The costs of sustainability in hospitality investment - implications for reference ADR pricing using the Hubbart formula

Abstract

Purpose: In order to contribute to the knowledge on the subject, in this article we propose to present, the differences between an investment in a hotel without specific environmental concerns, and one that incorporates this positioning from scratch.

Methodology: For this purpose, we will use the Hubbart formula that allows us to establish the reference price of the average daily rate for the sale of the product "room" for the two aforementioned investment hypotheses. The comparison will also be made considering the seasonality in a city destination versus a sun and sea destination.

Findings: we present the differences in the competitiveness and feasibility of investing in sustainability, considering the costs of implementing the investment, its impact on operating expenses, and the dilemma between responding to customers' increased demand for sustainability versus competitive pricing of the hotel room product offering in the market.

Originality: Although there is relative consensus on the need to incorporate sustainability issues, particularly in new hotels to be built, many independent hoteliers or small chains are faced with the problem of estimating the impact on spending and therefore competitiveness in the market. We believe that with this article we contribute to improve knowledge on the subject.