​The importance of responsible design in the Hospitality sector

At the end of March 2022, PlaceTech (an online publisher that specialises in Property & Technology) and Mills & Reeve (a UK law firm), hosted a roundtable discussion to explore sustainability in hotel development in the current market. Chapman Taylor’s UK Director Michael Swiszczowski joined the panel alongside hotel developers, funders, advisers and designers from organisations including Savills, Turley, Willmott Dixon and RHC.

You can watch the full roundtable discussion here.

What are the big issues facing the industry?

Green loans

Andy King, Mills & Reeve senior real estate finance lawyer, said, “Hotel operators are starting to consider the ways they can make their hotels more sustainable. Sustainability Loans are now available, where the loan margin decreases or increases depending on the borrower’s sustainability targets. There are also green loans linked to a specific green project such as a workplace that uses renewable energy”.

Tom Cunningham, Savills director of hotel capital markets, added, “Some of the big hotel groups have green loans in place already. The Edwardian in London took a £175m green loan. For all the big hotel companies it's front and centre of their criteria at the moment”.

New legislation

Jonathan Conway, Hotel Land & Development director, explained, “When new legislation inevitably is introduced, it will hit developers & operators. Unless you make or develop a sustainable hotel, your valuation is going to be hit. It’s going to come down not just to the cost, but also to the end value. The legislation could be rendered retrospectively, too”.

New processes

Jo Davies, Mills & Reeve partner, said that she feels optimistic as the demand for increased sustainability seems to be coming from all angles – lenders, investors and driven by customers. It’s something that is being factored into early-stage due diligence, not just being paid lip service. In addition, it’s “sustainability on the environmental side, but also in terms of social value and governance. It’s becoming a feature of credit committee and it’s also a part of investment committee decision making”.

Michael Swiszczowski agreed that early-stage planning is essential. “As masterplanners, as well as architects, the biggest place we can bring the savings are in the original masterplan, the orientation of the building and the general principles of how you design into the urban fabric”. He added that a significant saving on Operational carbon could be achieved from the well-placed orientation of a building on the site.”

A learning curve for clients

Paul Unger, the editor of PlaceTech and chair, suggested that the whole industry needs to learn about different materials, energy monitoring and re-skill.

Caroline Hanratty, Mills & Reeve's real estate partner, agrees that “there is a real issue with the knowledge gap. Clients have said to me that within planning teams at local authorities they lack the knowledge about the carbon embodiment of the products”.

Tom Cunningham, Savills director of hotel capital markets, gave the example of ‘Savills Earth’, a scheme where 100+ employees are sustainability experts, with the remit to tech others in-house.

Fiona Lomas-Holt, Turley's associate director of sustainability, shared that some clients are moving faster than others. Some want to carry out a whole life-carbon assessment and circular economy statements.

Choice of materials

Daniel Redmond, Adapt Property Group director, suggested that the aspirations of the developer need to be built in from day one, so there is no shock later down the line, not just at the main contractor level but down to the product delivery. “What are the products and what is the impact of that cost on the design?”

Fiona Lomas-Holt shared that “we’re seeing a lot more refurbishment, and that has a huge cost saving to the developer and it’s a huge carbon-saving”.

Chris Yates, director at Willmott Dixon, says that the use of plasterboard on site can lead to more than 50% wastage. One opportunity for hotels to address this is by looking at standardisation.

Michael Swiszczowski added, “One of the real plus-points for hospitality is that we’re working with brands who get it, already, from a sustainable point of view. We’re working with developers who are already closely linked to the operations side because they need to be in order to make a hotel successful. We are actually in a privileged position in the hotel sector because we understand the relationship between capital expenditure and operational expenditure so well, and big brands are really on board with these methods, because they have a brand-standard product”.

Ros Roche, RHC director, agrees: “We do work to a brand standard, and we know what is going to be delivered with these hotels. These brands have large teams who are working on this constantly to try and make everything as efficient as they possibly can. With a developer hat on, you’ve got to make sure that the project is actually deliverable. If it isn’t viable, you haven’t got a project”.

The future

At the end of the roundtable, the chair asked the participants what is on the horizon in 5 years. The answers included:

• Green loans will become the norm
• There will be a more joined-up approach to achieving net-zero between investors, developers and hotel operators, with green metrics embedded from the outset
• There will be more frequent and robust assessments of the sustainability performance of a building
• Customers will become more sophisticated. The younger people for whom sustainability is now a priority will have more money in their pockets and the ability to make choices that the industry will have to respond to.

Chapman Taylor is currently working with several clients in the hospitality sector. Do get in touch if you have a project in the pipeline that you’d like to discuss with us.