Best Circular Economy practices in hotels - EHL Insights news

What is Circular Economy?

One definition of economics is to understand how the economic agents make their decisions to satisfy their unlimited needs under the constraint of limited resources. Even though it has been clear for many decades that resources are scarce and that some will be completely depleted in the coming years, concrete solutions to reduce or optimize consumption and production are still underexplored. For instance, even though the concept of circular economy (CE) has been around for 50 years (Ellen McArthur Foundation), it has become popular only recently.

Our preliminary research on the topic of circular economy practices in the hotel industry has highlighted a key particularity of today’s consumers. Not only are they increasingly demanding in terms of how much is done when it comes to a hotel's corporate social responsibility, but they are also very sensitive to how well it is done. Indeed, the current literature seems to suggest that for CE practices to be impactful from the consumer perspective, they need to be more thoughtful and sophisticated than few years ago.  

Circular economy is defined as a regenerative system in which resource input and waste, emission and energy leakage are minimized by slowing, closing, and narrowing material and energy loops (Geissdoerfer et al., 2017). In hospitality or hotels in particular, this can be achieved through reduction of resource inputs (e.g. raw material, energy, labor, physical equipment) and outputs (e.g. food waste, emissions), rethink of service or operation processes (e.g. waste management, purchase policies), long-lasting design (e.g., building, interior design), maintenance, repair, reuse, refurbishing and recycling.

Best practices in circular economy: the producer perspective

After reviewing the literature to identify all relevant CE practices for hotels, we wanted to select the most relevant ones for the hospitality industry. Therefore, we designed a questionnaire in which we asked hotel managers and industry experts to rate, on seven-point bipolar scales, each of the 25 CE practices we have identified, along 5 different criteria: feasibility, cost of implementation, operating cost reduction, impact on customer perception and impact on revenue per client.

The main finding of our questionnaire reveals a trade-off between the cost of implementation of the CE practices and their impact on guest perception. Indeed, the practices that require low investment, seem to have little positive impact on guest perception (e.g., reduce frequency of room cleaning, offer less room complimentary accessories like shoe polish, comb, toiletries). On the other hand, practices that could have an important positive impact on guest perception are the ones that are costly to implement (e.g., cook mainly with own produced food, use of own produced renewable energy for SPA like solar panels).

This finding is not surprising but points out to the difficulty of implementing effective circular economy practices with a small budget. It also seems that the most impactful CE practices that hotels could implement fall under the responsibility of hotel owners and not hotel managers as they require significant investment in the hotel infrastructure (e.g., solar panel installation, recycling grey water).

Best practices in circular economy: the consumer perspective

To better understand guest perception of hotel circular economy practices, we asked 80 hotel guests to rate the same 25 CE practices as in the previous questionnaire. Seven-point bipolar scales were again used and respondents had to rate each CE practice based on three criteria: their willingness to pay more, the importance of practicing  them, and their intention to reserve a stay. It is worth noting that hotel guests were very favorable about the implementation of CE practices in hotels as they all received positive evaluations. This supports our hypothesis regarding the importance of circular economy consideration in today’s consumption behavior.

Results show that the practice for which hotel guests are willing to pay the most is “Guest can choose remotely the room temperature (via smartphone), heat and air conditioning are generated by own produced renewable energy (e.g. solar panels, natural resources, geothermic or lake)” followed by “Offer non-polluting travel options while at the hotel (e.g. e-bikes, e-cars)” and “Recycle grey water (e.g. for toilets, irrigation) and use own produced renewable energy (e.g. solar panels)”.

Similarly, the most important practice for the respondents is “Guest can choose remotely the room temperature (via smartphone), heat and air conditioning are generated by own produced renewable energy (e.g. solar panels, natural resources, geothermic or lake)”, followed by “Cook mainly with own produced food” and “Use energy efficient electronic/electrical appliances (e.g. LED, A+++)”.

Concerning the intention to reserve a stay, the most promising CE practice seems to be “Use of own produced renewable energy for SPA (e.g. solar panels)”, followed by “Guest can choose remotely the room temperature (via smartphone), heat and air conditioning are generated by own produced renewable energy (e.g. solar panels, natural resources, geothermic or lake)”, and “Offer non-polluting travel options while at the hotel (e.g. e-bikes, e-cars)”.

As can be observed, there's a practice that systematically ranks in the top 3:  “Guests can choose remotely the room temperature (via smartphone), heat and air conditioning are generated by own produced renewable energy (e.g. solar panels, natural resources, geothermic or lake”. However, this same practice seems to be of little interest to the producers. Thus, a trade-off exists for this CE practice and actually for all others too. Being aware of this trade-off is of course crucial.

The consumer vs. producer trade-off

Based on our results and after normalization of our data, we can classify the different CE practices in 4 quadrants according to the perspectives of hotel managers and experts, named “Return on investment” and the perspective of hotel guests, named “Added value for guests” (see Figure 1). The CE practices related to each letter in Figure 1 can be found at the end of this article.

The detailed interpretation of the 4 quadrants of Figure 1 is trivial. Some practices lead to an above average return on investments and are very well perceived by the guests. Both economic agents win. The practices that also lead to an above average return on investments but that bring comparatively less added value for guests can be seen as easy fixes for hoteliers to perform. When practices exhibit a low return on investments but are of high added value for guests, they can be considered as long-term investments, probably still worth being implemented. Finally, CE practices of relatively moderate added value for guests and leading to a low return on investments may be considered as false good idea practices to be implemented. The practice “Bed linen and towels are cleaned with natural home-made cleaning products” falls into this category.

There is one main finding, supporting our hypotheses, that deserves to be brought to the fore. When comparing the answers of hotel managers and experts with those of hotel guests, it seems that hotel managers tend to value practices that are related to the reduction of energy use and resources such as the reduction of food waste or energy consumption, while hotel guests seem to prefer practices that involve a redesign or rethink of the way hotels are using and producing energy and resources, such as the use of own produced renewable energy. This observation deserves more attention from the researchers as it may be the key element for any practice to be truly considered as circular economy.

References:

Geissdoerfer, M., Savaget, P., Bocken, N. & Hultink, E. (2017). The Circular Economy – A new sustainability paradigm? Journal of Cleaner Production, 143, 757–768.