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going green: The Business impacT of environmenTal awareness on Travel

phocuswright's

By carroll rheem

®

PhoCusWright’s Going Green: Impact of Environmental Awareness on Travel February 2009

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PhoCusWright thanks all of our partners and sponsors for their participation in PhoCusWright’s Going Green: The Business Impact of Environmental Awareness on Travel. Without their active support, this landmark study would not have been possible.

industry partners

Hospitality Sales and Marketing Association International Foundation (HSMAI)

Sustainable Travel International (STI)

project sponsors

Advantage Rent-A-Car

American Express

Amtrak

Expedia Inc.

Grupo El Fuerte

InterContinental Hotel Group (IHG)

Sabre Holdings Corporation

San Diego Convention & Visitor’s Bureau

Vail Resorts


PhoCusWright Inc.1 Route 37 East, Suite 200Sherman, CT 06784-1430 USA+1 860 350-4084www.phocuswright.com

903, SevillaRaheja ExoticaMadh Island, Malad WMumbai 400061 India

c/o h2c consulting GmbH, Tannenstrasse 13, Duesseldorf 40476 Germany +49 211 989 2558

Philip C. Wolf President and CEO

Carol Hutzelman Senior Vice President

Christine Lent Vice President, Finance and Administration

Bruce Rosard Vice President, Sales & Marketing

Lorraine Sileo Vice President, Research

phocuswright’s going green: The Business

impact of environmental awareness on Travel

Written byCarroll Rheem

Researched byJulien Beresford, Carroll Rheem,

Libbie Rice, and Susan Steinbrink

Edited byMargarite Nathe

PhoCusWright's Going Green: The Business Impact of Environmental Awareness on Travel is published by PhoCusWright Inc. The information contained herein is derived from a variety of sources. While every effort has been made to verify the information, the publisher assumes neither responsibility for inconsistencies or inaccuracies in the data nor liability for any damages of any type arising from errors or omissions.

©2009 PhoCusWright Inc. All Rights Reserved.

Page iv ©2009 PhoCusWright Inc. All Rights Reserved.


1. Introduction, Definitions and Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1Research Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

2. Defining the Green Lifestyle Audience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

3. Profile of the Green Traveler . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

4. Analysis of Key Findings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14The Potential for Price Premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14The Establishment of a Consumer Standard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17Green Communications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18The Impact of the Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

5. Conclusion: What’s Next for Green Travel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20

6. Industry Partners and Sponsors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22

Contents

Figures

Figure 1, page 5, Green Lifestyle Scale

Figure 2, page 6, Actions Taken Due to Environmental Concern

Figure 3, page 7, General Green Motivators by Lifestyle Category

Figure 4, page 7, Cost/Saving Green Statements

Figure 5, page 8, Negative Green Statements

Figure 6, page 8, Communication-Related Green Statements

Figure 7, page 9, Impact-Related Green Statements

Figure 8, page 10, “Green Travelers”

Figure 9, page 11, “Green Travelers” Penetration of Green Lifestyle Groups

Figure 10, page 12, Factors Influencing Travel Decisions

Figure 11, page 13, Barriers/Enablers for Green Travel

Figure 12, page 15, Willingness to Pay Premium for Environmentally Friendly Travel

Figure 13, page 15, Finding Environmentally Friendly Travel Options

Figure 14, page 16, Environmental Ratings

Figure 15, page 17, Consumer Perceived Value

Figure 16, page 19, Effect of Economic Pressure

©2009 PhoCusWright Inc. All Rights Reserved. Page 1


able now than ever as green thinking begins to shape the qualities consumers seek in the travel products they purchase.

research objectivesTo understand how mainstream environmen-tal awareness is coloring consumer behavior and driving change for travel companies, PhoCusWright launched a multifaceted study examining consumer values, attitudes and behaviors as well as travel supplier, distribu-tor and media trends. This report presents the key findings and strategic implications of the detailed study, Going Green: The Business Impact of Environmental Awareness on Travel.

The research presented in this report is not built on an assumption that companies should or should not be green based on principle. Its purpose is to help travel companies understand how the permeation of green societal values will affect their businesses and how they can best compete in the evolving consumer mar-ketplace. Though the content of this report is focused primarily on the consumer compo-nents of the study, the industry perspectives gathered in the research process represent the foundation for much of the analysis. Some of the questions explored include: How wide is the green audience? How are green travelers different from other travelers? What business opportunities are created by the influence of green? What kind of messaging is most effec-tive when addressing the green audience?

There is little doubt that environmental awareness has gained mainstream status

in the U.S., as evidenced by the plethora of “green” consumer products and media atten-tion to the topic. In this setting, American companies can no longer operate without acknowledging perhaps their oldest – but most recently recognized – stakeholder: the environ-ment. Travel, as one of the country’s largest industries, is certainly no exception.

Unlike many of the trends that are shaping the travel industry at the onset of 2009, such as a slumping economy and the coming of age of mobile travel, the genesis of green consumer products comes from a proliferation of personal values that revolve around contributing to a general good, rather than financial gain or the convenience of better technology. Navigating a brand on a social current is a challenging prospect for travel companies, as consumers do not consistently carry their personal values over into their purchasing behaviors. Understanding the connection that consumers carry between their personal values and their travel decisions is critical to enabling travel companies to effec-tively respond to the changing marketplace.

From the industry point of view, the moti-vation to go green may come from employ-ees’ personal values, but the business reality requires strategic justification and financial viability, especially in today’s economic cli-mate. A balanced approach that recognizes the importance of environmental responsibility alongside financial objectives is more attain-

Section One

introduction, Definitions and methodology



Cost premium is the most commonly –identified barrier (67%) for consumers to potentially becoming greener with regard to travel, yet

No major travel company has imple- –mented price increases based on green initiatives.

There is a significant market for price premi-��ums.

Just under a third of travelers indicate a –willingness to pay some sort of premium for green travel.

The travel industry is not yet satisfying con-��sumers’ green needs.

Only 8% of green travelers believe it is –easy to find green travel options.

summary of strategic implications

The potential for a price premium exists for ��green travel products, but there are two core prerequisites:

A common, consumer-recognized standard – While a significant portion of consum-ers indicate that they’re willing to pay a premium for green travel products, they lack the information to recognize and differentiate products based on their envi-ronmental friendliness. At a basic level, the consumer decision requires an easily recognizable difference in quality (in this case, “greenness”); otherwise, consumers have no basis on which to adjust the price they are willing to pay.

The product must incorporate green ele- –ments that do not inherently save money Travelers are savvy enough to recognize that reduction of energy/water/electric-ity/fuel consumption also reduces costs. While consumption reduction certainly

DefinitionsWhile the terms “sustainable” and “green” are often used interchangeably in other categories, the travel industry generally uses the term “sustainable” in the context of the broader topic of sustainable tourism, as outlined by the United Nations World Tourism Organization (UNWTO). Sustainable tourism, according to UNWTO, “reflects a ‘quadruple bottom line’ of environmental, social, economic and climate responsiveness.” This study focuses on a subset of sustainable tourism: environmental and cli-mate responsiveness.

In this report, use of the terms “green” and “environmentally friendly” will refer to efforts in the following general categories:

Reduction of consumption

Product procurement

Key Research FindingsGreen is mainstream.��

More than four out of 10 U.S. travelers –(44%) consider environmental impact to be important to them when planning travel.

Consumers are sensitive to hype.��

A majority of U.S. travelers (56%) are –skeptical of what companies tell them about their green practices.

There is a disconnect with consumers on the ��cost of traveling green.


Section One: Introduction, Definitions and Methodology February 2009

Consumers

Quantitative survey 1,352 U.S. traveler responses

Influencers

Qualitative survey + 20 executive interviews

Suppliers

Qualitative survey + 20 executive interviews

consumers

PhoCusWright fielded an online consumer survey from August 8, 2008, through Septem-ber 12, 2008, through Global Market Insite, Inc., targeting the general U.S. online traveler population. Survey participation required respondents to have taken at least one leisure trip involving an overnight stay in paid accom-modations at least 75 miles from home during the past year. PhoCusWright received 1,334 qualified responses, and the respondent pool can be projected with confidence to the U.S. adult population of online travelers (as defined above). The error interval for analysis of groups within the respondent population is +/–2.7% at the 95% confidence level.

In addition to the general U.S. online traveler population, the consumer survey was also field-ed to research partner Sustainable Travel Inter-national’s (STI) consumer database. Eighteen qualified responses were received from STI’s list. Due to the source of these participants, their responses were included in the sample set for certain questions only.

suppliers and influencers

In addition to a total of 40 executive inter-views, PhoCusWright, STI, and Hospitality Sales and Marketing Association International (HSMAI) Foundation fielded a qualitative survey to industry members from August 14, 2008, to September 26, 2008. Collectively, 134 qualified responses were received.

cannot be ignored, differentiation that elicits price premiums must incorporate elements that go beyond those that reduce consumption, such as the use of alterna-tive fuels, renewable energy and organic products.

If there is ever to be a ubiquitous consumer ��standard, it must come from a travel rating brand that U.S consumers already trust, and is likely in partnership with an environ-mental advocacy group and/or government agency.

For communication about green practices to ��resonate with consumers, it should incorpo-rate:

Facts that are phrased in a context that –consumers understand

A focus on how a company supports –consumers in their green lifestyles, rather than just how the company or product itself is green

Tough economic conditions will accelerate ��efficiency/savings-related green activities and decelerate activities that do not directly result in savings for both the industry and consumers. Given that a good portion of the “low-hanging fruit” has already been picked, the net effect will be a slight slowdown in the “greening” of the travel marketplace, but not a dramatic fall-off.

methodologyTo understand the effect of environmen-tal awareness on the U.S. travel industry, PhoCusWright conducted comprehensive research on three core components of the mar-ketplace: consumers, suppliers and influencers (distribution intermediaries and media).



To build a context for understanding green travel trends, PhoCusWright set out to

create a baseline for consumer adoption of the overall green lifestyle. Examining multiple indicators around behaviors, values and atti-tudes provides a comprehensive picture of how deeply consumers embrace green ideals and how that affects their daily product-purchase decisions.

One of the core characteristics of a green life-style is attitude toward energy consumption, which encompasses two major resources: fuel and electricity. When asked to self-assess their day-to-day activities, U.S. travelers reflect an extremely strong awareness and at least a light level of activity toward consumption reduc-tion. Five groups were isolated based on their energy-related self-assessments: indifferent, passive, uncommitted, dedicated and activist consumers. Upon cluster analysis, these groups were found to be consistent throughout other lifestyle factors such as behaviors and values, and therefore these groupings are indicative of not only energy-related activities, but also of general lifestyle.1 Within the five groups (see Figure 1), the responses reflect a relatively nor-mal distribution, with a skew toward the more actively green categories.

Across a range of individual green behaviors, the consistently higher level of response by the more actively green categories is clear2 (see Fig-ure 2). This consistency indicates that consum-ers follow their self-described level of energy

1 Differences are significant at a 90% confidence level.2 Difference is significant at a 90% confidence level.

Section Two

Defining the green lifestyle audience

commitment through to other green lifestyle components. For all lifestyle groups, lighting-related actions and recycling were most com-mon. Hybrid and flexible fuel vehicles and solar energy were the least common, which is consistent with expectations given the lack of widespread availability as well as the commit-ment and investment required.

The relevance of the lifestyle groupings becomes even more apparent when considering certain personal values and attitudes. There is generally a strong positive response across the board to more abstract concepts and situations in which being green is free/easy (see Figure 3), though the differences between lifestyle groups is still apparent.3 When situations involve cost or inconvenience, the differences widen dra-matically (see Figure 4). In the actively green categories, 77% choose green options when it saves them money and 62% are willing to pay a premium. For the less actively green categories, 74% choose green options when it saves them money, and only 31% are willing to pay a pre-mium. The sizable drop-off highlights some of the limits to the group’s commitment to envi-ronmental friendliness.

The contrast between lifestyle categories all but disappears when in regard to negative statements; the exception is the topic of global warming (see Figure 5). Even among those in the actively green category, a majority of respondents believe that companies often label products green just to charge more, with agree-ment from both categories at a remarkably

3 Differences are significant at a 90% confidence level.


Section Two: Defining the Green Lifestyle Audience February 2009

Figure 1Green Lifestyle Scale

Indifferent Passive Uncommitted Dedicated Activist

Indifferent Passive Uncommitted

4%

13%

50%

Dedicated

27%

Activist

6%

I don't reallythink about

energyconsumption

in myday-to-dayactivities.

I don't wasteenergy butdon't doanything

in particularto reducemy use ofenergy.

I do a fewthings hereand there toreduce my

energyconsumption.

I do a lot ofthings to

reduce myenergy

consumption.

I seek outopportunitiesto reduce my

carbonfootprint in

as many waysas possible.

Question: Which of the following statements best describes you? Select one. (n = 1,331)BASE: U.S. travelers

Source: PhoCusWright’s Going Green: The Business Impact of Environmental Awareness on Travel©2009 PhoCusWright Inc. All Rights Reserved.

consistent 57%. Twenty-three percent of both lifestyle groups indicate that they sometimes feel peer pressure to make environmentally friendly choices, implying that social pressure affects different strata of green lifestyle groups somewhat evenly.

Responses to communication-related state-ments show a strong demand for more informa-tion about environmentally friendly practices, but a critical tangent is that respondents also exhibit a high level of skepticism about what companies say about their practices (see



Figure 2

Actions Taken Due to Environmental Concern

23%

32%

34%

36%

35%

39%

41%

62%

66%

75%

53%

57%

63%

59%

63%

70%

70%

85%

88%

91%

Purchase organic or locallygrown food

Use water-efficient plumbing(e.g., toilets, shower heads)

Use “energy/water-efficient”appliances

Limit purchases of bottled water

Maintain efficient landscaping (e.g.,watering only at certain times)

Reduce water consumption (e.g.,taking shorter showers)

Use durable (versus disposable)beverage containers

Use “energy efficient“ light bulbs

Recycle bottles, cansand newspapers

Only use lights when needed

Dedicated/Activist Uncommitted/Dedicated/Indifferent

2%

2%

3%

6%

5%

11%

24%

20%

23%

4%

7%

8%

9%

14%

20%

36%

51%

50%

Drive a flexible/alternativefuel vehicle

Drive a hybrid/electric vehicle

Use solar energy

Carpool to work

Ride a bicycle for transportation(as opposed to recreation)

Use public transportation

Drive a fuel-efficient vehicle

Use nontoxic cleaningproducts

Bring your own shoppingbags for groceries

Question: Which of the following actions do you regularly take, if any, out of concern for the environment (as opposed to saving money)? Select all that apply. (n = 1,331)BASE: U.S. travelers


Figure 6). The more actively green categories display a significantly higher percentage of those who would like more information, and also a slightly higher percentage of skeptics. Overall, U.S. travelers exhibited a consistent level of skepticism: 56% are skeptical of com-pany information and 57% believe that compa-nies label products green just to charge more.

The interlocked trends of demand for more information and skepticism about information present an obvious challenge for companies, and emphasize the need for more fact-based information and better dissemination of that information through a range of communica-

tion channels. Posting information on Web sites is the ubiquitous first step in a green com-munication plan, but a Web site is inherently a “pull” communication channel that requires consumers to seek information out themselves. Pushing communication out to consumers – through pre/post-purchase emails and in-house/in-flight video channels, for example – is the essential next step in widening information dissemination.

To understand how travel relates to the overall green lifestyle, respondents were asked if they believe that their everyday actions and their travel choices have an impact on the environ-



Figure 3General Green Motivators by Lifestyle Category

95%

85%

90%

76%

87%

66%45%

29%

46%

31%

39%

14%

21%

58%

30%

59%

46%

81%

Indifferent/Passive/Uncommitted

Dedicated/Activist


Dedicated/Activist


Dedicated/Activist

I want to set a good example for children by maintaining an environmentallyconscious lifestyle

I see value in using nontoxic products for health reasons

I think it is important to do my part to leave the world a better place for futuregenerations

Slightly agree Strongly agree

Question: Please indicate how much you agree or disagree with the following statements: (n = 1,331)BASE: U.S. travelers


Figure 4Cost/Saving Green Statements

77%

74%

62%

31%

75%

72%52%

38%

27%

43%

46%

34%

20%

37%

4%

19%

28%

43%


Dedicated/Activist


Dedicated/Activist


Dedicated/Activist

I choose environmentally friendly options when they are convenient

77%

45%39%

49%

6%

28%


Dedicated/ActivistI am willing to sacrifice some conveniences to make environmentally friendly choices

I am willing to pay more for environmentally friendly products

I choose environmentally friendly options when they save me money






Figure 5Negative Green Statements

57%

57%

21%

35%

23%

23%19%

16%

20%

13%

42%

36%

4%

7%

15%

8%

15%

21%


Dedicated/Activist


Dedicated/Activist


Dedicated/Activist

I sometimes feel peer pressure to make environmentally friendly choices

I think global warming is mostly media hype

I believe that companies often label products as environmentally friendly just to charge more




Figure 6Communication-Related Green Statements

80%

51%

59%

54%42%

39%

39%

42%

12%

20%

12%

38%


Dedicated/Activist


Dedicated/Activist

I am skeptical of what most companies tell me about their environmentally friendly practices

I would like to learnmore about the environmentally friendly practices of companies Ipatronize






ment (see Figure 7). Not surprisingly, the more actively green categories had a stronger agreement with both statements, but the drop-off rates between everyday actions and travel choices are relatively similar between the cat-egories. This is evidence that travel choices are not often viewed as effective due to nongreen-

related travel characteristics such as small party size, infrequency, and short traveling distance. Despite the drop-off, the majority of respon-dents (even in the less actively green category) believe that choices they make regarding travel can affect the environment.

Figure 7Impact-Related Green Statements

92%

70%

79%

54%40%

37%

43%

28%

14%

42%

27%

64%


Dedicated/Activist


Dedicated/Activist

I believe that my travel choices can make a difference in the environment

I believe that my everyday actions can make a difference in the environment






tance they place on environmental impact based on the nature of their trips and who they are traveling with, the question separated travel into leisure trips with children, leisure trips without children and business trips. Though frequent business travelers are significantly more likely to be green travelers than are infre-quent and leisure-only travelers, a small portion (15%) of green business travelers prioritize envi-ronmental impact when traveling for leisure, but not when traveling for business. Results

Travelers who have adopted green lifestyles and attitudes do not necessarily apply their green values to their travel decisions. Therefore, “green travelers” were isolated by identifying travelers who consider environmental impact to be important to them when planning travel. Overall, 44% of U.S. travelers indicate that they consider environmental impact to be somewhat or very important to them in the travel planning process (see Figure 8). Under-standing that travelers might vary the impor-

Section Three

profile of the green Traveler

Figure 8“Green Travelers”

Very important/somewhat important

Neutral/don‘t know

Not at all important/Somewhat unimportant

Not applicable

41%

46%

38%

34%

30%

27%

22%

21%

27%

3%

3%

9%

“GreenTravelers”

Without children (n=1035)

With children (n=567)

Business trips (n=457)

Question: How important are the following when making travel plans for you (a) leisure trips taken without children in the past year? (b) leisure trips taken with children in the past year? (c) business trips in the past year?BASE: U.S. travelers



Section Three: Profile of the Green Traveler February 2009

Across various key demographic and travel segments, green travelers exhibit the following trends:

Higher penetration among frequent business ��travelers (55%) than among infrequent busi-ness (48%) and leisure-only travelers (41%)

Higher penetration (50%) among travelers ��in the $75,000-$99,999 annual household income (HHI) range (versus 43% for HHI less than $75,000 and 45% for HHI more than $100,000)

Higher penetration among consumers who ��typically stay at higher-rated hotels (42% for budget hotels and 50% for four-star hotels)

also indicate that a slightly higher percentage of respondents are green travelers when taking lei-sure trips with children than when taking these trips without children.

As expectations would suggest, travelers in the more actively green lifestyle categories are sig-nificantly more likely to be green travelers (see Figure 9). Interestingly, a portion (albeit small) of the indifferent and passive groups falls into the green traveler category, which suggests that while the environment is not a big part of their everyday lifestyles, environmental friendliness becomes important to members of these groups when they travel. On the flip side, a small por-tion of the dedicated and activist groups does not fall into the green travel category, implying that they do not apply the importance they place on maintaining an everyday green life-style to their travel.

Figure 9“Green Traveler” Penetration of Green Lifestyle Groups

Activist

Dedicated

Uncommitted

81% of Activist

62% of Dedicated

37% of Uncommitted

27% of Passive

16% of Indifferent

NongreenTravelers

GreenTravelers

Question: See Figure 1 and Figure 8 (n = 1,331)BASE: U.S. travelers




Barriers and enablers for green travel were iden-tified by asking consumers what conditions could potentially lead them to be more envi-ronmentally conscious about their travel choic-es. For both green travelers and “nongreen” travelers, cost premium was the most common barrier and the percentages were remarkably similar given the wide differences for the other conditions presented (see Figure 11). One poi-gnant difference surfaces in the responses to standards, ratings and certifications. For the nongreen traveler, standards do not appear to be as important an enabler as they are for green travelers.

Higher-than-average penetration among ��travelers who shop for travel online: 50% for online travel agency shoppers, 47% for sup-plier Web site shoppers

Even penetration across gender: 44% for ��males, 45% for females

Of the various environmental qualities associ-ated with travel, green travelers most often indicate that distance traveled is influential in their travel decisions, implying that transporta-tion-derived environmental impact is the most common concern (see Figure 10). Destination proximity-related consumer messaging would therefore be a well-suited context for green messaging.

Figure 10Factors Influencing Travel Decisions

Distance traveled 57%*

How unspoiled/pristine the destination is 30%*

Fuel efficiency of rental car 25%

Environmental friendliness of destination activities 23%

Environmental friendliness of accommodations 21%

Environmental impact of travel transportation 18%

Impact on local communities 17%

Environmental impact of in-destination 10%

Environmental friendliness of cruises 10%

Ability to purchase carbon offsets 5%

Other 2%

None 15%

Question: Please indicate which of the following factors, if any, influenced your leisure travel decisions in the past year. Check all that apply. (n = 608)BASE: U.S. travelers



Section Three: Profile of the Green Traveler February 2009

Figure 11Barriers/Enablers for Green Travel

No cost premium for environmentally friendly travel

Higher fuel prices in general

Universal acceptance of global climate change

Increased air and water pollution

Other

Nothing/Don’t know

Increased availability of environmentally friendlytravel options

More convenient ways to find environmentally friendlytravel options

Improved availability of environmental standards,ratings, or certifications

More information on what environmentally friendlytravel is and why it might be important for you

68%66%

53%39%

48%39%

42%23%

39%31%

37%26%

28%11%

27%14%

1%1%

7%17%

Green Travelers

Other Travelers

Question: Which of the following conditions could potentially lead you to become more environmentally con-science with regards to your travel choices? Check all that apply. (n = 1,351)BASE: U.S. travelers




Section Four

analysis of Key findings

The potential for price premium

Most U.S. travelers – and green travelers – perceive cost to be the top barrier for

making greener travel choices. Approximately two thirds of U.S. travelers indicate that no cost premium could potentially lead them to be more environmentally conscious in mak-ing travel choices. Almost the same percentage (63%) of green travelers who indicate that find-ing green travel options is difficult name higher cost as a reason for this difficulty.

However, upon the completion of industry interviews, PhoCusWright found that no major travel company had implemented systematic price premiums for green products. Companies indicated that the financial justification for green initiatives was derived from the associ-ated cost benefits rather than from additional revenue from increased prices. Starwood, for example, does not bank on charging premiums based on “greenness” with its new element brand, though environmental friendliness is part of the company’s core brand concept. Connecting the industry trends with the consumer point of view brings to light how strongly consumers’ perceptions about the pre-mium associated with green products in their everyday lives carry over to travel.

Broad consensus between interviewees across the travel industry, as well as consumers’ gener-ally negative reactions to price premiums for green products, seem to indicate that the travel marketplace cannot bear price premiums for green travel products. Consumers say different-ly, however. When green travelers were asked to

describe their willingness to pay a premium for various travel products, a significant majority (72%) indicated they are willing to pay some level of price premium (see Figure 12). Of the U.S. traveler population, the group willing to pay a premium represents 32%. On average, just under half of green travelers indicate they would pay a 1-10% premium for green travel products. The obvious questions then become: Why has the travel industry not been able to build price premiums for green products? And what would have to happen or change for con-sumers to actually pay the premiums they indi-cate they would be willing to pay?

premium prerequisite 1: a common consumer-recognized standard

The consumer’s purchase decision pared down to its most basic level is the weighing of two pieces of information: price and product qual-ity. For a company to have the ability to charge a higher price for a given product, the consum-er needs the corresponding information about what makes the product better in quality. Without information about the difference in product quality, consumers have no basis upon which to adjust their willingness to pay.

In the context of travel, the target market (green travelers) is clearly lacking product-quality information. Only 8% of green travel-ers indicate that they find it easy to find green travel choices, and over half find it difficult (see Figure 13). By definition, green travelers consider environmental impact to be important to them when planning travel, and so there appears to be a sizable gap between the infor-


Section Four: Analysis of Key Findings February 2009

Figure 12Willingness to Pay Premium for Environmentally Friendly Travel

Travel (in general)

Air travel options

Train travel options

Bus travel options

Car rental options

Environmentally friendly cruises

Environmentally friendly accommodations

Environmentally friendly activities

28%

37%

37%

40%

31%

33%

29%

29%

29%

27%

27%

26%

29%

28%

28%

28%

23%

18%

19%

18%

21%

18%

20%

19%

13%

12%

12%

11%

13%

14%

16%

16%

4%

4%

4%

3%

3%

4%

5%

6%

3%

2%

2%

2%

2%

2%

2%

2%

Not willing to pay premium 1–4% 5–9% 10–14% 15–24% 25%+

Question: How much of a premium would you be willing to pay for any environmentally friendly travel choices when traveling for leisure? (n = 608)BASE: U.S. travelers


Figure 13Finding Environmentally Friendly Travel Options

Very easy, 1%

Somewhat easy,7%

Neutral/Unsure,38%

Somewhatdifficult, 45%

Very difficult, 8%

Question: How easy or difficult is it to find environmentally friendly travel options? (n = 608)BASE: U.S. travelers




ed sources of information and a benchmark to enable consumers to determine whether a prod-uct is green, the opportunity for actualizing any price premium will remain unrealized for major travel companies.

premium prerequisite 2: incorporation of green elements That go Beyond consumption management

Part of the consumer skepticism surrounding green products and their pricing derives from the knowledge that many green initiatives directly reduce costs. While efforts aimed at saving fuel, electricity and water clearly lessen environmental impact, they also benefit the company. These types of consumption-related initiatives, along with recycling, are familiar to consumers and are similar to actions they

mation consumers are seeking and what the industry is providing.

One of the biggest challenges for companies trying to address this product information gap is the high level of skepticism consumers have when interpreting green messaging. Consumer confusion around commonly used green termi-nology such as “zero-waste” and “carbon neu-tral” exacerbates the issue.

In this set of circumstances, objective third-party information is essentially the only vehicle for addressing consumer needs. Unfortunately, no entity has emerged as a consumer-trusted source for information. As seen in Figure 14, none of the listed organization types reached the 50% mark for being trusted sources of green travel information. Without widely trust-

Figure 14Environmental Ratings

State/local governmental agency 48%36%16%

47%41%12%

44%37%19%

42%46%12%

40%48%12%

39%52%9%

36%55%9%

36%51%13%

33%53%14%

33%51%15%

29%51%20%

24%58%18%

Environmental advocacy group

Federal government agency

Green travel advocacy group

Local travel agency

Travel/rating guide

Private environmental certification body

International regulatory agency

Online travel agency

Travel industry coalition

Travel provider

Tour operator

Do not/Somewhat do not trust

Neutral/Don’t know

Strongly/Somewhat distrust

Question: How likely would you be to trust environmental ratings or certifications provided by the following organi-zations? (n = 1,331)BASE: U.S. travelers




how accurate the companies’ ratings are. Con-sumers would easily recognize an inaccurate four-star rating for a hotel because they see and interact with the qualities that determine that rating. In contrast, many of the qualities that make a hotel green may not be obvious. For example, consumers cannot see the recycled materials that were used to build a property or any renewable energy it utilizes. Therefore, consumers must take the green rating pro-vider’s word for it, and the importance of trust becomes even more pronounced than with overall quality ratings.

Another nuance to the issue of green ratings is that rating providers must be scientifically qualified to provide an accurate green rating. Travelers may trust the American Automobile Association (AAA) to recognize high-quality beds and furnishings, but they may not trust AAA to accurately calculate a hotel’s carbon footprint. As green initiatives often involve the measurement of environmental impact, a more quantitative approach becomes part of the con-sumer expectation.

take in their everyday lives (see Figure 2). For this reason, an informal standard essentially takes shape for consumers, and companies that hope to build price premiums must surpass the threshold set by consumer “common sense.” Initiatives that are common or save companies money create a baseline of what consumers might expect from companies. Hotel linen re-use programs, for example, would fall squarely into the cost-saving/common category depicted in Figure 15. Initiatives that involve cost or incorporate products that are unusual or scarce, such as alternative fuel, create a product with differentiation and potential to elicit price pre-miums.

The establishment of a consumer standardConsumers generally evaluate the quality of a rating by judging how accurate the actual experience is in comparison to the expectations set by the rating. The challenge for companies trying to create consumer green standards is that it is difficult for consumers to determine

Figure 15Consumer Perceived Value

Cost-saving/Common

Price premiumthreshold

Costly/Scarce

Examples:

• Renewable energy (wind, solar)

• Alternative fuel

• Organic products

Examples:

• Recycling

• Fuel, electricity, water-consumption reduction

Consumer-perceivedvalue




tion, and the vast majority of companies have already set goals and implementation plans.

As consumers often view information from companies with a skeptical attitude (see Figure 5), it is critical that communications incor-porate factual and specific information rather than claims that are subjective or vague. It is also important that the facts presented are phrased in terms that consumers can relate to. For example, talking about the number of cars taken off the road gives consumers a more familiar frame of reference than providing the percentage of emissions reduced. Even among green travelers, who are likely to be more famil-iar with green terms than the average traveler, a majority (54%) indicate that confusing termi-nology is a factor in making it difficult to find environmentally friendly travel options.

Another key to effective green communications is the assignment of responsibility for positive environmental impact to the consumer – that is, describing how the consumer is taking actions that are good for the environment by using the product, rather than just describing the greenness of the product itself. It is good to know that a hotel company might have saved enough electricity to light Cleveland for a year, but the next step is to explain what that means to the individual traveler’s goal to be green. Phrasing communication in a way that transfers the product’s benevolence onto the consumer would likely resonate with the vast majority of U.S. travelers who place importance on green values, such as the 89% that want to do their part to leave the world a better place for future generations (see Figure 3).

The impact of the economyBecause a basic element of environmental friendliness involves efficiency and reduction of consumption, many green efforts save money,

As seen in Figure 14, no single entity has estab-lished a wide base of consumer trust for its green ratings. The creation of partnerships and coalitions involving multiple types of organiza-tions, such as the Partnership for Global Sus-tainable Tourism Criteria, is a logical next step. Unfortunately, though these entities may help the travel industry to build standards for itself, they are unlikely to capture mainstream con-sumer mindshare. This brings to light another quality that an effective consumer standard must have: a wide distribution network.

Upon reviewing the three necessary charac-teristics of a widely accepted consumer green standard – a trusted brand, scientific integrity and a wide distribution network – it is clear why consumers have yet to accept any of the standards on the market today. Of the likely contenders in the travel industry, the ratings and travel guide giants seem best suited, as they already have two out of the three necessary characteristics. The component of scientific integrity will likely require partnership with an environmental advocacy group or government agency.

Though the development of a consumer green standard will undoubtedly be a difficult and time-consuming endeavor, its relevance will be exceptionally powerful. The vast majority of U.S. travelers want to make green choices (see Figure 3) and the establishment of an eas-ily accessible, trusted standard will provide the vital source of information they need to do so.

green communicationsThe issues surrounding green communications largely represent the next hurdle for most travel companies. Both the industry survey respon-dents and interviewees indicate that much of the effort planned for green initiatives during the next 1-2 years is related to communica-



levels, which indicates that economic factors affect even the more actively green categories.

From the industry’s perspective, prioritization of green initiatives is also likely to decrease because of current economic trends. Practices that provide immediate cost savings would clearly be an exception to this trend, but given that most major travel companies have had environmentally focused programs in place for several years, most initiatives that do not require investment are already in place. Therefore, with the possible exception of large development projects that require long-term planning (such as new hotel property and air-plane technology development), there will be a general lull in the overall progress of green ini-tiatives as travel companies turn their focus to overcoming the near-term economic challenges.

both for the industry and for consumers. For that reason, a tough economy would likely heighten the priority given to green actions that relate to cost savings.

Among consumers, however, there is a com-mon assumption that green products cost more, and this is reflected in their reactions to economic challenges (see Figure 16). Nearly four out of 10 respondents indicate that they prioritize environmental friendliness less in their purchasing than they otherwise would because of the current economic climate (sur-vey was fielded in August-September 2008). Given that the economy took a significant turn for the worse in late 2008, it is likely that a portion of the substantial neutral group may have since shifted their stance. The green life-style categories had relatively similar agreement

Figure 16Effect of Economic Pressure

10%36% 28%

10%44% 30%Indifferent/Passive/Uncommitted

Dedicated/ActivistI prioritize environmental concerns less in my purchase decisions because of the current economic climate

Slightly agreeNeutral/Don’t know Strongly agree

Question: Please indicate how much you agree or disagree with these statements: (n = 1,331)BASE: U.S. travelers




out of 10) who are willing to pay a premium for differentiated green products. Brands that are able to distinguish their products from the baseline will be able to charge premiums to those consumers for whom environmental friendliness is a source of satisfaction. The challenge for companies that seek to attract premium-paying consumers is that these con-sumers are skeptical and savvy. Not only must the product stay on the cutting edge of the latest green technology, the communication around it will have to maintain the delicate balance of drawing attention to the green aspects of the product without overplaying the benefits.

major travel rating and guide organizations will be expected to provide green information.Because 62% of U.S. travelers believe that their travel choices can make a difference in the environment, the potential green travel audience is so wide that travel rating and guide companies would be ignoring a strong consumer need if they do not systematically introduce green information in their offerings. A large portion of green travelers (42%) views standards/ratings specifically as an enabler for making green travel choices. While it’s not necessary that the information be generated in-house, the opportunity afforded by the high level of demand for green information presents a great opportunity for organizations such as AAA and Mobil – enhanced because of their brand connections to transportation –

for most travelers, green will act more as a “hygiene factor” than a source of satisfaction.Consumers will expect travel companies to maintain a basic level of responsibility to the environment in the course of doing business. The threshold of green expectations will likely evolve and increase over time, but a natural set-tling point seems to fall at the consumer “price premium threshold” depicted in Figure 12, where opportunities to reduce consumption are exhausted and initiatives begin to cost compa-nies money.

For most travelers, meeting this base level of greenness will become something of a “hygiene factor” – that is, if the baseline is not met, it will be a source of dissatisfaction, but exceed-ing the expectation will not generate increased levels of satisfaction. Corporate travel managers already exhibit these characteristics in that they collect information regarding environmental friendliness as part of the standard request for proposal (RFP) process. Hotels could easily be rejected if they are not actively maintaining environmentally friendly practices, but they are not regularly chosen based on their environ-mental friendliness alone.

The travel marketplace will bear premiums for differentiated green products.Though they will not represent the major-ity, there is a sizable portion of travelers (three

Conclusion

what’s next for green Travel


Conclusion: What’s Next for Green Travel February 2009

associations to provide information and share best practices, and these efforts – though not the focus of this study – deserve recognition for the progress they will undoubtedly achieve. While findings suggest that mainstream travel-ers will be most receptive to standards put forth by established players, efforts made by all travel companies, large and small, will help shape the future of green travel.

to increase their market relevance by adding a green component to their standards.

* * *

The industry is clearly eager and determined to meet the challenge of “greening” the world of travel. Many valuable programs have been launched by travel companies and industry



industry partners

Sustainable Travel International is a global leader in sustainable tourism development. The membership-based non-profit organiza-tion’s mission is to promote responsible tourism by providing programs that enable consum-ers and the travel trade to contribute to the environmental, socio-cultural and economic values of the places they visit, and the planet at large. Sustainability solutions and offerings include carbon management, eco-certification, travelers’ philanthropy, education and training, and advisory services. For more information, please visit www.sustainabletravel.com or call 800-276-7764.

About HSMAI Foundation | Established in 1983 to serve as the research and educational arm of the Hospitality Sales and Marketing Association International, the HSMAI Foun-dation’s mission is to expand and enhance the educational opportunities available to hospi-tality sales and marketing executives and to increase the amount of in-depth research con-ducted on behalf of the profession. Today, and in the years ahead, the HSMAI Foundation, a 501 (c) (3) organization, plans to accelerate its

research and publishing activities to contrib-ute even more to the continuing education of those engaged in this fast-paced, increasingly demanding profession. For more informa-tion on the HSMAI Foundation, contact the Hospitality Sales & Marketing Association International Foundation, 1760 Old Meadow Road, Suite 500, McLean, Va. 22102; (703) 506-3280; fax (703) 506-3266, or visit the website at www.hsmaifoundation.org.

sponsors

Advantage Rent A Car is committed to provide value for it’s customers at all it’s locations in the U.S. And abroad.

American Express entered the travel agency business in 1915 and today is one of the larg-est travel agency networks. The company has Travel and Foreign Exchange Services locations worldwide.

Amtrak has posted six consecutive years of growth in ridership and revenue, carrying more than 28.7 million passengers in the last fis-cal year. Amtrak provides intercity passenger rail service to more than 500 destinations in 46 states on a 21,000-mile route system. For schedules, fares and information, passengers may call 800-USA-RAIL or visit Amtrak.com.


Sponsors February 2009

Expedia® is the world’s leading online travel provider, helping millions of travelers per month easily plan and book travel. In part-nership with UNESCO and United Nations Foundation, Expedia founded the World Heritage Alliance to educate travelers about sustainable travel and tourism and raise awareness for World Heritage Sites around the globe. Learn more at www.expedia.com/worldheritage. Expedia.com is an operating company of Expedia, Inc. (NASDAQ: EXPE).

Fuerte Hoteles, a local family company, based in Marbella (Spain), offers 6 hotels in Anda-lucía (Marbella, Conil, Grazalema and El Rompido). During 51 years, Fuerte Hoteles has been managing its hotels in a responsible way by: 1. caring for guests and employees satisfac-tion, 2.offering best destinations and best loca-tions, 3. maintaining our facilities in pristine conditions, 4.promoting innovation, 5.offering local gastronomy, 6. reducing its environmen-tal impact, and 7. promoting local culture and helping local communities to develop.

InterContinental Hotels Group (IHG) is the world’s largest hotel group by number of rooms. IHG owns, manages, leases or fran-chises, through various subsidiaries, over 4,100 hotels and more than 600,000 guest rooms in nearly 100 countries and territories around the world. The Group owns a portfolio of well recognized and respected hotel brands includ-ing InterContinental® Hotels & Resorts, Hotel Indigo®, Crowne Plaza® Hotels & Resorts, Holiday Inn® Hotels and Resorts, Holiday Inn Express®, Staybridge Suites® and Candlewood Suites®, and also manages the world’s largest hotel loyalty program, Priority Club® Rewards with 40 million members worldwide.

As a world leader in the travel marketplace, Sabre Holdings connects people with the world’s greatest travel possibilities. Sabre Hold-ings merchandises and retails travel products and provides distribution and technology solu-tions for the travel industry. Sabre Holdings supports travelers, travel agents, corporations and travel suppliers around the world through its three companies: Travelocity, Sabre Travel Network, Sabre Airline Solutions and other leading brands.



The San Diego Convention & Visitors Bureau (ConVis) is the sales and marketing engine for the San Diego region. The organization is rec-ognized as San Diego’s umbrella Destination Marketing Organization (DMO), charged with monitoring the health of the tourism industry and promoting all areas of the region. A not for profit corporation, ConVis serves the local community by stimulating inbound travel to San Diego.

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