Why ESG isn’t just about added costs for hotel investors

The Shape of Things to Come - An Investor Update panel
IHIF 2021 investor panel discussion. (Questex)

Environmental, Social, and Corporate Governance, shouldn’t be seen as a cost to hotel investors but as a profit opportunity.

Speaking as part of a panel discussion at the International Hospitality Investment Forum (IHIF) 2021, Brian Kaufman, managing director in the Real Estate Group at Blackstone, said the prospects for returns were genuine. 

“One thing to keep in mind is ESG initiatives aren’t just necessarily costs, there’s real ROI opportunity that comes from investing in ESG initiatives, whether its water reduction initiatives, energy efficiency implementation, we as a firm have an emissions reduction target that we’re very focused on across all sectors across all assets,” Kaufman said.

Dominic Seyrling, investment director at Archer Hotel Capital explained that given his company has the ability to hold assets for the long term, it meant taking ESG extremely seriously.

“If I see that a private equity company has developed an asset and had no consideration for ESG then it’s probably a red flag,” Seyrling said.

Lack of distress

For most investors there has been a distinct lack of distressed assets entering the market but for some at the smaller end, there have been opportunities.

“We play in a slightly different segment, where we saw actually a lot of discount and a lot of opportunity. We look for boutique hotels and boutique deals that for many institutional players are just too small,” Benjamin Habbel, founder and CEO of Limestone Capital, said.

That means targeting family-owned businesses where there might be inheritance issues. Over the last 18 months, Limestone has managed to secure four acquisitions.