In recessionary times, is there enough customer demand to make green initiatives sustainable? Andrew Donoghue searches for some answers.
“Building a reputation as a responsible business can set you apart from the competition as more and more customers look to do business with more ‘ethical’ companies.” Graeme Crossley, Brand Reputation
Installing an exercise bike connected to a generator in a hotel foyer so guests can pedal for their supper is one way to put green policies into action. But while this recent experiment at the Crowne Plaza Hotel Copenhagen Towers shows that guests are happy to expend energy to save the planet, there is still uncertainty about how far this commitment extends in fiscal terms.
Amid an unsteady economic recovery, and concerns over a potential double-dip recession, the hospitality sector along with other industries are looking for evidence that investment in sustainability makes business sense. Ultimately, everyone wants to know just how much customers care.
Finding an answer is not easy, though that hasn’t stopped plenty of organisations from trying. Consumer research specialists, such as Mintel and Ipsos Mori, have carried out numerous studies to track green spending, and the markets attempt to measure the financial performance of companies that meet corporate social responsibility (CSR) standards with the FTSE4Good Index and the Dow Jones Sustainability Index (DJSI).
A late-2008 survey from the Market Metrix Hospitality Index revealed that a company’s CSR programme is only important to those who can afford it. “‘Eco-friendly’ or ‘green’ initiatives are most compelling to luxury hotel guests with 20% of such travellers claiming these programmes are ‘very important’ when selecting a hotel,” the researchers stated. Conversely, only 9% of guests in the mid to lower end of the market were concerned by how green the establishment was.
The concept that green is only affordable for those with cash to spare is not confined to the hospitality sector. A survey published in October 2009 by research specialist Mintel revealed that one in five consumers were not prepared to pay more for sustainability. “Our research shows that in the recession fewer people are prepared to pay more for environmentally friendly products, suggesting that for most people being greener is a ‘nice to do’ rather than a ‘need to do’ aspect of their lifestyles,” said Mintel senior retail analyst Richard Caines at the time.
Although economic conditions may have improved since last year, concerns about the unstable recovery may mean that Mintel’s findings still hold true. And it is not only in Britain where consumers are being forced to keep their principles in-line with their wallets. Another Mintel survey carried out last year revealed that around 54% of consumers would have bought more green products if they were cheaper. “People’s priorities have changed because of economic hardship,” said Mintel senior research analyst Marcia Mogelonsky. “A substantial number of shoppers are now struggling just to provide the basics for their families, so green living is no longer top of the mind for many Americans.”
Spokesperson for Marriott International, Dasha Ross, agrees that price is still a significant factor in consumer buying behaviour, but adds that there are ways to provide guests with a “green” experience without raising prices. These include one of the group’s recent initiatives, which asked 40 of its top suppliers to provide more sustainable equivalents of existing products at the same price. “The majority of travellers are not willing to pay extra at this time,” she explains. “But many of the environmental changes that we provide are cost neutral and therefore do not add any additional cost for the consumer.”
While research conducted during the depths of the recession painted a pretty bleak picture of green spending, there are some signs that the situation could be improving. A study of US consumers by Mintel conducted in March this year showed that 35% of respondents would pay more for environmentally friendly products with 48% saying they were buying as much or more organic food as before the recession.
Research from Market Metrix has shown that this willingness to spend more for green services also applies to the hotel sector. “Overall, guests who rank a hotel’s green programmes highly are willing to pay at least 7% more for their room compared to other guests,” the researchers stated. The survey also revealed other benefits for hotels with highly ranked environmental and social programmes—they have half as many guest complaints.
As tough as economic conditions have been—and continue to be for many—some experts believe that concepts of sustainability and of behaving environmentally and socially responsibly are more than a passing fad. A study in January 2009 by the Hartman Group, Sustainability: The Rise of Consumer Responsibility, stated that consumers won’t easily give up on environmental concerns even if they feel financially pressured. “Many of the core beliefs and aspirations surrounding sustainability behaviours represent personal journeys for consumers,” the report concluded. “These philosophically and objectively driven travels are quickly becoming a broadly focused expectation to find such qualities reflected in the stores, employees, brands and products they buy, interact with and use on an everyday basis.”
Jenny Dawkins, research director at Ipsos Mori, agrees that environmental commitments run deep. “Environmental concerns have not dropped off the consumer agenda altogether,” she says. “They still have high expectations of companies on responsibility and ideally want to see them taking care of environmental concerns on behalf of the customer, as part of their core service.”
This commitment to green beliefs is more than a theory, according to David Jerome, senior vice-president of corporate social responsibility at InterContinental Hotels Group (IHG). “We know from our in-depth consumer research that corporate responsibility influences buying decisions,” he says. “A recent survey of 6,000 of our Priority Club Rewards members highlighted that 38% of our guests choose hotels based on their environmental credentials. We believe that in the future our guests will not only want, but expect, hotel companies to run their operations with environmental principles at the core, without compromising on their guest experience.”
Other industries are also wrestling with the conundrums of the green spending debate. However, evidence from the retail industry suggests a strong belief that consumers want sustainable products, with areas such as organic food, ethically-sourced beauty products and even environmentally friendly cleaning products continuing to defy the downturn. UK supermarket giant Tesco recently launched a solar energy service, while the Co-operative Group has introduced an environmentally friendly shopping basket made from 100% recycled plastic.
According to the Co-operative Group’s Ethical Consumerism Report released in December 2009, spending on sustainable products and services increased by 5% despite the recession. The study reports that each UK household spends on average £251 per annum on green items. Products and services, such as energy-efficient appliances, green energy and carbon offsetting, have become a market worth more than £6bn per year in the UK alone.
In the US, retail giant Walmart has also seen a strong demand for its green products. It claims to have sold more than 260m energy-saving compact fluorescent light bulbs since 2006, for instance, saying that the key to stong demand was to highlight to customers the economic benefits (savings) as well as the environmental ones. “We in retail can serve as a trusted institution. We can empower individuals to make smarter buying decisions,” explains Walmart’s executive vice-president of corporate affairs and government relations Leslie Dach. “We can partner with our suppliers to drive innovation. And, we can have a dramatic impact on the environment.”
While green spending has increased, it still only accounts for less than 1% of total household expenditure. The Co-operative Bank’s chief operating officer, Tim Franklin, believes that government support for green products and services is vital to boost their uptake. “The leadership of ethical consumers and the innovation of business work best when backed up by thoughtful government intervention. This has happened with white goods, boilers and lightbulbs, where inefficient laggards have been phased out,” he says. “We now need to see such initiatives in a raft of new areas, such as transport and electronic goods.”
It seems that there is still a healthy green market to tap into, but keeping on track with environmental initiatives is still a concern for business in the current economic climate. The advice from marketing experts, however, is that companies considering abandoning green plans over cost concerns really don’t understand the dynamics.
“I’ve heard many stories from within the hospitality sector of businesses struggling to continue with eco-initiatives or sustainability programmes as their ‘focus must now be on the immediate needs of the business’ and it is then that I realise how poorly the potential of CSR is really understood in this sector,” says Graeme Crossley, chief executive of brand communication agency Brand Reputation. “It’s very worrying and many could see themselves in serious financial difficulty this year which could have easily been prevented.”
Tough and competitive times are exactly where differentiators such as environmental focus really count according to Crossley. “Building a reputation as a responsible business can set you apart from the competition as more and more customers look to do business with more ‘ethical’ companies,” he says.
Becky Willan, director of sustainability specialist agency Given London, says that consumers’ trust, respect and loyalty in brands have dropped significantly. “An inflated brand image does not sell your product or service any more as people are starting to see through the hype,” says Willan. “Consumers are looking for something more, something with tangible value that has a positive impact on them personally. Hotels should be improving the whole experience for guests, whether it’s offering locally sourced produce or inviting them to get involved in local wildlife or cultural initiatives. It’s about getting hotels to think about what they do already and look at how they can create more value for guests on a personal level.”
So while the recession and unstable recovery has certainly put the emphasis back on cost for many consumers, evidence also suggests that a genuine commitment to the environment is also deeply entrenched in society. Quantifying how these two pressures will impact on green spending requires credible and comparable research that should be as much a priority for companies catering to this market as developing the products and services themselves. As any good hotelier knows, customer satisfaction is not only about giving the customer what they want when they want it but crucially anticipating those needs before they arise.
Reprinted with permission from Green Hotelier.
This article is quoted from the Sustainable Travel International (STI) Newsletter published August 2010 by STI.
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