While many hotel owners and operators are reducing energy consumption and evaluating how energy is used in their businesses, a growing number of hospitality leaders are looking more deeply into their overall carbon footprint. Increasingly, their sights are focused on how to procure renewable electricity for their properties.
This is exactly where Highgate Hotels (Highgate) has chosen to raise the bar as one of the industry’s premier investment and hotel management firms. They recently announced the publishing of their first-ever 2022 ESG Report, “our drive to achieve and maintain strong ESG performance delivers efficiencies, cost savings, and other operational improvements for our hotels while meeting guest expectations.”
More importantly, in an interview with Costar’s Hotel News Now, CEO Arash Azarbarzin stated that he “doesn't believe his company's commitment to environmental, social and governance issues is new or trendy, but what is new is the company's commitment to publicly disclose the results of those efforts.” He noted further to Hospitality.net that “we all share an urgent responsibility to reduce our impact on climate change, and this is especially true for the hospitality industry. Highgate is very proud to be a leader on this front by presenting this analysis that can serve as a roadmap to help drive hospitality management toward a net-zero future without compromising the guest experience.”
Highgate’s VP of Sustainability, Marianne Balfe, added that “with this report, we endeavored to exhibit our most successful initiatives and to provide visibility into our full carbon footprint, including initial emissions calculations for our entire supply chain. We will use these data to establish achievable goals and measure our progress.”
However, as we look deeper into the report we see that Highgate has taken some very innovative and unique approaches to address Scope 2 emissions quite rapidly.
Highgate Is Embracing A Fast-Paced Approach to Their Sustainability Commitment.
Highgate is a leading real estate investment and hospitality management company with over $20 billion of assets under management. The firm has a more than 30-year track record as an investment manager, operating partner, and developer for REITs, private equity firms, sovereign wealth funds, high-net-worth individuals, and other institutional investors. With a particular focus on hospitality real estate, their portfolio includes over 500 owned and/or managed hotels comprising over 84,000 rooms across the United States, Europe, Latin America, and the Caribbean.
This combination of high performance and deep experience was the impetus to make quick work of taking a leading role in sustainability in the hotel industry. The result made 2021 an exceptional year for the company from a sustainability perspective.
One of their first moves was to pluck Balfe away from Marriott to take on a new role as their VP of Sustainability. Chief Operating Officer, Steve Barick, described the opportunity to include Balfe in their leadership as a “time to add to our agile team given our strong growth trajectory and because we value doing good. It’s in Highgate’s DNA as one of our core tenets.”
In that same year, according to their 2022 ESG Report, Highgate became the first hospitality company signatory to the Clean Energy Buyers Association’s (CEBA) Commercial Real Estate Principles. Highgate capped the year off by announcing in the fall of 2021 that they had procured 100% renewable electricity for all of their select-service portfolio, and that they’d be doing the same for 17 of their full-service portfolio starting in January of 2022.
Their 2022 ESG Report explained that these two procurements allowed Highgate to complete their first large-scale purchase of Green-e certified renewable energy certificates (RECs) for over 200 of their hotels to be powered by 100% renewable electricity. According to Balfe this effort demonstrates that Highgate is “determined to be part of the solution to address climate change.” She added that “according to the Sustainable Hospitality Alliance, the hotel industry needs to reduce its carbon emissions per room by 90 percent by 2050 in order to keep the industry within UN goals for reduced emissions. This is a humbling statistic that highlights the importance of investments in renewable energy as a business imperative moving forward. The utilization of renewable energy is a simple and impactful step that the entire industry can and should be taking to reduce our collection effect on the planet. We are proud to be paving the way with aggressive and momentous sustainability efforts.”
Improving On A Winning Strategy: The Positive Impact of RECs with Additionality
If past performance and leadership are indicators, there’s no doubt Highgate will continue to iterate and improve upon its stellar sustainability strategies and goals.
However, its current strategy appears to employ RECs retrospectively. Incorporation of RECs with additionality into Highgate's sustainability strategy could have a significant impact on both its progress and the grid.
RECs with additionality would play a vital role in increasing the speed at which the grid transitions to renewable energy. By procuring RECs as a forward commitment, instead of a retroactive commitment, Highgate would be directly supporting the development of new renewable energy projects. Thus these RECs would facilitate the rapid expansion of clean energy capacity, contributing to a more sustainable and resilient energy grid.
Including RECs with additionality in their strategy presents an opportunity to mitigate long-term procurement costs associated with continued renewable energy procurement as Renewable Portfolio Standards and REC demand drives prices up. Investing in new renewable projects at a fixed price through forward committed RECs with additionality would provide a stable and cost-effective source of clean electricity, safeguarding against potential price fluctuations in the market.
From a marketing perspective, Highgate could also make a more impactful claim regarding its sustainability efforts by including RECs with additionality. These RECs would highlight the company's commitment to driving tangible change and directly supporting the growth of renewable energy infrastructure, resonating positively with environmentally conscious consumers.
While Highgate is already considering on-site generation opportunities, RECs with additionality offer scalability to Highgate’s emission reduction strategies. RECs with additionality provide Highgate with the means to procure renewable electricity at a volume that can’t be matched by the on-site generation from a single hotel property. These RECs would also be more aligned with their business needs as a real estate company, avoiding lengthy negotiations, long commitments and the market risk typically associated with PPAs or VPPAs.