3 Travel Companies Turning Sustainability From A Cost Center to a Profit Generator

By Brad Martin

Corporate sustainability efforts are often derided by stockholders as “do gooder” actions that are a cost center as opposed to a source of additional profits. While that criticism has been largely debunked by studies such as that conducted by We Mean Business in April 2016, which found that companies taking steps to mitigate climate change accrue profits at an above-market internal rate of return of 27 percent, the critique remains persistent against the travel industry.

That’s in part because, for many, travel is an industry in which excessive consumption on both a personal and ecological level is seen as integral to the industry’s business model. But a number of travel companies prove that sustainability can drive increased margin and profits. Here are three of them.

1. Holland America Cruises

Within popular culture, cruise lines epitomize excessive consumption both for their passengers and as to their ecological impact. Bucking that popular image, however, is Holland America. Marketing to the luxury cruise sub-market, Holland America has incorporated a black water treatment system, worked extensively with their supply chain to reduce the amount of waste generated each day, and employed and empowered environmental officers on every ship to constantly seek areas of improvement. One such improvement was adding window tinting to passenger room windows to keep rooms cooler and reduce the use of air conditioning.

The company was an early adopter of low hanging fruit efforts like towel re-use programs and installing low-flow showerheads and faucets. They’ve since gone well beyond these efforts by incorporating a two stage water internal waste water treatment system, converting to all non-toxic cleaning supplies and soy based detergents among other steps. Holland America has also modified the ships themselves and their travel schedules. For example, they schedule port visits to work with, rather than against, tide schedules to conserve fuel, and by adding silicone paint to the ships hulls they’ve reduced drag and fuel consumption.

In terms of profitability, the company has leveraged these efforts to differentiate itself among the premium segment of the cruise industry, where it is a leader, and as such able to command higher margins than most competitors across the cruise industry. That success is reflected in the earnings and healthy profit margin of its parent company, Carnival, which earned $1.9 billion on nearly $16 billion in sales in 2011, in part due to the success of Holland America.

2. NatureAir

Listing an airline company in an article highlighting sustainable businesses may seem counterintuitive, but NatureAir is no ordinary airline. Established in Costa Rica in 2000, the airline takes extraordinary measures to reduce its carbon emissions, such as providing bus service for employees, using single-engine taxiing, and replacing lighting with energy efficient LEDs. Additionally, the company is researching incorporating ethanol and pig waste as fuel alternatives. But because the airline industry has an inherently heavy and largely unavoidable carbon footprint, the NatureAir purchases carbon offsets which support wind farms, solar energy and forest conservation, which led it to be certified in 2004 as the world’s first carbon neutral airline.

In terms of how these conservation efforts have translated to corporate growth and profitability, NatureAir has seen consistent and dramatic growth in large part due to their ability to distinguish themselves from larger more established competitors through their marketing as a sustainable airline. That status has given the company a dramatic leg up when developing and growing partnerships with other eco-conscious companies and tour groups. Growing from a mere one aircraft in 2000, the company now makes 74 flights per day.

3. Element Hotels

The upscale hotel chain parent company Starwood, which includes Westin and Sheraton, has made sustainability a priority, reducing energy usage by 11.5 percent, water usage by 14.8 perent and carbon emissions 11.6 percent over the last four years. This initial success in attacking low-hanging fruit for sustainability and cost savings led Starwood to launch a sustainability-focused line of boutique hotels under the brand name Element. Element hotels are all LEED certified, use eco-friendly paints, carpet and furniture, utilize water-efficient faucets and fixtures, and employ reflective roof surfaces to reduce energy demands.

In terms of the profitability of the brand, because it’s a subsidiary of Starwood, individual brand statistics are unavailable. However, a 2014 study by the Cornell School of Hotel Administration compared 93 LEED-certified hotels to 514 non-certified competitors, and found that the LEED-certified hotels had an average ADR of $10 more for the long term, and an additional $20 for the two years immediately following certification, which collectively outweigh the additional infrastructure costs considerably. Thus it’s clear that Starwood has made, and continues to make investments in sustainability not only for the ecological benefits but also because it is a source of increased margin.

Conclusion

The financial case for travel companies making the investments necessary to seriously incorporate sustainability efforts into their business model is rather clear, as several studies have shown. Without trailblazing companies actually making the investments needed to demonstrate the viability of sustainable business practices to achieve greater profitability, however, such conclusions remain purely academic. That’s why it’s important to highlight the financial success of companies like those listed above.

Image credit: Flickr/Bernal Saborio

Brad Martin is an Editor with Soar Payments, a merchant account provider that serves the travel industry. You can get company updates and learn more about Soar Payments via their Facebook page.