Hospitality Industry
3 min read

Sustainable actions in hospitality: A driver for competitive advantage

Dr Steffen Raub
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With the cumulative effects of the Covid pandemic, the worldwide economic downturn, war scenarios, inflation and an ultra-tight labor market, hospitality firms are currently going through rough times. As a result of widespread belt-tightening and firefighting, the enthusiasm for future-oriented initiatives like sustainability is, understandably, rather limited. How and why bring sustainable actions in hospitality more center stage?

Sustainability – A change in perspective

The knee jerk reaction of many hoteliers to the topic of sustainability is likely to include statements like “I’d love to, but I can’t afford it …”, “We don’t have the bandwidth…” or “Of all industries, why should hospitality pay to save the planet…?”

We suggest a change in perspective. Could sustainability not be seen as a win-win? Could it be that there is untapped potential in sustainability that progressive hospitality firms may be able to uncover? What if engagement in sustainability would not only help the planet and society-at-large but also the competitive position of a hotel?

The strategic management guru Michael Porter, of Harvard Business School fame, suggests that strategies for competitive advantage can take different forms.

Cost leadership strategies focus on reducing the cost for the production of goods and services, allowing the firm to gain competitive advantage by offering a similar product or service at a lower price compared to its competitors.

Differentiation strategies, on the other hand, focus on adding features to the product or service that competitors cannot offer, thereby offering the potential to command higher margins stemming from the products’ or services’ uniqueness in the marketplace.

Using this well-known framework, the question we asked ourselves was twofold: First, can sustainability help create competitive advantage? And, second, which specific sustainability actions are likely to contribute to either a cost leadership or a differentiation strategy for hospitality firms?

 

The hotel industry’s viewpoint

In order to find out where hoteliers perceive the greatest potential for competitive advantage through sustainability we did the obvious thing: we asked them! Having included a total of more than 200 hotels from France and the French-speaking parts of Switzerland in our sampling process we received responses from 60 hoteliers. Respondents were mostly GM’s or management team members in charge of sustainability.

We asked them to evaluate a list of 30 sustainability actions identified in a previous project in terms of their potential to contribute to a cost leadership and/or a differentiation strategy. The sustainability topics that were explored in this list of actions included some related to environmental sustainability (e.g., water, energy, waste), others related to social sustainability (e.g., employees, guests, society) and still others focused on economic sustainability. Response options ranked from 1 (no potential) to 5 (very high potential). Here is what we found.EHL Graduate Programs  Which Master in Hospitality is right for you?  Discover which Master in Hospitality at EHL fits you best. It will only take  the time it would to make yourself a coffee.  Start the quiz

Potential for cost leadership – The engineer’s hat

The infographic below illustrates how the hoteliers in our sample assessed the potential of different sustainability domains for a cost leadership strategy. The domains are color-coded and they are presented in decreasing order of potential. You may also want to refer to a more detailed list of individual actions belonging to theses domains by clicking on the link below the infographic. 

We observe that energy-related issues are rated as the most promising. Other topics include water saving and waste reduction as well as strategies that focus on co-opting employees and guests to show more sustainable behaviors.

Hospitality_Insights_EHL_Sustainable_Actions_Image_Schema_004

 

Maybe not surprisingly, the ranking provided by our sample of hoteliers suggests that for hotels who want to engage in sustainability with the purpose of achieving cost leadership the focus needs to be on technical engineering expertise. Energy, water and waste-related issues are addressed through investment in infrastructure and optimization of processes, requiring an “engineer’s hat” with a mindset focused on efficiency. Conversely, most of the guest-oriented actions, most of the employee-oriented ones, as well as those focused on societal issues are rather seen as cost drivers and feature at the bottom of the list.

 

Potential for differentiation – The marketing communicator’s hat

A look at the assessment from a differentiation strategy perspective provides quite a different picture. The top ten or so actions in this ranking are dominated by waste-related topics, initiatives related to guests and employees as well as by actions focused on economic sustainability. The common topic underlying many of these actions is that they are more relationship-oriented than technical, and that they imply a strong potential for communication and positioning. This becomes evident in the focus on sustainable F&B choices as well as guest health and safety, which top the list, but also in connection to purchasing of sustainable products, supply chain issues and the use of labels and certifications.

Hospitality_Insights_EHL_Sustainable_Actions_Image_Schema_005

 

All of these actions can be communicated towards guests as a commitment to sustainability that sets a hotel apart from its competitors. In a similar way, employee-related sustainability measures, such as more sustainable career development opportunities or a commitment to diversity and equal opportunities, can be used as differentiators in a tight labor market. Taken together, the most promising measures in this context require a “marketing communicator’s hat”, with a good understanding of how to send a consistent message that leads to a desirable positioning as champion of sustainability.

 

A little caveat is in order. In alignment with the requirements of our funding agency, our sample focuses on hotel properties surrounding the Alps on the French and Swiss side. Therefore, our results may be valid for destinations with a similar profile, but less generalizable to hotels, say, in tropical destinations or in countries with a radically different economic and societal profile, where other priorities may well emerge.

At any rate, we hope that these rankings stimulate reflection on what sustainability can achieve. Engaging on a path towards greater sustainability in hospitality will certainly require some time, effort and managerial attention. However, there are payoffs down the road. Keep exploring …

 

Interreg France-Suisse

Acknowledgment. This article is based on work undertaken for the European Regional Development Fund INTERREG V France-Switzerland program 2014- 2020 on the DUET – Développement Durable dans l’industrie hôtelière Transfrontalière- Project. The author wishes to acknowledge the financial support and cooperation received through INTERREG for undertaking this study.

 

 

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Full Professor of Organizational Behavior at EHL

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COST LEADERSHIP STRATEGY

list of actions related to environmental, economic and social sustainability
DIFFERENTIATION STRATEGY
list of actions related to environmental, economic and social sustainability