ESG hospitality: what clients and banks now ask of hotels

Corporate travel buyers now ask hotels to prove their sustainability, and banks are starting to ask the same questions. For many hotel owners and operators, ESG hospitality still sounds like a reporting exercise for large chains. That view is risky. Environmental, social and governance performance is becoming a condition for winning corporate business and for borrowing money at a fair price. This article explains what is changing, why it matters for every hotel, and which steps to take before the pressure arrives.

The insights come from Erwin van der Graaf, VP Operations at a global hotel operator, where he is responsible for a portfolio of hotels across Western Europe from his base in Amsterdam. He also chairs a Dutch platform that promotes the wider hospitality industry to students and the labor market. In his view, sustainability is super important and still underestimated, and hotels that have not invested yet face a tough few years ahead.

What ESG hospitality means for a hotel today

ESG stands for environmental, social and governance. For a hotel it covers how the business affects the climate, how it treats its people and the community around it, and how it is managed. Van der Graaf sees all three gaining weight, but the environmental part is where the commercial pressure builds fastest.

The driver is reporting. Corporate clients now deal with the Corporate Sustainability Reporting Directive, the CSRD. Van der Graaf points out that many companies are still struggling with it, but that it will only become more important over time. Every company will need to report on its efforts to become more sustainable, including its carbon emissions. That is why, in his words, corporate clients require hotels to measure their carbon footprint: these companies have to report on their own footprint, and business travel is part of it.

Why corporate clients ask for an eco label

A sustainability claim on a website is not enough for a corporate buyer. Van der Graaf says a lot of clients today only book hotels that have an eco label certification. A certificate gives them certainty that the hotel is not greenwashing or window dressing, and that it actually lives up to what it says and can prove it. A related article looks at the reverse risk: greenhushing in hotels.

“There will be high demand for hotels to move into eco certification.”

Erwin van der Graaf, 13:06

For hotels without certification, the consequence is simple: they risk losing business from corporate clients. Those clients may also ask the hotel to measure its carbon footprint, because they need the figures for their own reports. A hotel that cannot supply them makes itself harder to book.

Carbon budgets change how business travelers choose

A newer development makes the link even more direct. Van der Graaf describes companies that give employees not only a travel budget in money but also a carbon travel budget. In theory, an employee can reach the end of the year with a few thousand euros left to spend and no carbon budget left at all.

That changes how a traveler picks a hotel. A room with a lower carbon footprint uses less of that budget, which makes the hotel more attractive to book. In his view, this rewards the hotels that have already invested in sustainability. For a property that relies on corporate guests, the footprint of the room it sells becomes part of the offer, next to rate and location.

How banks price ESG hospitality performance

The second angle is financing, and Van der Graaf calls it another very important one. Banks already reward companies that can show where they stand.

“We know that banks are today giving a discount if you can prove a certain level and ambition of sustainability for your company.”

Erwin van der Graaf, 14:25

He warns hotels not to be naive about where this is heading. In his view, the interest discount on a loan will soon turn into an interest surplus for companies that cannot provide the details of their sustainability efforts. Borrowing money or getting a mortgage will be much cheaper for a sustainable company than for one that invested too late. At some point, he expects banks to close the tap and stop financing companies that are underinvested in sustainability.

That makes sustainability a question of financing costs as much as image. A hotel that waits risks paying twice: through higher interest and through lost corporate bookings. A related article looks at why a hotel feasibility study comes before the architect.

The social side: people, diversity and opportunity

ESG is not only about energy and emissions. The social pillar covers how a hotel treats its people, and here Van der Graaf sees the industry starting from a strong position. In the Netherlands alone, he counts over 100 nationalities working in hotels.

Diversity, he stresses, goes wider than nationality. It includes gender, ethnic background, sexual orientation and people with a physical or mental disability. He gives the example of a hotel in Luxembourg that hired staff members with a visual impairment, who are now a full part of the team. He also mentions dedicated training programs for people from a less favorable socio-economic background, so that their talents can grow. His reasoning has two parts: diverse teams are more successful, and a hotel company cannot only take from society, it also needs to give.

Fair pay belongs here too. Van der Graaf is candid that hospitality is not known as a high-paying industry, but he notes that the average wage in Dutch hospitality rose by over 20 percent in the last four years, and that modern secondary benefits matter alongside money. A related article looks at employee profit sharing in hotels.

Steps to build an ESG hospitality plan

Van der Graaf's core message is timing. You cannot stay behind; you need to be in time and act first. Based on his advice, a practical starting list looks like this:

• Measure your carbon footprint, so you can answer corporate clients who need the figures for their own reports.
• Work toward an eco label certification that proves your claims and protects you from accusations of greenwashing.
• Document your sustainability efforts in a form a bank can assess, before discounts turn into surcharges.
• Invest now rather than later, because the gap with hotels that moved first will only grow.
• Build diverse teams and create opportunities for people who have had fewer chances.
• Review your business model a few times a year, on revenue, costs, guest expectations and employee expectations.

“Make sure you are in time to do proper investments in sustainability because, otherwise, your company will die.”

Erwin van der Graaf, 36:58

Asked which trends will shape the sector over the next five to ten years, he names sustainability first, followed by diversity and inclusion and the need for lifelong learning. To hear how he connects these themes to the labor market and overtourism in Amsterdam, watch the full conversation.

Frequently asked questions

What does ESG hospitality mean?

ESG stands for environmental, social and governance. For a hotel it covers its carbon emissions and energy use, how it treats and develops its people, and how the business is run and reviewed. Corporate clients and banks increasingly ask hotels to prove their performance on these points, so ESG is becoming a commercial and financial question as much as a moral one.

Why do corporate clients ask hotels for an eco label?

Corporate clients need to report on their own sustainability, including the carbon footprint of business travel. An eco label certification shows that a hotel is not greenwashing and can prove what it claims. Erwin van der Graaf says many clients today only book certified hotels, so hotels without a label risk losing corporate business.

How does sustainability affect hotel financing?

According to Erwin van der Graaf, banks already give a discount on loans to companies that can prove a certain level and ambition of sustainability. He expects that discount to turn into an interest surplus for companies that cannot provide the details, and in the end banks may stop financing hotels that are underinvested in sustainability.

What is a carbon travel budget?

Some companies give employees a carbon budget for travel next to their budget in money. An employee can have money left at the end of the year but no carbon left to spend. Hotel rooms with a lower carbon footprint use less of that budget, which makes sustainable hotels more attractive for those business travelers.