The Return on Investment for Sustainable Tourism

Walk, don’t drive. Recycle. Buy local products. The culture of commitment to the future of the planet is here to stay. Nowadays you don’t just have to be sensitive to the environment but also show it. If you dare to not do so, you will be not just irresponsible, but also uncool. Younger generations have jumped the bandwagon of sustainability so vehemently that today companies find it impossible to continue ignoring the shift in the preferences of new consumers. While previously we only demanded products to be useful and unique, now we also require them to be green. And the tourism industry, given its ability to cause irreparable damage to the environment or otherwise champion its protection and promote the equitable distribution of the wealth it generates, could not escape this phenomenon.

Two segments of consumers are driving this transformation: the millennials, and the middle class of the developed countries, with its growing purchasing power. Both groups are more likely to buy tourism products related to sustainability than any other generation until now. They bought a GoPro to take pictures at the top of a cliff before diving into a lake of crystalline waters, not to stay lying on the sunbed of any Grand Resort. And you can’t just offer them a hideous tourist path in the most inadequate conditions. Millennials are not only able to detect greenwashing practices, but also punish them through social networks.

According to the Nielsen study on the ROI of sustainability, about 55% of consumers are willing to pay more for products and services from companies that demonstrate to generate impacts social and environmentally positive. ¿Shocking? There’s more: the same measure was 10% lower just three years ago. The tendency to acquire sustainable products and services is experiencing an unstoppable growth in parallel with the growth of the purchasing power of the younger generations.

And yet the majority of tourism companies still see sustainability as a “green tint” for their marketing efforts and not as a strategic priority. What these companies are missing may not be the benefit of sustainability in itself, but the long-term performance provided by a good reputation, whether it’s gained in the field of sustainability or not. Enhancing the reputation of the company can improve relationships with suppliers and customers, leading to increased profitability. Also, it is proven that by adopting fair employment practices, health standards and adequate security, you can reduce the company’s exposure to potential litigation and other risks.

But that’s not all. The adoption of sustainable actions not only improves the operating efficiency of the company, which leads to increased innovation and the development of competitive advantages that also contribute to improved financial performance, but it also helps to strengthen brand engagement not only with customers, but as well with investors, employees, suppliers and other stakeholders, ensuring the loyalty of all actors involved in the value chain.

Sustainable initiatives lead to a more committed and efficient workforce, to a more loyal and satisfied customer base, to improved relations with stakeholders, greater transparency and ability to innovate. All of them are factors that contribute to improving the long-term financial performance. It’s no wonder that sustainability leaders also tend to be leaders in their industries from the financial point of view. They have a wider vision, they focus on the long term and are better at anticipating and minimizing risks.

Commitment to sustainability has a positive effect on financial results, causing an increase in customer satisfaction and thus promoting loyalty. That is the conclusion of Greenloons’s study on the ROI measuring by Fáilte Ireland (the national tourism authority in Ireland) on the effects of the adoption of sustainable tourism carried out in the last decade in the country.

The study shows that

+ The ROI for hotel establishments (green hotels, hostels, inns) is higher than for other types of companies (guided tours) that implement sustainable practices.

+ Operational ROI is negative for about five years, but the Return on Investment generated by other variables (community, employees, customers) makes up for it.

+ The main generator of positive impacts on the triple bottom line (accounting for economic, environmental and social sustainability) is the transparency with the customer when it comes to making clear what makes the company sustainable and how that contributes to improving the experience of the customer (storytelling efforts).

We are in 2015. Companies are under constant scrutiny and, like Caesar’s wife doesn’t just have to be honest but also look the part. It’s no longer just about developing a product or service that meets all customers’ needs, we must also be good citizens and shout it from the rooftops. If our company is perceived as complicit in polluting water, receiving bribes or being environmentally irresponsible, we risk losing the new middle classes. And if we don’t manage our online reputation properly and it is damaged by a hoax, we will lose millennials before we even know why.

A hopeless environment? Of course it is. At least for companies that don’t want to take the initiative and engage in the booming business of sustainability. Some of them still focus their efforts on preventing adapt to new times, but all they get is delaying the consequences of operating outside the reality of the rest of the planet.

Meanwhile, companies that are already realigning their strategies to suit the needs and trends of the new generations will be at a better place to deal with the upcoming changes. And when times of uncertainty and change arrive, having the trust of consumers on their side might do that sustainability and its return on investment is seen at last as a strategic imperative and not as another sheet within the budgets of the company.