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.
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.
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.
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.
Image credit: Flickr/Bernal Saborio