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Friday, October 4, 2024

Charting a New Course in Hospitality: The ESG Impact

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The theme for the Future Hospitality Summit – FHS World 2024, taking place from 30 September – 02 October at Madinat Jumeirah in Dubai is Invest in Our Future’. The conference programme will comprise numerous content tracks under the main theme including Investment & Developmen;, Destination & Urban Development; People, Planet, Profit; Tech & Innovation; and Real Estate Hotelisation. In the lead up to the event we asked several industry partners about how they’re investing in the future in 2024 and beyond.

In an age where the well-being of people and the planet takes center stage, Environmental, Social, and Governance (ESG) principles stand as a vital framework for the necessary transformation ahead. Although ESG has gained significant traction across various industries, its impact on the hospitality sector is particularly significant.

Beyond the industry’s 1% contribution to global carbon emissions, the opportunity for meaningful change is immense. As an industry deeply intertwined with both our environment and the communities we serve, we face today a pivotal opportunity to redefine sustainability practices, blending innovation with genuine community impact.

As stakeholders—from guests to investors—demand greater transparency and accountability, integrating ESG principles has become both a regulatory necessity and a strategic advantage. Looking ahead to 2024, international tourist arrivals are projected to rise by 17.23%, reaching approximately 1.53 billion. This growth will boost tourism’s GDP contribution to 10.6% and generate an estimated revenue of $9.4 billion. Embracing ESG principles will be crucial in meeting these rising expectations, ensuring a sustainable future for hospitality, and establishing it as a leader in responsible business practices.

The ESG Advantage

Hotels and resorts use significant energy and water, generate waste, and contribute to greenhouse gas emissions.

Adopting ESG principles offers multiple benefits. Customers increasingly support businesses committed to sustainability and ethical practices, with 66% of global consumers willing to pay more for responsible services. This commitment enhances brand reputation, increases customer loyalty, and creates a competitive edge. The same goes for talent acquisition and retention. Among employees, 70% of millennials prioritize socially and environmentally responsible companies in their job choices.

Investors also value robust ESG practices as indicators of effective management and long-term growth, leading to better investment opportunities and potentially lower financing costs.

Integrating these principles into hospitality operations requires a strategic and holistic approach. Starting with thorough assessments to identify areas for improvement and set specific, measurable goals for sustainability, social responsibility, and governance. Initiatives include implementing energy-efficient technologies, reducing waste, and sourcing materials responsibly. Additionally, promoting workplace diversity and inclusivity, engaging in fair trade practices, and supporting local communities reflect the social aspect of ESG.

Effective leadership is crucial for this process. By establishing a clear vision and embedding ESG values into the organization’s culture, leaders can drive the adoption of sustainable practices. Providing resources, facilitating regular training, ensuring transparent communication, and rewarding achievements further reinforce the commitment to ESG, ensuring that it becomes an integral part of the business’s DNA.

ESG Success Stories in Saudi Hospitality

Saudi Arabia’s Travel & Tourism sector is growing rapidly, reflecting the Kingdom’s ambition to become a global tourism hub. Last year, the sector grew by over 32%, contributing a record USD 118.4 billion to the GDP and representing 11.5% of the national economy. This highlights the sector’s growing importance in Saudi Arabia’s economic landscape and the need for robust ESG practices.

Major ESG strategies are already in place in Saudi Arabia, driven by the national blueprint for sustainability and socioeconomic progress. Giga projects like Red Sea Global align with all 17 Sustainable Development Goals. The company announced the world’s first zero-emissions 5G network in its The Red Sea regenerative tourism destination. Meanwhile, NEOM aims to develop a 100% sustainable tourism sector utilizing clean energy through wind, solar, and hydrogen. In addition, social progress includes legal requirements for equal pay and increasing women’s workforce participation to 33%, meeting Saudi Vision 2030 targets.

Besides greenfield ecotourism projects, existing hotels across the Kingdom are upping their responsibility commitments and practices. Marriott Riyadh DQ showcases advanced ESG practices within Saudi Arabia’s hospitality sector. It is the first hotel in the Kingdom to achieve LEED Gold certification, featuring a solar energy system with 1,788 panels that supply 20% of its energy needs. The hotel’s wastewater treatment technology reduces wastewater by 20%, and its design maximizes natural light to minimize reliance on artificial lighting. Additionally, it uses recycled wood for furniture and fixtures and supports local biodiversity with 6,473 species of native flora and fauna on its grounds.

In parallel with climate action, many hotels are embedding a sustainability culture throughout their organizations. They are engaging with local communities, supporting cultural preservation, enhancing local content, and ensuring fair labor practices. For nearly a decade, Athar, the CSR arm of Taiba Investment, has embedded corporate responsibility into its business strategy, focusing on the environment, capacity building, and community support.

Likewise, transparent governance with regular audits ensures high ethical standards and accountability across the industry. These initiatives are already demonstrating the positive impact of ESG integration in a rapidly growing sector.

Driving Sustainable Growth

The importance of ESG in the hospitality industry is clear. Adopting sustainable practices, focusing on social responsibility, and ensuring strong governance are essential for securing a prosperous and ethical future, build customer loyalty, and drive long-term success.

As the industry evolves, leaders must integrate ESG into their business strategies and operations. By setting an example and prioritizing sustainability, we can be better positioned to meet the expectations of a conscientious market and drive meaningful, lasting positive change.

Anne Bleeker
In2 Consulting
+971 56 603 0886
The Bench

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