To identify a baseline, I used AlphaSense at year-end to see what I could find on sustainability discussions and disclosures by publicly-listed U.S. sector companies across traditional investor relations (IR) communications vehicles, before affected reporting entity changes occur in 2017.
To-date, sector leaders appear to have focused sustainability strategy mostly on attracting consumer interest and on beginning to lower operating costs through sustainability initiatives.
I believe individual sector companies can reach higher competitively through robust collaboration between sustainability and IR program strategies for ESG / sustainability positioning. Company leadership and IR teams should be able to differentiate and expand stakeholder relations, both from the bottom-up and top-down (traditional IR). This blog post provides a glimpse into the opportunities I see.
2017 will be particularly interesting in lodging and leisure.
A competitive sustainability and investor relations horse race could intensify!
ESG is the interchangeable acronym for sustainability, most commonly used in the U.S. It stands for Environmental & Energy, Social Responsibility and Governance.
Why Talk About This Now?
Significant recent events have occurred in domestic lodging and leisure companies, such as M&A activity, spin-offs and IPOs and large foreign (Chinese) investments. These activities may alter the public reporting entities sustainability-related materiality thresholds and disclosure priorities in 2017 and beyond. Sector leaders have already figured out that it is prudent to build sustainability into customer marketing programs and new hotel brands to cater to the growing millennial and female demographics.
Do Investors Really Care?
“2016 data shows that ESG is increasingly embedded in infrastructure investments, with more than 90% of participating funds having ESG policies and including ESG considerations in their investment processes.”
“More than 280 members, including 58 pension funds and their ﬁduciaries, use GRESB data in their investment management and engagement process, with a clear goal to optimize the risk / return proﬁle of their investments.”
Do Companies Really Care?
Lodging and leisure companies are far more complex and inter-connected than meets the eye.
First, let’s define “customer:” For the asset owner / operator lodging company business model, hotel guests are simply the customer. Both hotel guests and property owners are important customers for the management fee-based business model; but this mix can vary greatly by company. There are also the capital customers, e.g. equity, fixed income and other investors.
As noted above, sector leaders appear to have focused mostly on attracting consumer interest. In terms of sustainability program strategy and execution, there could be many other angles from which a company might coordinate IR strategy and disclosure.
Next, let’s consider that the ESG / sustainability field is far more adaptable to competitive strategy than the lodging and leisure sector has yet incorporated, by relative comparison to other sectors.
The following images and charts show what I found in my research using AlphaSense.
The goal of my research was to get a snapshot of baseline ESG / sustainability discussions and disclosures by the U.S. lodging and leisure sector’s publicly traded companies. I wanted to see how sustainability may have permeated the previously familiar reporting entities’ traditional investor relations disclosure over the past two years (as generated by AlphaSense timeframe search). This was important to do now before entity combinations and reporting changes driven by the major 2016 sector events take effect for the full New Year 2017.
Here are six high-level observations from the results of my AlphaSense research:
The scope of U.S. companies I could research in the sector using AlphaSense included 7 Hotel companies, 18 Lodging REITs and 3 Timeshare companies:
Hotel Companies – Choice Hotels ($CHH), Extended Stay America ($STAY), Hilton Worldwide ($HLT), Hyatt Hotels ($H), Marriott International ($MAR), Starwood ($HOT), Wyndham Worldwide ($WYN)
Lodging REITS – Apple Hospitality ($APLE), Chatham Lodging Trust ($CLDT), Chesapeake Lodging Trust ($CHSP), Condor Hospitality ($CDOR), Diamondrock Hospitality ($DRH), Felcor Lodging Trust ($FCH), Hersha Hospitality Trust ($HT), Hospitality Properties Trust ($HPT), Host Hotels & Resorts ($HST), Innsuites Hospitality Trust ($IHT), LaSalle Hotel Properties ($LHO), Pebblebrook Hotel Trust ($PEB), RLJ Lodging Trust ($RLJ), Ryman Hospitality Properties ($RHP), Sotherly Hotels ($SOHO)($MCL), Summit Hotel Properties ($INN), Sunstone Hotel Investors ($SHO), Xenia Hotels & Resorts ($XHR)
Timeshare Companies – Diamond Resorts ($DRII), Interval Leisure Group ($ILG), Marriott Vacations ($VAC)
Please note that I exclusively used AlphaSense and third party references for my research to form the basis of observations in this blog. Company websites, sustainability reports or any other related communications collateral were not included in the scope of this research.
As I identified in my most recent AlphaSense blog post, “Is Sustainability a Real Competitive Frontier for Utilities?” it is becoming noticeable that some utility sector leaders have been quietly bridging their company’s sustainability program successes into their IR communications strategy. I believe this also holds true in the lodging and leisure sector.
1. Triple Pundit: Targeting Millennials, Marriott Looks to Hotel Sustainability
2. Hotel News Now: What do millennials want from a green hotel?
3. Paul Ellis Consulting: Is Your Practice Ready for Millenial Investors?
4. US SIF – The Forum for Sustainable and Responsible Investment: Sustainable and Impact Investing in the United States Overview
5. Jean Rogers’s Unconventional Wisdom: Shark Alert, Asset Managers Take Note: Millenials and Women are Poised to Reshape the Investment Waters Over the Coming Decades
7. IPE Real Estate: GRESB assessment of infrastructure funds finds room for improvement
8. REIT.com: REITs & Sustainability
9. meetings TODAY: Cornell Releases 2016 Sustainability Index
10. Cornell University School of Hotel Administration: Cornell Study Outlines Improved Hotel Sustainability Benchmarks
11. RealFoundations for NAREIT: 2014 Leader in the Light Award Entries & Trend Analysis
12. Pam Styles, AlphaSense: Is the Topic Coming Up on Earnings Calls?
13. Pam Styles, AlphaSense: Is Sustainability a Real Competitive Frontier for Utilities?
Pamela Styles is principal of Next Level Investor Relations LLC, an Investor Relations consultancy with dual IR and ESG / Sustainability specialties.