Hotels in 2023: a time for asset transformation and resilience.

The climate emergency and social instability demand urgent action from hotel investors, the public and privatesectors,and industry stakeholders.

COP27 Hanging over COP27 was the specter that despite decades of meetings and landmark accords, like the Paris Agreement, the world was still not doing enough to slow the climate crisis. UNEP’s Emissions Gap Report 2022 found that policies currently in place point to a 2.8°C temperature rise by the end of the century, a number that could lead to catastrophic consequences for the planet. Full implementation of the latest pledges to reduce greenhouse gases could slow this increase to 1.8-2.1°C, but the report does not find a credible pathway for the 1.5°C target.

States are turning more to technology The United Nations Bodies, Technology Executive Committee, and Climate Technology Centre and Network plan to accelerate the deployment of technologies. Secretary-General - Antonio Gutierres- unveiled a US$ 3.1 billion plan to ensure everyone on the planet is protected by early warning systems in the next five years.

COP15 Next week, December 7th to 19th, the UN Biodiversity Conference Part 2 will take place in Montreal, Canada. World leaders will decide on the new Post-2020 Global Biodiversity Framework and will also include a high-level segment. Ahead of next week's COP15, the fifteenth meeting of the Conference of the Parties to the Convention on Biological Diversity will be the biggest biodiversity conference in a decade. World leaders are expected to agreeon a new Global Biodiversity Framework. The post-2020 global biodiversity framework will be presented for consideration. The framework has 21 action-oriented targets for urgent action over the decade to 2030. Healthy biodiversity means healthy people, food, andwater security. Goal A Enhance the integrity of all ecosystems. Increase of at least 15% in the area, connectivity and integrity of natural ecosystems, supporting healthy and resilient populations of all species, the rate of extinctions has been reduced at least tenfold, and the risk of species extinctions across all taxonomic and functional groups, is halved, and genetic diversity of wild and domesticated species is safeguarded, with at least 90 % of genetic diversity within all species maintained. Goal BNature’s contributions to people are valued, maintained, or enhanced through conservation and sustainable use supporting the global development agenda to benefit all. Goal CThe benefits from the utilization of genetic resources are shared fairly and equitably, with a substantial increase in both monetary and non-monetary benefits shared, including for the conservation and sustainable use of biodiversity. Goal DAdequate financial resources to implement the framework are available and deployed, progressively closing the financing gap up to at least US $700 billion per year by 2030. Adequate other means, including capacity-building and development, technical and scientific cooperation and technology transfer to implement the framework to 2030 are available and deployed. European Union Objectives The intention is to establish a global biodiversity framework toeffectively halt and reverse biodiversity loss. The EU has the following measurable goals and targets:

1. Protect at least 30% of land and oceans by 2030

2. Restore 3 billion hectares of both land and oceans

3. Halt species extinctions caused by humans

4. Address unsustainable agriculture, forestry and fisheries

5. Tackle drivers of biodiversity loss such as pesticides, invasive alien species, and plastics

6. Strengthen the links between biodiversity and climate action, for example with nature-based solutions
   

Polycrisis The word ‘polycrisis’ describes the rare situation in which multiple crises hit society simultaneously. Multiple global systems become causally entangled in ways that significantlyand irreversibly degrade humanity’s prospects. Various issues affecting the hospitality industry are not limited to inflation, war, and geopolitics. Science has proven that climate-related risks and biodiversity loss threat businesses and society. Hotels operate in a volatile, uncertain, complex, and ambiguous environment. As a result, owners, operators, and leadership teams face a constantly changing market. The rise in energy and food supply costs, water stress, and chronic staff shortages require industry action and impact monitoring as they become more acute. Hotelsthat lead the sustainability and regeneration conversation in 2023 will be those that understand risks and opportunities assessments and focus on tangible impacts, and will navigate geopolitical uncertainties, energy transition and operational challenges effectively. The current global situation can be described as a polycrisis with multiple, long-term crises simultaneously culminating into a moment of systemic risk, with each one complicating the solution of the others. The consequences of these crises can be assessed more thoroughly, looking through three different lenses: an ecological, an economic, and a social/political lens. - Triodos Investment Manager 2023 Outlook What would this transition look like in the hotel sector? F&B The food source for restaurants and hotel operations has to support regenerative agriculture*, fair and just supply chain and sourcing practices, and guests' healthy diets.

• Sourcing consciously, promoting plant-based, permaculture, seasonal ingredients, labeling menus with CO2 emissions, etc.

*Regenerative agriculture: “Regenerative Agriculture” describes farming and grazing practices that, among other benefits, reverse climate change by rebuilding soil organic matter and restoring degraded soil biodiversity – resulting in both carbon drawdown and improving the water cycle - Regenerative International Hotel Circularity FF&E and OS&E The circularity of operational suppliers and building furniture also plays a key role. Understanding the opportunities for renting, using second-hand or giving a second life to other properties' furniture and fixtures, or simply donating them to keep the cycle closed. EURegulation on reducing packaging waste and making all packaging recyclable by 2030https://ec.europa.eu/commission/presscorner/detail/en/ip_22_7155 Energy Transition Energy bills are among the top issues and costs in utilities. Ultimately, the goal is to have hotels that have a decarbonization strategy and divest from fossil fuels, invest in renewable energy that fits with the local energy infrastructure. Using roofs and other asset sides to growbiodiversity and support carbon sequestration projects in city-center hotels. Social transition to support thriving destinations and further cooperate outside the hotel and explore community-led and based possibilities. Wellbeing Beyond architecture and design, looking into how the hotel operations experience boosts guests' and employees' well-being is a key topic. Guests have less materialistic-driven satisfaction and booking tendencies, to healthy and wellbeing-focused inspirational brands. Hotel Wellbeing and Mental Health procedures and SOP facilitate an environment where everyone feels safe and make it easier to enable people-centric innovation. To do so, it is imperative to create an environment where teams can thrive regardless of adversity. Education and Implementation In this journey, all the employees (from the front line, mid-management, leadership, and board members) have to work towards the same goal and purpose. Thus, having internal infrastructure and a learning and development strategy is key regardless of the brand and team size. Digitalize the asset When hotels implement technology in portfolios, it is key to think before choosing the software or the technology to be used. The data collection points are not as important as choosing the right metrics and monitoring tools. Use technology and have a continuous improvement approach to SOPs implementation.

• Back office digitalization

• Automatize processes

• Use technology to organize unplanned tasks and link them to climate-related scenarios and issues.

• Staff education through digitalized training

• Digitalized procedures to transform hotel practices.

The impact on the asset revenue and ADR

• Upscale and lifestyle brand guests' willingness to pay more (WTM) for conscious stays.

• Sustainability is becoming a commodity in hotels, and it is expected by travelers.

• Calculate the cost of inaction (COI) and its impact on the financial materiality

• Expenses for non-compliant / brown assets and risk of losing the license to operate

Implementing cloud PMS, building technology systems, facility management APPs, measuring and reporting tools, and in-house communication tools will help to improve the implementation, communication, and transparency of organizational processes. The most important thing in technology implementation into hotels performance is context. Understanding the difference between KPIs and SDPIs Key performance indicators help measure the hotel's operational performance and sustainable development performance indicators. However, companies have to account not only for how they perform in terms of economic efficiency and good governance but also concerning environmental, social, and human rights impacts. Current indicators, methodologies and reporting models still fail to provide an adequate basis for assessing impacts related to socio-economic, governance and environmental dimensions of sustainable development. Several blind spots that render sustainability reporting ineffective need to be addressed to create meaningful assessments. Reporting overload and an excessive number of indicators are also problematic. - United Nations Research Institute for Social Development (UNRISD) Tech tools implementation without the right mindset, culture, and leadership education are ineffective in achieving businesses' sustainability goals. Define a clear path for what needs to be measured, establish the strategy of how to feed from hotel data points, and choose the technology carefully. For hotel assets to be future-proof and resilient, leadership teams and operators should go beyond energy and waste efficiency tools, comprehend the link between biodiversity loss and climate-related risks, human rights and social issues, and clarify the scope of impact for asset decarbonization. Data collection and understanding the hotel's context are imperative to efficient asset management and technology implementation.

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