The UAE economy has cemented its position as a regional powerhouse, attracting global talent and capital. The growth of the real estate and the hospitality sector ensured this demand could be met by ample supply.
This was further bolstered by investors monetising their assets through short-term rentals. The tourism industry – hotels and rentals in particular – now stands at a critical junction where the pressing need for sustainable practices meets the pursuit of growth.
Skyrocketing tourism demand as well as private capital investments, are putting sustainable practices and business growth at loggerheads. This conflict, termed as the ‘green dilemma’, is forcing business leaders to navigate the complexities of incorporating sustainability without compromising on growth.
Are sustainability and growth mutually exclusive?
Sustainable products are often viewed by industry leaders as more expensive and less efficient. Research by Kearney highlights that green products can be 75-85 per cent more expensive, ranging from a 20 per cent markup on sustainable energy products to a staggering 220 per cent markup on beauty products.
Studies from universities in the US and recent ones from Deloitte in Canada indicate scepticism about the genuineness and effectiveness of green products, which has led to lower adoption rates. This has prompted business leaders to re-evaluate whether the growth-sustainability trade-off creates bottom-line value. Startups raising capital are faced with the additional pressure of prioritising returns.
High industry emissions
The broader travel and tourism sector contributes 11 per cent of global greenhouse gas emissions. Within this, short-term rentals alone account for 10 per cent of total annual emissions of the tourism sector.
There are multiple reasons for this. Firstly, supply chains are highly fragmented which makes scaling of sustainable practices difficult. Second, regulatory hurdles complicate sustainability ambitions, with changing guidelines, leading to businesses having inconsistent approaches.
Lastly, guests are price-sensitive, and cost often trumps sustainable options while making a booking.
Despite this, the demand for sustainable travel remains robust. A study by booking.com found 81 per cent of travellers consider sustainability important, and 71 per cent are willing to make more effort to travel sustainably. However, only 46 per cent have actually stayed in sustainable accommodation, due to general lack of awareness.
Limiting carbon emissions face numerous constraints
In the Middle East, there currently is a lack of data about sustainability for the short-term rental sector. So we decided to commission our Carbon Footprint Report, where we studied areas of impact for STRs vs. traditional hospitality. As an initial finding, holiday homes have over 80 per cent lower carbon emissions compared to traditional hospitality.
In STRs, the primary direct contributors to carbon footprint throughout the year are energy use in apartments, employee transportation, and furniture procurement, while indirect impacts such as guest travel to the region were also significant, with transportation being the number one driver of our carbon footprint.
The lack of best practices and market data for the STR sector means localised sustainability recommendations are lacking and not tailored for the region, making it difficult to define clear next steps
Unlocking the green opportunity
By 2027 the market for sustainable travel is expected to grow to $336 billion. But there is significant amounts of work to be done.
While large hotel chains are often driven by established CSR frameworks and investor expectations to implement comprehensive sustainability practices, the short-term rental industry is building best practices as it progresses.
From an energy management perspective, setting ACs to at least 23 degrees reduces costs and emissions. While guest welcome baskets elevate the guest experience, the inclusion of reusable water bottles, installation of water purifiers and locally sourced products reduces plastic usage and transportation costs.
The local sourcing of furniture and other apartment elements creates opportunities for homegrown brands and reduces the carbon footprint of such partners.
Short-term rental operators must also consider investing in preventative maintenance against the region’s harsh climate, ensuring the longevity of the property, and saving maintenance costs.
By offering guests the ability to offset their travel impact through a checkout option, STR operators can demonstrate a shared responsibility for the future.
Finally, STR operators must consider establishing a fund to offset unavoidable environmental impact. By putting capital behind their commitments, and attracting contributions from stakeholders and guests, the sustainability ambitions for the sector can be achieved quickly.
We are at a critical juncture, where the industry needs to achieve big, audacious goals…
