Gulf hotels under pressure to boost green credentials

Reuters/Satish Kumar

• New EU green banking rules
• Hotels must substantiate green claims
• Banks to be increasingly stringent

Hotels in the Gulf region are facing pressure to make their buildings and operations more green or lose out on future investment. 

Ufi Ibrahim, chief executive of the Energy and Environment Alliance (EEA), a hotel industry network, told AGBI that EU green banking regulations that take effect in January will affect global investors.

If hotel owners in the Gulf and elsewhere cannot substantiate their green claims against global sustainability benchmarks, Ibrahim said, “it could have a serious impact on the value of their assets, as well as on yields and commercial performance”. 

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The EEA is a coalition of hospitality investors, developers, operators and asset managers that works to make the industry greener. Its members own approximately 24,000 hotel properties. 

Under the new green asset ratio rules, EU banks have until next month to report on the weighting of “green” loans and securities within their portfolios, based on EU environmental criteria published in 2020.

From January, banks are expected to be increasingly stringent, requiring parties to demonstrate the sustainability aspects of deals when applying for financing.

Tools are being developed to assess buildings’ sustainability performance, which will heap further pressure on the sector, Ibrahim said.

The Carbon Risk Real Estate Monitor, backed by the EU, for example, analyses a building’s energy consumption and emissions and decides whether it falls in line with net zero targets. 

It can work out how much it will cost to get that building back in line with regulatory requirements and avoid being “stranded”, enabling investors to negotiate discounts. 

The hotel industry is one of the key sectors in the spotlight, said Ibrahim. This is because hotels contribute among the highest greenhouse gas emissions of all real estate assets, according to a September report by the United Nations Environment Programme.

Many Gulf hotels are rising to the challenge. In July Five Holdings signed an agreement to obtain 100 percent of its Dubai hotels’ electricity needs from the Mohammed bin Rashid Al Maktoum Solar Park. The company said the deal helped reduce its carbon use intensity by over 76 percent compared to 2020, and it aims to raise this to 85 percent by 2025. 

IIbrahim said it was easier to “green” new-build projects.

The real challenge came with retrofitting old ones, she said, especially as 80 percent of buildings that will be standing by 2050 have already been built and account for most emissions, according to the Building Research Establishment.