Cornell Study Finds LEED Certification Boosts Hotel Revenue

A new study from Cornell University has found that hotels gain a revenue benefit when they are certified under the LEED sustainable building program.

By comparing LEED certified hotels with a competitive set of non-certified hotels, the study found substantial increases in ADR and RevPAR for the LEED hotels.

The study, "The Impact of LEED Certification on Hotel Performance" by Matthew Walsman, Rohit Verma, and Suresh Muthulingam, is available at no charge from the Cornell Center for Hospitality Research (CHR) at the School of Hotel Administration.

"The hotel industry has embraced environmental sustainability and several hotels have registered for or earned "green" certification under the LEED program," said Verma, who is the Singapore Tourism Board Distinguished Professor at the School of Hotel Administration. "But LEED, which stands for Leadership in Energy and Environmental Design, is really aimed at controlling costs by limiting resource use. So, the question was whether there also is a revenue benefit from LEED. We found that the answer is, absolutely yes."

The study compared the performance 93 LEED-certified U.S. hotels (the number for which operating data were available) to that of 514 comparable competitors, and found that the certified hotels obtained superior financial performance. The authors completed this report by analyzing comprehensive hotel performance data provided by STR, a Partner of the Center for Hospitality Research.

Walsman, a doctoral candidate in Service Operations Management at the School of Hotel Administration, pointed out that many of the hotels had only recently been certified, so the study could compare their revenue experience for a period of just two years.

"We'll have many more hotels to study in the future," he said, "since companies like Marriott have now included LEED as part of their own design specifications for new constructions."

The researchers found that the revenue benefit applied in hotels of all types, although most hotels in the study were upscale or luxury properties located in urban or suburban locations.

"This makes sense, because many of the LEED standards involve a hotel's connection to public transit or other resources typical of urban areas," Verma added.

Developed by the United States Green Building Council in 2000, the LEED certification process gives commercial buildings a scorecard for meeting standards relating to such areas as location and transportation, materials and resources, and water efficiency, among others. The more points under the program, the higher the certification level. Although the initial LEED standards were not directly aimed at hotels, numerous hotel properties nevertheless have earned certification. The most recent version of the LEED standards specifically include hotels, along with other commercial buildings.