel, say experts. Vikram Vithal Kamat, executive director of Kamat Hotels, said building an Ecotel hotel is slightly expensive (10-12% higher) as there are restrictions on using certain types of building materials and refraining from using cheaper alternatives. “But while the capital outflow is on the higher side, asset owners tend to recover the cost faster because long-term maintenance cost is significantly minimised.”

Besides higher initial cost, increased construction cost, lack of knowledge on how to run an Ecotel hotel, lack of guidance on how to ace the intense scrutiny that precedes Ecotel certification are other reasons why hotel asset owners shied away from adopting Ecotel, industry observers said.