The factors influencing the willingness to pay for sustainable hotels in Amsterdam

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Master Facility & Real Estate Management

Title assignment : Master Thesis Name module/course code : BUIL 1230 Name Tutor : Carla Brouwer Name student : Maksim Sergeev Full-time / Part-time : Full-time Greenwich student nr. : 001006532 Saxion student nr. : 441114 Academic year : 2017-2018

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The factors influencing the willingness to pay

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Summary

Purpose: This paper explores the factors influencing willingness to pay for sustainable technologies in some hospitality industry facilities, particularly hotels.

Design, methodology, approach: for this study was used quantitative analysis of the results obtained through a survey conducted by the author of this work on the streets of Amsterdam. Findings: In this paper, the questions have been put forward that demographic characteristics such as gender, age, education, marital status, influence the subject when choosing between hotels that support sustainable technologies or those that don’t. However, the results showed that among the above characteristics, only the country of residence could be a factor that can ultimately affect the choice of a hotel that supports sustainable technologies. Other demographic factors are not decisive in the final choice of a hotel that supports sustainable technologies.

Research limitations, implications: The survey was conducted only in Amsterdam and only by filling in paper questionnaires according to respondents for a strictly limited period. For further research, it may be proposed to use an online survey, as well as research on other popular tourist destinations and cities.

Originality, value: At present, the issues of environmental protection and the use of non-renewable energy sources have acquired global significance. In this regard, the issues of sustainable development affect all aspects of the existence of modern civilization. The hospitality industry is one of the areas where the issues of sustainable development are most relevant because they are associated with the daily use of water, electricity, gas, various consumables and consequently operating costs. Investments in sustainable technologies have a defined payback period and lead to higher prices for the final consumer of hotel services. The goal of this study is to determine the need and importance of such investments and to make recommendations on the feasibility of creating and maintaining sustainable technologies in hotels.

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Foreword

I have always been interested in various aspects of the functioning of real estate in the hospitality industry as I sometimes have the opportunity to travel and visit various hotels, holiday homes, and other facilities. This fact was the reason for the choice of the direction of my further study and preparation of the Master Thesis on the specialty Facility and Real Estate Management (FREM) at Saxion University of Applied Sciences.

I would want to thank my tutor Mrs. Brouwer who assisted me and helped to shape the direction of this study and delineate boundaries and horizons of my study work, as well as Mrs. Eros who helped me to determine the initial stage of preparation of this paper.

I also want to thank all the teachers who have revealed to me a lot of important aspects and nuances of the functioning of Facility Management. Special thanks to Mrs. van Sprang, Mr. van den Hogen, Mr. Bergsma, Mr. Breuker, Mr. Bodewes, Mr. Palstra and certainly and obviously to our course Director Mr. Verwijmeren.

I want to say a special thanks to the Coordinator of our course Mrs. Koopman-Bijwank for the smooth organization of the educational process and invaluable assistance in the resolution of emerging issues.

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Declaration of own work

I hereby declare that each stage of the study and the writing of the final document were carried out by me independently.

The primary information for subsequent calculations was also collected by me independently, and the results were not manipulated in any way.

All the used external sources of information have relevant links and confirmations.

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1. Introduction

1.1 Trends and Developments in the current hotel industry

People travel more and more every year. Based on the World Tourism Organization’s report (2018), “tourism has grown above average, at around 7% per year, for seven straight years”. Furthermore, “2017 was a record year for international tourism. International tourist arrivals grew for the eighth consecutive year, a sequence of uninterrupted growth not recorded since the 1960s. Destinations worldwide welcomed 1,326 million international tourist arrivals, some 86 million more than in 2016” (UNWTO, 2018).

The number of hostels, hotels, and other properties grows in most countries too. For example, the number of establishments in the European Union (28 counties) growth from 608,400 in 2016 to 656,318 in 2017 (Eurostat, 2018).

PricewaterhouseCoopers (March 2017) forecasts the following trends related to the tourism industry for 2017-2018: “GDP in the Eurozone will grow by 1.5% and 1.6% in 2017 and 2018 respectively. Growth in the US is also projected to pick up steam this year, and combined with a rising dollar, we may see increased numbers of US tourists flocking to Europe. Europe is expected to continue to see relatively low levels of new hotel supply growth despite some hotspots such as Berlin and London. Some popular tourist cities have tried to intervene and moderate hotel development while some want to encourage it. Serviced accommodation and shared platforms continue to compete for travelers, and more legislation and taxation is likely to regulate this sector. There’s no change in 2017 or 2018 with the highest occupancies forecast to be in the same two cities again: Dublin with 83% forecast (supply shortages) and London 82% (despite high supply additions). Amsterdam stays in third place with 78.3% in 2017 but slips down in 2018 (PwC, 2017). There’s no change at the top of the ADR rankings. In 2017 the highest ADR in euro terms are Geneva (€300.2), Zurich (€244.9) followed by Paris (€229). Paris room rates remain high despite a 4% fall in 2016 and further falls in 2017. The cost of a hotel room in Geneva and Zurich reflects the appreciation of the Swiss franc and exchange rate assumptions against the euro. Neither is expected to see growth in room rates in Swiss francs in 2017 or 2018, indeed quite the opposite. In 2017 Geneva, Zurich, Paris, London and Dublin top the RevPAR rankings. Geneva’s expected RevPAR at €201.8 is significantly higher than the other leading cities and over three times as high as Budapest in 2017. Although Budapest is expected to see some strong ADR growth in 2017 and 2018, rates remain below European norms.”

Deloitte (2018) informed that 2017 was the year of challenges for hoteliers. “There is little doubt that companies like Airbnb already compete head-to-head with hotels in certain segments of the market. Some of this business may be additive, as travelers take more or longer trips than they would without the option, but perhaps more importantly, private accommodations have altered consumer expectations on a fundamental level by redefining what and where a hotel is. The hotel industry has proved to be extremely resilient during this marketplace shift. Industry forecasts project continued success, estimating a 4.3 percent gain

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9 in hotel revenues for 2017. This is phenomenal growth considering one in three US leisure travelers stayed in some form of private accommodations in 2015” (Deloitte,2018).

Airbnb is also actively developing its business in Amsterdam. According to the report submitted by IPK International (2016) “Airbnb sold up to 736,000 nights in about 18,500 accommodation units in 2015. Rentals increased by 474% in 2015 and are likely to double again this year. About 500,000 – 600,000 visitors, nearly all of them international, booked accommodation in Amsterdam through Airbnb, giving the company a 10% share of the 5.5 million international visitors in the Dutch metropolis last year. Airbnb generated revenues of $110 million from rentals in Amsterdam.”

Economic affairs minister Mona Keijzer (2018) informed that based on the report of Nederlands Bureau voor Tourisme en Congress (NBTC), the number of international tourists in 2017 increased to 17.6 million people. Thus, in 2017, the growth was 11% compared to the previous year, which is higher than the European average. Also, the Netherlands continues to be an attractive destination for tourists from outside the EU. Thus, in 2017 the number of tourists from China and the USA increased by 23% from each country, from Russia by 33%. In 2016, tourists spent 75.7 billion Euros in the Netherlands. Taking into account inflation, total tourism expenditure increased by almost 20 percent between 2010 and 2016. Also, the tourism industry employs 641,000 people, showing that the sector is a significant employer in the Netherlands.

Tourism contributes to the fact that the Netherlands is an attractive country for life, work and investment (Keijzer, 2018). Tourism strengthens the level of facilities, accessibility of the region and a pleasant environment.

1.2 Problem statement

Amsterdam attracts many tourists every year. PricewaterhouseCoppers (2018) expect RevPAR (Revenue per available room) growth in Amsterdam, around 7% in 2018. Amsterdam’s growth is driven by strong ADR gains (PricewaterhouseCoppers, 2018) (Appendix I-a).

Another interesting factor that partly affects the hotel business in Amsterdam is Brexit (UK's leaving the European Union), scheduled for March 29, 2019. “Amsterdam too hopes to capitalize on Brexit. The European Medicines Agency (EMA) will relocate to Amsterdam in 2019. The EMA is reported to generate around 40,000 room nights a year. Nevertheless, in 2019 Amsterdam’s growth slips a little, however, 3.5% RevPAR growth is still anticipated, driven by continued economic growth” (PricewaterhouseCoppers, 2018).

Also, Amsterdam occupies a leading position in the indicator Occupancy rate (Appendix I-b) exceeding the level by 80% along with London and Prague.

Amsterdam is “number one position in Health, safety, and security as well as in Sustainability and the natural environment underlines the importance of a good living environment for citizens which is a key to success for global cities. Looking at the city’s sustainability measure,

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10 a top three score in both Recycled waste and Air pollution are also key factors for Amsterdam’s future” (PwC, 2018).

Sustainability generally implies achieving a balance between environmental, economic and socio-cultural aspects, otherwise known as the ‘triple bottom line’ (Reid, Johnston, & Patiar, 2017).

The development of sustainable technologies is a top priority in Amsterdam. The municipality of Amsterdam believes that the future of the city depends on the health of its citizens and therefore fights waste and pollution. In this regard, the Municipal Council of Amsterdam (2015) has developed a unique program of sustainable development of the city which defines the main goals:

• 20/20/20: By 2020, Amsterdam will generate 20% more renewable energy and use 20% less energy per resident than in 2013.

•_{Improve air quality: by putting as many zero-emission vehicles on the road as possible.} • Establish a circular economy with new forms of production, distribution, and consumption. • Make Amsterdam ‘climate proof’ by 2020.

• Ensure that 65% of household waste is collected separately by 2020 (Gemeente Amsterdam, 2015).

Also, the municipality of Amsterdam is making efforts to eliminate the use of natural gas by 2050. At the same time, the municipality of Amsterdam itself is involved in sustainable programs such as planning to reduce its CO2 emissions by 45% by 2025.

The development of sustainable technologies in Amsterdam affects all areas of the urban environment, including the hospitality industry. Hotel guests increasingly prefer to stay in hotels that support sustainable technologies. “These responsible consumers deliberately look for a hotel that offers the best price, quality, and service, while still respecting the environment” (Gemeente Amsterdam, 2015). According to the developers of the sustainable development program of Amsterdam, “sustainability and comfort go hand in hand”, as the hotel can be distinguished by the best environmental conditions and at the same time offer increased comfort for guests (Gemeente Amsterdam, 2015). Some sustainable methods, such as placing on the roof of a small garden, bring a new sustainable look to the hotel and offer guests something new (Figure 1.1).

Hotels in Amsterdam are becoming more sustainable together with the city. The hotel chains such as Mövenpick Hotels & Resorts, NH Hotel Group, and independent hotels use different methods to improve their sustainability, using such technologies installation of solar panels, separate collection, and disposal of waste, various equipment to save energy and water, green roofing and many others. These aspects are discussed in more detail in the next Chapter.

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11 Figure 1.1 Roof terrace with garden, Hotel Casa Amsterdam (Booking.com, 2018)

For hotel management, the development of sustainable technologies is also important, as the use of sustainable technologies can reduce costs and increase profits. For example, the cost of different types of energy is a significant part of hotel operating costs (Gemeente Amsterdam, 2015). “These costs can be reduced through additional investment in energy-saving measures, and this type of investment can be recovered in just a few years” (Gemeente Amsterdam, 2015).

However, the introduction of new sustainable technologies will entail the need for additional investment. The development and implementation of investment programs, in turn, may entail an increase in the cost of living in such hotels, as it is necessary to ensure the return of investment in the project deadlines. The increase in the cost of living may affect the choice of guests facing the dilemma of accommodation in a more expensive hotel that uses sustainable technologies, or pay less and stay in a hotel that does not make any changes. However, as noted above Amsterdam remains a leader in the occupation rate even though many hotels are adopting sustainable technologies.

To date, several studies have been conducted in the United States studying the factors that encourage guests to choose hotels that support sustainable technologies (Kang, Stein, Heo, & Lee, 2012); Han, & Hyun, 2018; Han, Lee, Trang, & Kim, 2018). However, until the moment of this research, no published works were found in open sources that studied the factors influencing the choice of sustainable hotels, as well as influencing the willingness of hotel guests to pay more when choosing such hotels among tourists visiting the Netherlands and in particular Amsterdam. In this regard, the author of this study aims to define

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2. Literature review

This Chapter provides theoretical background information.

2.1 The theoretical model of Willingness To Pay

Nieto-García, Muñoz-Gallego, & González-Benito (2017) stated that willingness to pay (WTP) denotes the maximum price the consumer agrees to pay for a given quantity of a product or service and reflects the value that the consumer perceives.

The researchers are trying to establish what external and personal factors determine the behavior and desire of a person to pay more for a particular product or service. (Tsen, Phang, Hasan, & Buncha (2006); Chau, Tse, & Chung (2010); Singh & Pandey (2018); Portnov, Trop, Svechkina, Ofek, Akron, & Ghermandi (2018); Shao, Tian, & Fan (2018); Peng, Zhang, Yin, & Wang (2018); 2018; Nieto-García et al. (2017); Zalejska-Jonsson (2014); Czajkowski, Barczak, Budziński, Giergiczny, & Hanley, (2016); Laroche, Bergeron, & Barbaro-Forleo (2001).

One of the most well-known, because it is often found in academic literature, and is used in research studies of WTP more than 15 years, represented by Laroche et al. in 2001 (Figure 2.1).

Figure 2.1 Conceptual framework Laroche et al. (2001).

In this model, the authors present factors that influence consumers’ willingness to pay more for environmentally friendly products. Laroche et al. (2001) grouped these factors into five categories: Demographics, Knowledge, Values, Attitudes, and Behavior.

Concerning demographics Laroche et al. (2001) stated mentioning several researchers that “most findings about the impact of consumers’ demographic characteristics on their environmentally conscious behavior are contradictory (Roberts, 1996), it is clear that they exert a significant influence. However, the other authors agree that demographics are less important than knowledge, values and/or attitude in explaining ecologically friendly behavior (Webster, 1975; Brooker, 1976; Banerjee and McKeage, 1994; Chan, 1999)”.

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13 “Knowledge is recognized in consumer research as a characteristic that influences all phases in the decision process. Specifically, knowledge is a relevant and significant construct that affects how consumers gather and organize information (Alba and Hutchinson, 1987), how much information is used in decision making (Brucks, 1985) and how consumers evaluate products and services (Murray and Schlacter, 1990)” (Laroche et al., 2001).

Regarding the hospitality industry, knowledge is whatever affects customer’s decision making in selecting and paying for the hotel, for example, guest’s environmental awareness may cause them to choose to stay in more sustainable hotels and pay a little more for a room in the sustainable hotel.

During the study of consumers’ attitudes, Laroche et al. (2001) recognized that “that the relationship between inconvenience and recycling was in the expected direction, that is, the more individuals believed recycling was inconvenient, the less likely they were to recycle. By contrast, beliefs about the importance of recycling were not significantly related to recycling behavior. Therefore, it appears that regardless of how important individuals believed recycling to be, the perception of the inconvenience of the recycling activity had a greater influence on their actions.”

Furthermore, Laroche et al. (2001) using the definition of Schwartz (1994) defines human values (such as individualism, collectivism, security, fun) as desirable goals, varying in importance, that serve as guiding principles in people’s lives. Furthermore, they cited McCarty and Shrum (1994) which believe that “the fun/enjoyment value was positively related to attitudes about the importance of recycling and to the recycling behavior.”

Concerning behaviors, Laroche et al. (2001) used researches of Suchard and Polonski (1991) inform that “ecologically conscious consumers will try to protect the environment in different ways (e.g., recycling, checking that a package is made of recycled material, purchasing only green products)”. On the other hand, Pickett et al. (1993) state that marketers must exercise caution when attempting to extend environmental initiatives from one ecologically conscious behavior to another (Laroche et al., 2001). An example is such behavior when, on the one hand, the subject recycles paper, but does not use the goods produced from recycled paper. This theoretical model presented by Laroche et al. (2001) was chosen by the author of this paper as the theoretical basis for this study and the creation of a conceptual model (explained in the next Chapter). The reason for this choice was the following factors:

•_{First, as noted above, this theoretical model has been used for more than 15 years by many} researchers studying WTP (Han & Hyun, 2018; Han & Yoon, 2015; Choi, Jang, and Kandampully, 2015; Tsen et al., 2006)

• Secondly, as noted above, this model evaluates various human factors such as demographics, knowledge, values, attitudes, and behavior and allows the researchers to create a detailed image of the potential and actual consumer (hotel guest).

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14 • Thirdly, this model can be adapted according to the objective of the study, as well as the various factors accompanying the study (location, target audience) by using only specific categories, such as performed by (Tsen et al., 2006)

2.2 How to measure of Willingness to Pay

It is necessary to assess whether guests are willing to pay for such initiatives to understand whether the increase in the sustainability of hotels affects the increase in hotel revenues. Also, the result of the implementation of sustainable technologies may indicate a change in the occupation rate after certain actions for the implementation of sustainable technologies. Also, the idea of whether a hotel guest is willing to pay more for sustainable initiatives can be a signal to owners and facility manager (FM) hotels to choose a direction to focus their efforts and align corporate strategy with facility management strategy. The final Chapter contains recommendations for the field of the facility and real estate management.

Breidert, Hahsler, & Reutterer, (2006) introduced a framework that presents possible ways to evaluate WTP (Figure 2.2).

Figure 2.2 Classification frameworks for methods to measure willingness-to-pay (Breidert et al., 2006).

Breidert et al. (2006) found that preferences can be identified by declared (unconfirmed) and confirmed factual information. Because this study was conducted on the basis of the results of surveys of respondents, the information was recorded with the words of their stated preferences, which could not be verified by the author of the study. This study was based on stated preferences.

According to Breidert et al. (2006), state preference can be established with two types of surveys: Direct and Indirect. "With direct surveys, responses (e.g., selected customers) are asked to state how much they would be willing to pay for some product” (Breidert et al., 2006). Because in this study the primary information was obtained during face-to-face

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15 contacts with respondents (to be described in the next Chapter), Direct Survey was used in this study.

The Breidert et al. (2006) model involves the use of experts from the industry under study (in this study we are talking about official representatives of hotels) or/and consumers of goods and services (for this study they are hotel guests) as sources of information when conducting a Direct Survey. Breidert et al. (2006) quoting Nessim and Dodge (1995), who state that “expert judgments are an important source of information because an educated guess is better than a random selection of a presumably adequate price from a number of price possibilities.”

However, according to Breidert et al. (2006) expert opinion is best applied when it comes to a market with a small number of clients. Based on Statistics Netherlands (2018) in Amsterdam, there are 459 hotels, which have 30,873 rooms and 68,800 beds (as of January 1, 2018). According to Breidert et al. (2006) "with a larger and more heterogeneous customer base, the availability of this knowledge becomes a critical issue.” Also, Breidert et al. (2006) represent the opinion of Balderjahn (2003) who believes that “label expert judgments as a poor measurement instrument with low validity and discourage from its use.” This factor was one of the reasons why hotel representatives were not used as primary sources of information for this study.

Directly asking respondents to indicate acceptable prices is referred to as a direct approach to measure WTP Breidert et al. (2006). Hotel guests (customers) were interviewed as respondents for this study.

Surveys are accessible as they allow the collection of a significant amount of data from a sizeable population in a highly economical way (Saunders et al., 2008). At the same time the self-conducted survey allowed the author to control the number of questionnaires received because to obtain the results that can be considered adequate, it is necessary to obtain the minimum required a number of questionnaires. Also, the refusal to conduct an online survey allowed the author of the work not to depend on the desire of respondents to answer questions as there was always another respondent to contact.

The survey is a widespread and common strategy in business and management research and is most frequently used to answer who, what, where, how much and how many questions (Saunders et al., 2008). The low cost of this method is due to the possibility of the questionnaire not only by filling out paper questionnaires but also by sending respondents e-copies of the questionnaires and links to the online survey. The author of this study did not need to bear any financial costs associated with both the receipt of primary information and the conduct of the study in general.

Also, in the case of when the respondents come up with clarifying questions during the study, it is possible to explain respondents the crux of the issue which will help to get the most accurate answer. The survey showed that sometimes respondents asked for clarification of some of the questionnaire's questions, such as what the terms "to be environmentally

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16 sustainable" meant or what the phrase "extra percentage" meant for hotels, as this phrase was most often associated with a visit to a café or restaurant.

2.3 Willingness to pay in the hotel industry

Currently, one of the driving forces of the development of modern society is competition. Competition forces economic competitors to invent new ways of doing business in order to improve financial performance through increased revenue and lower costs. One way to increase revenue is to increase the number of customers using the goods or services of any business. It is possible to increase the number of such customers by encouraging customers to pay for a particular product or service. In the hospitality industry, competition is also one of the driving forces of development because, as noted above, the number of hotels and other facilities is growing steadily.

New brands and hotel chains are emerging that provide more and more different services besides the possibility of living, which increases their attractiveness among consumers. New and better services give business owners the right to encourage customers to pay more and to pay a premium price. Singh and Pandey (2018) defined a price premium as “the additional amount that (a) is paid over the average price and (b) represents improvements in the quality of a product or service.” Hotels need to provide the best service because otherwise, guests will choose competitors.

Kang, Stein, Heo, and Lee (2012) informed that “a study completed in 2007 by Lonely Planet showed that 88% of travelers consider sustainable travel to be important, but while some tourists are willing to pay extra to support environmental sustainability, others believe that overall, the hotel has the responsibility to fund those initiatives.” For the hotel industry, thus far, research on consumers’ willingness to pay for environmental sustainability produced mixed results, which may cause some hoteliers to have reservations about going green. The reluctance of hotel owners to implement sustainable technologies in their hotels is primarily due to economic considerations because such modernization is associated with a certain amount of investments that have a long payback period (more will be discussed in the section on financial aspects).

2.4 The hotels’ classification

As informed above, there are more than 480 hotels in Amsterdam with the different service level. Customers’ willingness to pay for green initiatives may vary according to hotel types or segments (i.e., economy, mid-priced, and luxury segments) (Kang et al., 2012). The customers of a higher price hotel segment (e.g., luxury segment) may be more willing to pay for green initiatives to satisfy a higher threshold for self-esteem than customers of a lower price segment (e.g., mid-price or economy segment) (Kang et al., 2012).

In general, different countries have different approaches to the classification of hotels. There is no single classification system in the world. At the present stage of development of the hotel industry, there are about 30 different systems of classification of hotels (UNWTO, 2018). The most common of them are:

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17 • The Star system used in France, Austria, the Netherlands, Hungary, Egypt, China, and some

other countries.

• The Letter system used in Greece. All Greek hotels are divided into four categories: A, B, C and D. “A” category hotels correspond to the four-star level, b - three-star, C - two-star. Hotels of the highest category in Greece are often awarded the de Luxe category.

•_{The Crown system is typical of the UK. To transfer the hotel category from "language of} crowns" to "star" tourists could take away one from the total number of crowns. For example, 3 “stars” hotel is similar with 4 “crowns” hotel by service level

• The Category system: Luxe, А, B, I, II, III, and IV, which used in some CIS countries.

•_{In Germany, adhere to their standards in determining the class of hotels. There are about} 20 criteria for evaluation. With the increase in the class of the hotel the number of factors affecting the definition of this class increases as well. In this classification, there are five classes: 1 star - Tourist: 2 stars – Standard; 3 stars – Comfort, 4 stars - First Class; 5 stars – De Luxe.

There are two types of classification of hotels: Optional - in countries such as Austria, Czech Republic, Estonia, France, Germany, Russia, Iceland, Latvia, Sweden, England; Mandatory - in countries such as Belgium, Denmark, Greece, Hungary, Italy, Lithuania, Malta, Netherlands, Portugal, Spain, Switzerland. The need for classification is due to the internal laws of each country.

Unlike other countries in the United States, there is no official government-approved classification of hotels. Regarding comfort, the United States is usually divided into five categories (UNWTO, 2018).

One of these approaches is that a hotel is assigned a certain number of "stars” depending on the set and quality of services provided by the hotel or network of the hotels. The more stars a hotel has, the higher the number of services the client may expect.

The hotels in the Netherlands have rated with stars systems based on the standards adopted by Hotelstars Union (Appendix II-a). Hotelstars Union is a hotel association of Austria, Czech Republic, Germany, Hungary, Netherlands, Sweden and Switzerland which operates under the control of HOTREC (Hotelstars, 2018). For its part, HORTREC is an Association consisting of 43 participants representing 30 European countries. This Association presents various hotels, restaurants, and cafes from among the member countries of this Association (HOTREC, 2018).

Classification of hotels makes it easier for guests to navigate when choosing the most convenient accommodation option both in terms of the level of service provided and in terms of the financial capabilities of the guest. In the process of choosing a hotel, guest may be interested in one or another aspect of accommodation, including the use of sustainable technologies that the hotel demonstrates, for example, the use of "a towel reuse program" (will be discussed below). Thus, increasing the level of attractiveness of the hotel can affect its occupancy and revenue of the hotel.

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18 In this regard, management may also be interested in the environmental certification of the hotel.

2.5 Green Hotels’ Certification

According to Nimri, Patiar, & Kensbock (2017), many hotels are attempting to reduce the level of negative environmental impacts, which has led to the emergence of ‘green hotels.’ The industry defines ‘green hotels’ as lodging properties that are committed to various environmental initiatives such as reducing energy and water consumption, and decreasing waste outputs (Rahman & Reynolds, 2016).

To confirm the participation of hotels in the development of sustainable technologies, various programs have been developed for the certification of objects in the hospitality industry. According to Blancas, Lozano-Oyola, & González (2015), the United Nations World Tourism Organization (UNWTO) establishes the need to manage the destinations to obtain long-term sustainable tourism. The goal is the reconciliation of the development of tourist activities with the protecting and conserving of the natural and cultural resources which back this activity (Blancas et al., 2015).

Tourism in Europe faces a number of challenges, including increasing competition in the market, new behaviors of tourists associated with demographic change, the effects of climate change and the scarcity of resources, the consequences of information technologies and communication for the relationship between supply and demand (European Commission, 2010). Demographic changes in the tourism industry are primarily because of an increasing number of young people (students and young professionals) are actively traveling when traveling in Europe is becoming cheaper and more affordable. This is due to the development of transport infrastructure and increased competition among various transport companies, for example between bus companies such as Eurolines and Flixbus or between low-cost airlines. Concerning the climate change, Ridderstaat, Oduber, Croes, Nijkamp & Martens (2014) stated that climate is a significant push (cloud coverage, rainfall, temperature, and wind speed - the weather conditions in Aruba that attract visitors) and pull (rainfall, temperature, and wind speed – weather conditions in both the USA and Venezuela that cause residents to travel to destinations like Aruba) factors affecting tourism demand. They studied the impact of climate on the tourism industry in Aruba and concluded that the climate is vital for travelers from different countries because tourists choose the destination in depends on the purposes of a trip and await weather condition which is typical for such destination. Also, the goal of Environmental certifications is to demonstrate efforts in the field of sustainable technologies in hotels. Environmental certifications offer hotels an opportunity to showcase their environmental commitments and communicate their status as ‘frontrunners’ of the hospitality industry (Black and Crabtree, 2007).

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19 • environmental certification schemes promote the voluntary implementation of

sustainability practices in hotels. After paying a membership fee, hoteliers get access to the expertise of the certification body, and hotels will generally be provided with customized information regarding the implementation of sustainability practices

•_{environmental certification schemes have a positive impact on the profitability of certified} hotels. Acquiring environmental certifications has seen increased prevalence in the hospitality industry, and is often discussed in the hospitality literature as additional marketing or PR tool to draw customers

•_{environmental certification schemes provide booking hotel guests with more accurate} information about the environmental performance of hotels. Certification schemes generally come with a logo, and often with a hierarchical system like a star-rating, which provides customers with an instantly recognizable assurance that the hotel is committed to reducing its impact on the environment.

There are more than 20 different environmental certification programs in the world, including Green Globe, Green Tourism, Green Key Earth Check (Appendix II-b). Most of them have certified European hotels. For example, in the Netherlands, many hotels have a Green Key certificate.

“Green Key is an international voluntary eco-label for tourism facilities that promotes sustainable tourism. It aims to contribute to the prevention of climate change by awarding and advocating facilities with positive environmental initiatives. Green Key is a non-governmental, non-profit, independent program operating under the umbrella organization of the Foundation for Environmental Education, FEE. The program is recognized and supported by the World Tourism Organization, WTO and United Nations Environmental Program, UNEP. Green Key has an international program administration at the FEE Head Office in Copenhagen and Green Key National Operators in most member countries implementing the program on national levels. Green Key is one of the largest eco-labels for the hospitality industry worldwide and currently has more than 2,700 awarded hotels and other establishments in 56 countries” (Green Key, 2018) (Figure2.3).

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20 Figure 2.3 The Green Key labels at the hotels’ entrances (Sergeev, 2018)

There are other sustainable certification programs including ISO 14001 and LEED. “International Organization for Standardization (ISO) is an independent, non-governmental international organization with a membership of 161 national standards bodies. The ISO 14000 family of standards provides practical tools for companies and organizations of all kinds looking to manage their environmental responsibilities” (ISO, 2018).

ISO 14001:2015 and its supporting standards such as ISO 14006:2011 focus on environmental systems to achieve this. The other standards in the family focus on specific approaches such as audits, communications, labeling and life cycle analysis, as well as environmental challenges such as climate change” (ISO, 2018). A study conducted by Segarra-Oña, Peiró-Signes, and Verma (2011) among 2000 hotels in Spain found that hotels that apply this standard demonstrate better sales and higher revenues compared to non-certified hotels. “The LEED certification system’s new v4 scorecard is specifically designed for the hospitality industry and is intended to create incentives for new lodging construction that meets sustainability criteria.”(Bruns-Smith et al. 2015) A study among 93 LEED certified hotels found that such hotels performed better financial results compared to non-certified hotels. It is interesting that even though 93 hotels showed the partly low level of occupancy, however, their average daily rate (ADR) was higher, which allowed obtaining higher revenues (Bruns-Smith et al. 2015).

Mentioned above facts indicate the importance of the environmental certification of hotels and the need to follow the established standards to maintain a better image and achieve better performance.

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2.6 Sustainability in the hotel industry

Sustainability issues are the most important at the beginning of the 21st century. The development of civilization led to a rise in emissions of methane and CO2, the destruction of

the huge areas covered the forests that are the source of oxygen on the Earth. The growth of industrial production and new construction also raise questions of environmental protection. There are several international organizations and programs involved in Sustainability in the hotel industry

• United Nations Environmental Programme (UNEP): one of the primaries authorities on contemporary environmental issues;

•_{World Tourism Organization (UNWTO): an agency related to the United Nations,} responsible for promoting touristic sustainability;

•_{Foundation for Environmental Education (FEE): recognized by UNESCO as one of the main} authorities on “Environmental Education” and “Sustainable Development”;

• Global Sustainable Tourism Council (GSTC): the organization's main purpose is to disseminate sustainable guidelines capable of improving and leveraging information to both the public and private sectors;

•_{Global Reporting Initiative: an independent organization, which helps public and private} institutions to understand the diffusion of their impacts better.

The United Nations (UN) General Assembly approved the adoption of 2017 as the International Year of Sustainable Tourism for Development [UNWTO, 2015]. Therefore, the objective of reducing the consumption of non-renewable energy sources, as well as reducing waste production, is significant for all industries, including tourism. Hotels can lower their environmental impact while also gaining attention for conservation from travelers. Due to hospitality’s high visibility around the world, the industry has not only the potential to save millions of dollars by “going green” but also become a channel for social change (Ryan, 2002). 2.6.1 Theoretical approaches to sustainability

Theoretical study of sustainability makes it possible to identify two basic approaches to the consideration of this sphere. Perez and del Bosca (2017) state that some scholars consider that sustainable development theory provides the most suitable approach to the study of sustainability in tourism industries. “Under the light of this perspective, sustainability is reinforced as a multidimensional construct that equally emphasizes the economic, social, and environmental duties of companies” (Panwar, Rhine, Hansen, & Juslin, 2006). These three dimensions refer to the triple-bottom line of the company (Perez and del Bosca, 2017). “The economic dimension is based on ensuring viable economic activities in the long term so that all stakeholders receive appropriately distributed socioeconomic benefits. The social dimension refers to a respect for the cultural authenticity of host communities, the preservation of their architectural and living cultural assets and traditional values, and a contribution to intercultural understanding and tolerance The environmental dimension refers to the optimal use of environmental resources, which is an essential element of tourism

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22 development, protecting essential ecological processes, and helping to conserve natural resources and biodiversity” (Dyllick and Hockerts, 2002; Perez and del Bosca, 2017). Secondly, scholars aligning with the stakeholder relations management theory (stakeholder theory) consider that emphasizing pro-social (economic, social, or environmental) deeds will do little to enhance corporate reputation for sustainability if the company is simultaneously perceived to be harming other individuals or stakeholders, or even deceiving the public about such matters (Steurer et al.,2005; Perez and del Bosca, 2017). “Thus, the stakeholder theory defends that sustainability should be evaluated by those stakeholders who benefit the most from pro-social initiatives because they are the target audiences of each corporate behavior” (Perez and del Bosca, 2017).

2.6.2 Stakeholders of sustainable development in the tourism industry

At present sustainable development “is a well-known societal guiding model that asks for the integration of economic, social, and environmental issues in all societal spheres and levels in the short-and long-term” (Steurer et al., 2005; Perez and del Bosca, 2017). Stakeholders play an essential role in the sustainable development of hotels (Perez and del Bosca, 2017). Freeman (1984) defines stakeholders as those groups or individuals who can affect or are affected by the achievement of the company’s objectives or those actors with a direct or indirect interest in the company (Perez and del Bosca, 2017). Based on the above, stakeholders of sustainable development in the tourism industry can be defined as customers, employees, shareholders, the environment, providers (Perez and del Bosca, 2017).

Interestingly, the "Facility Management Value Map" presented by Jensen, Nielsen, & Nielsen (2008), also defines the above-mentioned stakeholders (Figure 2.4).

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23 Facility management, as one of the main aspects of the company's operation, can participate in the development of sustainable technologies in hotels forming added value for final stakeholders.

There are several operational strategies that FM can implement in the hotel, for example: •_{FM can monitor the use of water, gas, and electricity regularly. Constant monitoring}

enables the hotel to react quickly to potential losses and overspending, as well as to determine the cause of it and resolve the problem quickly.

•_{FM can recommend the use of high-quality environmental indoor materials such as} flooring, wallpaper, paints, and varnishes.

• FM could encourage the use of energy efficient and power-saving lighting systems (fluorescent or LED) as well as water supply equipment (water taps with aerators) and plumbing allowing to consume less water (low flow shower heads).

From a financial point of view, these aspects will be carefully explored in the following sections.

2.6.3 Sustainable practices

Many independent hotels and hotel chains, understanding the importance of sustainable technologies, develop and implement special programs aimed at reducing consumption and costs of electricity, gas, and water and conduct special programs aimed at promoting green initiatives and attracting customers concerned about the preservation of the environment. For example, one of the largest hotel chains Accor Hotels, which operates 4300 hotels in 100 countries, has developed the program "Planet 21 Program" (Accor Hotels, 2018). This program covers six aspects of hotel operations, namely: Guests, Partners, Communities, Buildings, Food and Beverage, People, in which Accor Hotels is implementing green initiatives to reduce non-renewable energy consumption, reduce waste production and other aspects (Accor Hotels, 2018).

Another world-famous hotel chain named Movenpick, founded in 1973, operates in 24 countries in 83 hotels. Movenpick has developed its SHINE program. “SHINE aims to positively impact the environment, our people and the local communities where we operate our hotels and resorts. It is one of our core corporate values, and we divide our sustainability practices into three key pillars – Environment, Employer and Social sustainability, with education the common thread” (Movenpick, 2018).

Besides benefits to the environment, the reduction of environmental impact through the increase of sustainability allows increasing of revenue through raising of willingness to pay of guests (will be considered further).

Parpairi (2017) has united the ways of using sustainable technologies in hotels, which involve stakeholders (guests and staff) (see Appendix II-c). Also, it has grouped and presented possible energy-saving directions in new and existing hotels (Appendix II-d).

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24 2.6.4 Financial aspects of sustainable development

Implementation of sustainable practices can reduce operating and capital costs, which affected the efficiency of the business. Many hotels’ focus on policies that can financially benefit the company and this has not come without criticism (Geerts, 2014). Many hoteliers

decide to solely implement the measures that have low start-up costs or those that can make a profit (Kirk, 1995). Hoteliers need to implement additional financial investments, for example in the installation of solar panels, low flow showerheads, recycling bins to increase the level of sustainability.

That is why some hoteliers remain hesitant to invest in green initiatives because they are not convinced whether or not such investments are financially beneficial. That is, while implementation of some new green practices requires significant initial investments, quantifying returns is often tricky for investments which produce less tangible results such as improvement to a firm’s reputation for being conservation oriented (Bird et al., 2007).

2.7 Financial prospects of sustainable technologies

There is a very important aspect of the sustainable development of the hotel industry, namely the financial implications of the introduction and use of sustainable technologies. It is essential to understand the financial results of investments in sustainable technologies. How long can investors expect to achieve the planned financial results? How much investment is needed?

2.7.1 Eco-innovations practices.

At this time eco-innovations practices are gaining widespread popularity. Aboelmaged (2018) mentioned Martínez-Perez et al. (2015), stated that eco-innovation practices had gained eminence in hotel organizations as a new business model in which meeting the growing demand for quality and sustainable products and services, using innovations in hotel operations, and protecting the environment are well grounded. In general, eco-innovation is associated with an increase in the sustainability of hotels.

There are three levels of eco-innovations defined by Carrillo-Hermosilla, Del Río, & Könnölä (2010). First, the end-of-pipe eco-innovations which aim at reducing the negative environmental impact through adding components to the original product, processes or systems. Second, the eco-efficacy innovations that are the processes or systems which generate less waste and pollution. Third, the eco-effectiveness innovations that adopt an industrial ecology’s view towards developing effective environmental solutions for society through radical alteration of components and subsystems (Carrillo-Hermosilla et al., 2010). Menezes and da Cunha (2016) stated that «eco-innovations can be used in hotels to preserve resources including water (e.g., toilets with dual flush valves, sewage treatment plants, reusing treated water for cooling and irrigation, sensors on taps), energy (e.g., using LED and motion sensors in lighting, using low temperature systems in the laundry, solar panels for heating water, energy production from waste, heat recovery systems, wind turbines), waste

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25 (e.g., garbage separation, waste management, recycling of paper, cardboard, aluminum and glass, using anaerobic digestion to turn organic waste into energy, using vacuum systems in waste management, conversion of used oil in food and beverage, using a system that eliminates food wastage), and other resources (e.g., using natural ingredients in redesigning facilities and packaging, using certification of environmentally sustainable buildings, applying sustainable enterprise reporting, using a 100% PVC-free). » They further demonstrated that hotels tend to develop a large number of end-of-pipe eco-innovations to save costs, improve their image and increase market share. However, the impact of eco-innovation on hotel’s competitive advantage is wobbling when incentives (e.g., innovation funding and collaborations with other organizations) and barriers (e.g., lack of stakeholder’s pressures) are encountered (Menezes and da Cunha, 2016; Aboelmaged (2018). Alonso-Almeid et al. (2017) stated that basic and advanced environmental innovations that range from using LED lamps, and temperature controls to adopting solar panels and green clothes drying have a positive impact on financial and operational performance. For example, eco-innovation practices in Catalonian hotels was positively associated with improved operations cost, hotel image, sales, and market share compared to competitors (Bagur-Femenias et al., 2016). On the other hand, García-Pozo et al. (2015, 2016) examined the relationship between eco-innovation and labor productivity in Spanish hotels. The study was conducted among 173 hotels in Andalusia province that represented 70 hotels as 3-star, 93 as 4-star, and ten as 5-star hotels. The study found that implementing eco-innovative practices in hotel organizations enhances labor productivity by about 8.15%. It is not currently possible to assess the significance of this growth, as similar studies have not been carried out or found in other countries. However, the obtained Garcia-Pro et al. (2016) results provide an optimistic assessment of the use of eco-innovation in hotels regarding the efficiency of the hotel staff. Many hotels are attempting to reduce the level of adverse environmental impacts, which has led to the emergence of ‘green hotels’ (Nimri et al., 2017). The industry defines ‘green hotels’ as lodging properties that are committed to various environmental initiatives such as reducing energy and water consumption, and decreasing waste outputs (Rahman & Reynolds, 2016). Water conservation, towel, and linen reuse programs, the use of energy-efficient light bulbs and wastewater treatments are among the most popular green practices adopted in the lodging industry (Bohdanowicz, 2006; Chan, Wong, & Lo, 2009; Dimara et al., 2017).

2.7.2 Waste management

Every day hotels produce a significant amount of different types of waste. Singh et al. (2014) stated that the hotel industry is one of the significant contributors of organic/wet waste in landfills, which is the main cause of greenhouse gas emission. Similarly, Al-Aomar and Hussain (2017) informed that the majority of environmental impacts created by the hotel industry could be attributed to site planning and facility management; excessive consumption of local and imported non-durable goods, energy, and water; and emissions into the air, water, and soil.

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26 Furthermore, Bacot et al. (2002) reveal that for commercial sector facilities, which hotels represent 23%, generate around 45% of all municipal solid waste. The solid waste generated from the hotels is disposed of primarily in landfills. Hotel waste can be broadly classified as wet and dry waste. Wet waste comprises mainly the organic waste (food waste, garden waste, and cooking oil waste) and dry waste includes recyclable waste like metal (cans), plastic, paper, linen and others (Bacot et al., 2002).

The conducted research has shown that the efforts of hotels to separate waste by increasing the number of baskets for garbage collection, composting food waste can bring profits in the long term. A hotel can earn around $23,371.00–24,395.70 per year and can reduce greenhouse gas emissions equivalent to 90 passenger vehicles annually by proper recycling of their waste (Singh et al., 2014) (Appendix II-e).

In addition to the staff, the hotel guests can be engaged in the waste separation. The results of the research showed that hotel guests are actively involved in the separation of waste knowing that they are engaged in an important and socially useful business (Singh et al., 2014). In this regard, the administration of the hotels does not have to feel uncomfortable addressing this problem to the guests of the hotel. In this regard, it can be concluded that FM should pay considerable attention to the direction of waste management.

2.7.3 Energy Saving

Another important aspect of hotel operations, which significantly affects the operating costs, is the consumption of electricity. The economic feasibility of investments in energy systems is examined by comparing the degree of long-term economic performance of different alternative solutions used to cover the electrical and thermal needs of the building. Kyriaki et al., 2017.

A partial or complete replacement of the previously existing power supply schemes, including external power suppliers to independent power sources such as solar panels, can reduce the hotels’ costs and dependence on electricity suppliers. Beccali et al. (2017) having conducted a study in one of the hotels on the island of Lampedusa (Italy) confirmed the above mentioned. The results of modernization show that electricity savings can be obtained, reaching an annual solar fraction of 64%. The best results should be expected during the spring (90% reduction in April and May), while savings drops to 33-35% in winter (January and February) (Beccali et al., 2017, Appendix II-b )

Another possibility to reduce energy operating costs is to replace existing lighting systems (incandescent, halogen) with led systems that consume less electricity and are more durable. Beccali et al. (2017) revealed several significant facts:

•_{concerning the actual electricity consumption for lighting, replacing halogen lamps}

• with LED leads to 65% energy savings and 68% savings when illuminance control is activated;

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27 • concerning the actual electricity consumption for lighting and appliances, changing lamps from halogen to LED leads to 27% energy savings and 29% savings when illuminance control is on;

• the peak of consumption decreases from 18 kW to 12 kW for the LED scenario, and to 11 kW for the LED and illuminance control scenario;

•_{integrating building automation control technology into the system reduces energy} consumption by about 6% concerning overall electricity consumption, with a peak reduction from 18 to 15 kW.

Similar studies have been conducted by Kresteniti (2017) in Thessaloniki (Greece), which is the second largest city in the country and one of the most popular tourist destinations. Researching an 8-story five-star hotel with a combination of 500 m2 solar collectors and 500 m2 photovoltaic elements, he found that “even with the half application area the available solar energy through the collectors is higher than the necessary and covers 88% of the hot water (Kresteniti (2017). Furthermore, additional available energy can be used by an absorption chiller to cover the cooling needs that also occur during the same period as the energy surplus. As a result, the cooling consumptions could be reduced by almost 50% if an absorption machine with a ratio of 1.1 is used. Moreover, 25% of the lighting needs are covered by the 500m2 _{of photovoltaic elements with a total of 50 kW. Financial calculations}

showed that such investments have a payback period of 19 years and an average cost of 93€/ m2_{water (Kresteniti, 2017).}

Chan et al. (2013) researched several hotels in Shenzhen (China) to identify the economic impact of using solar energy collectors to produce hot water. The study further confirmed the usefulness of flat panel type solar collector in generating hot water for lodging business in the low-rise building (Chan et al., 2013). The results of the studies are presented in Appendix II-d. The data presented allow assessing the effectiveness of investments in solar panels. As noted above, such information can help FM demonstrate the effectiveness of such investments to hotel owners who do not yet use such technologies.

2.7.4 Towel reuse program

The researchers have identified another exciting aspect of the development of sustainable technologies in hotels, namely the desire of hotel guests to participate in the towel reuse program. Towel reuse is the most effective and widely used green hotel practice (Bruns-Smith, Choy, Chong, & Verma, 2015; Dimara, Manganari, & Skuras 2017). Dimara et al. (2017) stated that 72% would adopt a towel reuse program and that 44.1% of them are willing to pay extra for a single practice of towel reuse, in accordance with the meta-analysis of international studies which showed that an average of 53% of hotel customers are willing to pay more for green hotel practices or green hotels in general (Appendix II-e).

The use of such a program may also affect operating costs and hotel revenue. Goldstein, 2009 informed that the daily cost for the provision of fresh towels could run to $1.50 a room. Along with that Dimara et al. (2017) stated that The Association of Institutional Linen Management

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28 (USA) estimates that hotels can save up to $6.50 a day per occupied room (Griffin, 2001; National Association of Institutional Linen Management 2001)

Also, the use of a towel reuse program can significantly save water necessary for washing clothes and towels. The Green Lodging Calculator assessed that a 150-room hotel could conserve 210,000 gallons of water and 143 gallons of detergent per year with a towel and linen reuse program, not to mention the energy saved (Dimara et al., 2017).

It is interesting to note that the implementing of such a program is possible in almost every hotel as it does not require significant financial costs. It takes to place reminders or signs in prominent places such as bathrooms telling that linen or towels can be reused. Such an initiative on the part of FM can also increase the added value from the position of financial prospects.

2.7.5 Water Saving

Water is an essential factor of production for the hotel industry (including hotels, boarding houses, and campsites) (Barberán et al., 2013). The reason for this is partly that many guests in a hotel forget about the need to save water in contrast to how they save it at home. Loose water taps and excessive use of water during showering can result in a 3-fold increase in water consumption (Barberán et al., 2013). In this regard, this expense significantly increases the operating costs of hotels, which depend on external water suppliers.

The researchers conducted a study on the effect of the renovation of the water distribution system in a 4-star hotel in Zaragoza (Spain). Zaragoza is in the center of the north-eastern quadrant of the Iberian Peninsula. “Specifically, taps with ecological cartridges and a dual flow system (if the tap lever is raised until it meets a slight resistance, only 60% of the total flow is obtained) and aerators limiting the flow to 6 L/min were fitted to the washbasins and bidets. Also, discs limiting the flow to 9 L/min were fitted in the showers. These changes affected guest bathrooms and toilets and washrooms in the public areas (reception, restaurant, lounges, gymnasium and management offices). Also, further retrofitting took place in the kitchen, consisting of replacing pre-wash shower heads with others limiting the flow to 9 L/min, and replacing the devices controlling the flow of water to the dishwashing station, which is used only for banquets and similar events and consumes only hot water (no change was made to the kitchen and cafeteria dishwashers, which are used every day and consume cold water)” (Barberán et al., 2013). The modernization allowed saving more than 20% of water during the year (Appendix II-e).

To calculate the project costs, Barberán et al., 2013). Consider both the real case of the hotel (called the particular case) and the general case described above.

Using the same input data including the cost of water, gas, electricity and a 5% discount rate for the financial analysis and a social discount rate of 3.5% for the economic analysis, following the recommendation of the European Commission for countries not receiving Cohesion Funds, the authors of the study calculated Financial profit and Economic benefits (Appendix II-e).

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29 As noted above, such financial calculations can help FM demonstrate to hotel owners the effectiveness of investing in systems that save water as well as installing various water-saving systems in their hotels.

The studies have shown that the installation of water-saving equipment has a positive effect on the financial results of the hotel, allowing to reduce the consumption of water and electricity without causing dissatisfaction with the hotel guests. Also, such modernization reduces the burden on water suppliers and has a positive impact on the environment. Also, the introduction of the above technologies can reduce the overall load on energy networks and electricity producers, which in turn will use less non-renewable resources (gas, oil products) to generate electricity for heating and transporting water. These efforts will contribute to both financial and non-financial benefits not only for the hotel industry. Several authors have identified direct and indirect effects of eco-innovation on company performance in different directions (Cheng et al., 2014, Brasil et al., 2016). In addition, Aboelmaged (2018) having conducted the study in the UAE found that hotel managers can fulfill the hotel’s financial (e.g., market share and sales) and non-financial (e.g., image and guest loyalty) performance through implementing eco-innovation practices as a new strategic weapon that proactively meets sustainability prerequisites and enhances hotel’s competitiveness. Finally, taking into consideration the economic and the environmental perspective, the alternative system has almost 67% less CO2 emissions compared to the

conventional and is also cost-effective. Kyriaki et al., 2017. These efforts will make a significant public contribution to the protection of the environment and reduce the production of greenhouse gases.

As noted above, the changes have a direct relation to a certain amount of investment. As noted by Bruns-Smith et al. (2015) investors are interested in improving the sustainability of their hotels as it opens up long-term prospects for their business. However, investors may face the challenge of the increase in the cost of rooms caused by the investment causing unwillingness of guests to pay more. However, Hilton's Scandic experiment with offering 95% biodegradable rooms to hotel guests, the cost of which was 10% higher, showed that the popularity and demand of these rooms were higher compared to the standard rooms (Bruns-Smith et al. 2015).

Also, the study conducted by at the Statler Hotel in Ithaca, New York found that 45% of the surveyed hotel guests would be willing to pay a higher price for hotel accommodation supporting sustainable initiatives (Bruns-Smith et al. 2015). Hotel guests can support the demonstration by hotels of their contribution into the environment and the use of sustainable technologies through the booking of rooms of such hotels, which will certainly show higher level WTP for staying in such hotels.

There is no doubt that the satisfaction of hotel guests with sustainable initiatives is an important indicator of the success of such initiatives. Therefore, the hotels using sustainable technologies should not only be more environmentally friendly but also strive to be the best among the competitors (Bruns-Smith et al. 2015).

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30

3. Research Methodology

This Chapter consistently presents several interrelated aspects, namely: the formulation of the problem, the questions that were answered in the course of this study, as well as the methodology of the study.

3.1 Research objective

“Objectives are more generally acceptable to the research community as evidence of the researcher’s clear sense of purpose and direction” (Saunders et al., 2008). In addition, Saunders et al. (2008) stated that research objectives and a detailed review of the relevant literature are the base of research strategy.

As noted in the previous chapters this study aimed to identify the factors that influence the desire to pay a premium for maintaining sustainable hotel initiatives among tourists visiting Amsterdam since previously no such studies were conducted in Amsterdam before. Another goal is to compare the obtained results with the results of other researchers and to provide recommendations for the management of the hotels as well as FM for a more accurate matching of tasks in the field of sustainable development and strategy of Corporate Real Estate Strategy.

3.2 Conceptual model

As noted in the previous Chapter, the theoretical basis for the creation of a conceptual model for this study was the model presented by Laroche et al. (2001) (Figure 2.1).

Three categories of Behaviors, Demographics, and Knowledge were included in the conceptual model developed by the author.

The author of this paper aims to find out what demographic characteristics of hotel guests affect the WTP. The Demographics category included the following criteria of Country of Origin, Age, Gender, Marital status, Education and Income. The second objects of the study were some aspects of the behavior of hotel guests. This category examines the hotel category guests prefer, from the willingness to pay more for maintaining sustainable technologies when choosing a hotel and their willingness to pay more for hotel accommodation as a premium (tip). The third category presented in the conceptual model is the knowledge of the client in a particular case, the presence of experience in the hospitality industry. The author was interested in the question whether there is a relationship between experience in the hotel and WTP. According to the author, this dependence should exist because people who had or have experience in hotels are intimately connected with the hospitality industry and should be more interested in the development of such technologies because it also facilitates the staff of the hotel's operating activities (through sorting of garbage, saving towels, etc.). To create this conceptual model, the author did not use the Values and Attributes categories presented in the theoretical model. According to Hofstede (2010) ”The cultural dimensions represent independent preferences for one state of affairs over another that distinguish

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31 countries (rather than individuals) from each other. ” Thus, assessing one of the components of the Value category for example Individualism, according to the Hofstede studies, level of individualism in North America (USA, Canada) is higher than in China and South-East Asia (e.g., Vietnam) Hofstede (2010) (Figure 3.1).

United States of America 91

Canada 80

China 20

Vietnam 20

Figure 3.1 Level of Individualism (Hofstede, 2010).

Due to the fact that according to Hofstede (2010) representatives of each individual country basically have the same level of individualism or other criterion (Collectivism, Safety), it is possible to assume that the relationship of Individualism and WTP will be similar to the relationship of Country of Origin and WTP (criterion of Country of Origin is presented in the category of Demographics).

As for Attitudes, the relationship between this aspect and WTP was also not an aspect of the study in this paper. According to the author of this work, the subject's attitude may vary depending on demographic factors or age. For example, 25-year-old respondents may have different attitudes toward the development of sustainable technologies depending on the country in which they live. However, residents of one country may have different attitudes to WTP issues depending on their income level or age.

According to the author of this work, the Values and Attitudes Categories should be considered when studying WTP issues among a homogeneous demographic group, for example, in one country, such as studying some aspects of WTP in Malaysia by Tsen et al. (2006) or in the United States (Han & Hyun, 2018). On the basis of the above, the author has developed a conceptual model (Figure 3.2) .