The Energy & Environment Alliance (EEA) has released its latest report, “How Important is ESG in Hospitality Investment Decisions?” which is based on in-depth interviews with investors responsible for over $360 billion in hotel assets. The findings underscore the growing role Environmental, Social, and Governance (ESG) considerations play in shaping the future of hotel and lodging investment strategies for all investment groups, as follows.
Key Findings:
Energy Efficiency Leads ESG Priorities – Energy efficiency remains a primary focus for investors, driven by rising energy costs, regulatory pressures, and evolving market expectations.
Growing ESG Scrutiny in Transactions and Access to Finance – Investors and buyers are increasingly evaluating hotels’ ESG credentials, but whilst the impact of these credentials is difficult to isolate on exit valuations, we are seeing a notable impact on liquidity and a clear demonstration of brown discounts or transition capex to meet ESG standards. Institutional investors and more recently larger Private Equity investors are leading the shift, prioritising assets which can meet their ESG criteria and can be placed on a clear path to decarbonise. New regulations like Corporate Sustainability Reporting Directive (CSRD) compliance are influencing many owner-operator groups and creating accountability at senior management levels.
ESG Engagement Varies – Most groups now have acquisition checklists but the way in which ESG is impacting investment decision making is variable. Institutional investors have already embedded ESG due diligence into underwriting processes, Private equity investors are following and whilst we are starting to see dispositions with ESG as a driver, we are at a nascent point in this regard. The engagement across owner-operator groups and HNWs varies but there are plenty of examples of excellence which have attracted the attention of large private equity players who are looking to back credible investment strategies with a strong attitude towards risk management, of which ESG is a key component. However, all investor categories recognize the growing importance of regulatory compliance and the link between energy efficiency and asset performance.
Lenders Are Driving ESG Adoption – Sustainable finance is becoming increasingly important to the hospitality sector, with banks incorporating ESG considerations into financing terms. Right now, addressing ESG issues is more important to get access to finance rather than to get more attractive commercial terms. Green bonds and sustainability-linked loans are on the rise, though access to these instruments remains limited in certain regions.
…As Are Corporate Buyers – ESG credentials are increasingly influencing corporate travel decisions and brand strategies, and although evidence of a consumer’s willingness to pay a premium remains limited and difficult to isolate, there appears to be a correlation between higher demand and occupancy.
Although the hospitality sector is at a nascent point compared to other sectors, ESG considerations are growing in importance and starting to shape asset management and pricing decisions amongst the large players. Recently, Private Equity has been able to sweep up the best assets at attractive yields, but with the return of institutional investors, we expect to see an increase in transactions and greater focus on ESG credentials. Owing to divergent approaches to ESG, I expect there to be a hunger for collaboration and knowledge sharing in the investment community, which is the aim of the EEA Capital Markets Committee. Rekha Toora, Chair of the EEA Capital Markets Committee and Senior Vice President, Jones Lang LaSalle, Hotels and Hospitality
ESG is central to underwriting processes, risk mitigation, and long-term value creation. ESG considerations are well embedded in all steps of the investment cycle. David Kellett, Managing Director and Head of Alternative Investments, Invesco Real Estate
Energy is now one of our top cost considerations, where it used to be much lower. This has made capex projects that weren’t previously viable suddenly interesting investments. Gilles Clavie, Chief Executive Officer, AccorInvest.
We believe that accounting for sustainability considerations enables us to protect and create value at the asset level. These considerations are integrated across the asset lifecycle, from acquisition to disposal, reflecting both regulatory drivers and client expectations. Natalia Kolotneva, Head of Living and Hospitality for Europe, LaSalle Investment Management.
The report concludes that ESG will continue to shape hospitality investment strategies, with regulatory compliance, capital market pressures, and customer expectations driving adoption. Institutional investors and financial institutions are expected to further refine ESG benchmarking and standardisation efforts, enhancing transparency and comparability across the sector.
“This report makes it clear that ESG considerations are becoming increasingly important to everyone involved in owning, operating, investing in and financing hospitality assets. However, with divergent approaches, the need for standardisation is compelling – and that’s what the EEA is seeking to facilitate,” said Ufi Ibrahim, Chief Executive Officer, Energy & Environment Alliance.
Environment & SustainabilityReal Estate & Investment
