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New Hotel Accounting Metrics Designed To Benchmark Sustainability Efforts

Energy, Water and Waste a Focus of 12th Edition of Uniform System of Accounts for the Lodging Industry

By Bryan Wroten Hotel News Now December 7, 2021 | 9:22 AM

In a move to help hoteliers with sustainability efforts, a global committee is working on a way to help them better track their carbon footprint and enact metrics for use industrywide.

The Global Finance Committee, a co-sponsored committee created by the American Hotel & Lodging Association and Hospitality Financial and Technology professionals, has worked with the AHLA’s Sustainability Committee to create a new way to track, and eventually benchmark, hotel sustainability efforts.

As part of the upcoming 12th edition of the Uniform System of Accounts for the Lodging Industry, the Energy, Water and Waste section will break down and track hotels’ energy and water usage as well as waste production.

The new section of USALI will build on the Utilities Schedule 9 portion of the 11th edition of USALI, said Ralph Miller, committee member and president of Inntegrated Hospitality Management. The previous edition laid the groundwork for the EWW by creating operating metrics that would capture consumption data that the industry hadn’t tracked before.

“Now, some eight years later, we’re going to start using some of that consumption data in order to have a clearer picture of some of our use and broaden that so that we can classify that use better, whether its renewable or nonrenewable or any of the other classifications,” he said.

The Global Finance Committee includes major hotel brands, publicly traded and private owners, and academics, said Raymond Martz, committee co-chair and executive vice president and chief financial officer at Pebblebrook Hotel Trust. The committee includes international organizations, so there is a broad representation of the different stakeholders in the hotel industry.

When establishing sustainability metrics, the committee aimss to provide tools to individual owners who don’t necessarily have the resources of a global brand to allow them to track their energy, water and waste usage, he said.

The goal is to put forth a broad and detailed set of benchmark standards and metrics that every hotel can follow, similar to how the industry tracks occupancy, average daily rate and revenue per available room, he said.

This is the first time the hotel industry will have financial accounting to record these specific expenses and help guide decision-making, said Agnes DeFranco, committee member and professor at the University of Houston.

Many state and city governments already require similar reporting, so creating a standard for reporting these metrics helps the whole industry, Martz said. Many guests are also asking for hotels to track their carbon footprints. While hotels may have recycled in the past just to check that box, now guests want to see the data.

Many U.S. and European companies are focusing more on environmental, sustainability and governance issues when they book travel, Martz said. Google is starting to eliminate some of their daily flights and having employees stay multiple days instead of flying back the same day to reduce the carbon footprint.

Requests for proposals for meeting spaces and room contracts are increasingly asking questions about environmental responsibility, Miller said. Beyond their role as a regulator, governments are hotel customers, as well.

“All the governments are asking for this data when they’re making buying decisions,” he said. Changes to ReportingMany of the energy, water and waste metrics weren’t tracked before, Martz said. Waste, for instance, was buried in property operations and maintenance. One of the big changes is breaking waste out of that section and moving it into the EWW section.

“It allows the managers and owners to really think about this more,” he said. “Are you recycling? What type of recycling are you doing? Are you using single-use plastics in your room that contribute to greenhouse gases? Can you use it differently?”

The ability to track this also means owners and operators can see how their metrics compare to everyone else in their peer group, allowing them to flag areas that aren’t meeting standards, he said. That creates the opportunity for them to see what others are doing differently so they can improve their operations.

“We're providing the tools so they can actually monitor it,” he said. “Previously there were no tools for any owners and operators to track.”

The new process not only breaks out items like waste, it expands them into further detail, DeFranco said. Waste now turns into landfill or incinerator waste, recycled waste, composted waste and other diverted. Similarly, the EWW goes into more detail on water and sewer use, as well as electricity, different types of fuels, renewable energy and vehicle fuels.

“We're trying to make sure that we include everything,” she said.

It may not be applicable to all the different hotel types right now, but hoteliers will get more used to the reporting process in the future, she said.

“It’s going to move slowly but surely into more of this granular reporting to really serve the industry better,” she said. The Path ForwardThe committee has issued an exposure draft to industry stakeholder groups that expressed interest in reviewing changes to the USALI and are providing feedback and comments, Miller said. As the committee works on that, it’s also preparing a webinar through HFTP and AHLA on Dec. 10 to spread the word about the EWW reporting.

Once the 12th edition of the USALI is published, HFTP will sponsor a number of education sessions to go over updates and changes made throughout the entire edition, he said. The EWW is one of the more significant changes, so it will receive a fair amount of attention.

Given that the big hotel brand companies were involved, the brands will be sharing information about the changes through their organizations, Miller said. Ownership groups will do the same.

“There's a number of doors in the path to provide education on the changes,” Miller said.

As the committee receives feedback from the industry, it may modify or clarify the changes it has made to create the EWW, Martz said. The feedback is coming from brands, ownership associations and asset managers around the world.

The goal is to publish the 12th edition of the USALI in 2022 with the adoption of EWW likely by 2024 to give everyone time, he said.

It will take time for the creation of any industry standards from EWW reporting, Miller said. It’s going to be about five years before there’s enough information in the database to determine what an industry standard is for the different types of hotels.

“The spectrum in the industry is very wide, and so it'll take a bit in order to be able to establish the benchmarks by brand, class or by groupings of hotels or however they're classified,” he said.

Once the USALI proposition is accomplished, hospitality programs at universities can integrate it into their curriculum, DeFranco said. This will teach students how to look at the data, how to analyze it and then make the right decisions. The University of Houston is hiring new faculty that will focus on ESG in hospitality, and other universities may do the same.

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