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Revenue management and sustainability in hotels: how to get the maximum benefit (without greenwashing)

How to optimize revenue in your hotel by focusing on environmental sustainability.

How to combine revenue management and sustainability in hotels | Smartpricing

The relationship between environmental sustainability and tourism is an increasingly central issue facing entrepreneurs in the industry. According to the latest EPRS (European Parliamentary Research Service) estimates, tourism contributes about 5 percent of global greenhouse gas emissions, and although transportation accounts for the largest share (75 percent), the hospitality sector is responsible for about 20 percent of the emissions, due mainly to heating, air conditioning, and operation of bars, restaurants, swimming pools, and so on.

Awareness of this huge environmental impact has inevitably affected travelers as well, turning sustainability into a factor influencing not only the choice of location and means of transportation, but also the accommodation facility at which they stay.

According to the Sustainable Travel Report 2023 by

  • two thirds (65%) of respondents would prefer to stay in accommodation certified as sustainable
  • and 43% of respondents would be willing to spend more for such an option

And that's where revenue management comes in: while seemingly disconnected from any environmental issue, it can actually become a very powerful tool for meeting the growing demand for sustainable travel options while improving your profit margins.

In this article, we will look at what concepts to keep in mind and steps to take to apply revenue management from a sustainability perspective in your hospitality establishment as well.

How to analyze sustainability in hotels and plan interventions

Before implementing any Revenue management strategy from a sustainability perspective, it is important to establish a starting point. This involves analyzing your hospitality facility, defining the sustainability goals you want to achieve, and planning the interventions needed to realize them.

The best way to do this is to keep ISO 21401 (Tourism and Related Services - Sustainability Management System for Accommodation Facilities) as a reference: created in 2019, it is still the only internationally recognized standard that specifies requirements for the sustainable management of hotels, b&b's, campsites, hostels and residences.

According to the standard, facilities that achieve specific requirements from an environmental (energy and water efficiency, environmental protection, waste management), social (protection of workers and respect for human rights in general) and economic (promotion of local economies) perspective can be defined as sustainable.

Whether you choose to obtain ISO certification or not, following its guidelines and taking action to make your hotel truly sustainable will allow you, on the one hand, to reduce and optimize operating costs, achieving significant savings, and, on the other hand, to tangibly demonstrate your commitment to sustainability and attract even the most sensitive customers to this issue, without running the risk of "greenwashing."

Once you have completed actions to increase sustainability, you may choose to include them in the hotel's sustainability report. This is an annual document where you give an account of the choices made in the economic, social and environmental spheres.

As of 2024, the sustainability report is mandatory for companies with more than 250 employees, a turnover of more than 50 million euros, or an annual budget of at least 43 million. However, more and more small businesses are choosing to draw it up voluntarily, because it is ethically sound and because it is increasingly beneficial in terms of market competitiveness.

Where to start: promoting the local economy with cross-selling

While implementing actions to increase the environmental sustainability of your hotel may take time, the first place you can start to meet the standard laid out in the ISO norm just seen is by promoting the local economy and culture.

In this sense, cross-selling may prove to be the most immediate strategy from a revenue management point of view. Cross-selling means proposing to your customers additional products or services that can enrich their stay experience (if you want to learn more about this topic, you can read our article with everything you need to know about how to cross-sell in hotels).

With a focus on sustainability, it will be essential to incorporate cross-selling into a sustainable philosophy that covers every aspect of your accommodation, implementing an offer that includes, for example:

Local and organic food products

Provide organic and zero-mile food options in your restaurant or bar and communicate this choice through dedicated menus, meetings with vendors and themed tastings. This type of cross-selling not only provides customers with an authentic, high-quality dining experience, but also supports the local economy and reduces the carbon footprint associated with food transportation.

Ecotourism experiences

When selecting your external partners, you may favor those that offer eco-sustainable guided tours, i.e. those that guarantee the lowest carbon footprint (walking, cycling, electric vehicle tours) and pay more attention to the knowledge and protection of natural heritage.

Local crafts and workshops

Suggesting the possibility of purchasing "responsible souvenirs" to clients, such as handicrafts made by local artists and artisans, is another idea that is easily pursued. Similarly, courses or workshops taught by local experts can be organized.

How to manage room rates with a view to sustainability

After embarking on the path to increasing the sustainability of your accommodation, you might ask yourself a question: what impact does this have on my revenue? Can I optimize and increase my revenue not only with cross-selling activities, but also by acting directly on room pricing?

The answer is yes, and the first thing to do is to broaden your view of revenue management.

Traditionally, revenue management aims to maximize revenue through pricing strategies that allow you to optimize room occupancy. This process, however, focuses primarily on revenue, often leaving out the analysis of operating costs, which generally falls under the purview of management control.

However, for a hotel pursuing sustainability goals, it is essential to take a more holistic approach, which we can call "profit management." This may lead to, under certain circumstances, the decision to reduce the number of rooms sold (by raising prices).

Doing so will result in lower operating costs: less lighting, less heating/cooling, less use of courtesy sets and cleaning products, and so on.

Reducing consumption will not only reduce costs and save money, but also improve your carbon footprint.

Communicating sustainability in hotels

As can be deduced from the survey cited at the beginning of this article, being recognized as a green hotel boosts an establishment's attractiveness to an increasingly environmentally conscious clientele. And, to be recognized in this regard, it is crucial to communicate your commitment in the right way.

According to a Junker survey, only 10.8 percent of accommodation listings contain sustainability information, while 44 percent rarely or never mention it.

Among those that do mention sustainability, however, only 3 out of 10 accommodations actually present the features as they were mentioned in the ad. For the others, one can speak of greenwashing, which is the practice of exploiting green themes that are, however, not matched by concrete facts.

This is why it is essential to not only communicate sustainability on all your channels (website, OTA, social media, email, etc.), but to do so in an absolutely transparent and truthful way. Even better, while accompanying the communication, if not with ISO 21401, at least with one of the many sustainability certifications currently available for the hotel and non-hotel sector.

In this article you have seen how sustainability and revenue management can be combined into a single strategy aimed at increasing your market competitiveness, reducing operating costs and maximizing your revenue.

However, navigating the concrete actions to take, the best certifications to aim for, and the activities needed to engage customers and staff can be tricky. That's why we've created a comprehensive guide for you, where you'll find tips and practical examples on whether and how your facility, too, can actively engage in sustainability.