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The Covid-19 pandemic has accelerated the urgency for hotels and hospitality companies worldwide to act to protect the well-being of the planet, communities, employees and guests, leading to a sharper focus on environmental, social and governance (ESG) initiatives.

While still nascent, the Asia Pacific hotel industry’s commitment to ESG and sustainability initiatives is steadily increasing – a welcome development as the region has the highest concentration of hotel carbon emissions. Rising energy costs – which have increased significantly since the onset of the pandemic – as well as other factors such as the shift in guests’ preferences toward more sustainable tourism and green accommodation, and growing demand for disclosure around climate risk, are accelerating the industry’s focus on sustainability.

These developments are feeding into a trend that CBRE is observing in the hotels sector: green travellers want to stay in green hotels. With environmental consciousness coming to the fore, sustainable design will increasingly come into play, enhanced ESG practices will offer travellers places where they feel comfortable spending their time, and new investment opportunities will be created.

This report examines the key ESG trends shaping the Asia Pacific hotels sector, and explores the key actions that hotel companies, developers and investors can take to effectively integrate ESG initiatives into their business, operations and investment strategies.

This report was originally published in https://www.cbre.com/insights/reports/asia-pacific-report-eyes-on-esg-why-the-asia-pacific-hotels-sector-needs-to-pay-attention

With ESG taking on increased importance globally, the S (social) dimension of ESG has received considerable attention recently. This reflects the need to prioritise the health and well-being of staff and customers, as well as supply chain issues, and equity and diversity issues in the workplace. This article highlights these issues and the major initiatives in the S space now being actively implemented by the real estate industry in Australia and Asia.

Doing ESG Well

Importantly, the real estate industry has clearly recognised the importance of ESG in their activities. This mandate has moved on from “doing ESG” to “doing ESG well”. This sees the ESG agenda actively promoted by the professional organisations in the real estate industry in our area; this includes APREA, ANREV and the Property Council of Australia; check their websites for fuller details.

Specifically concerning the S dimension of ESG, this covers a range of social aspects needed for effective businesses today. This includes staffing aspects, concerning equity, diversity and inclusion issues such as gender equality and cultural diversity to address under-represented groups at all levels in the organisation (ie: staff, senior management, board), as well as staff turnover, retention and pay. Wellness and well-being have also been a focus, around issues such as safe workplaces and staff mental health (particularly during COVID). Many organisations have also developed supply chain codes of conduct, with aspects such as modern slavery issues and fair pay being critically important. This sees many real estate companies giving their historic performance metrics to show they are moving forward in the delivery of these S issues.

All of these S activities are important, as they now play a key role in real estate funds’ decisions on whether to invest in these real estate companies, as well as the real estate companies showing a strong commitment to ESG. This is essential for investors today as ESG takes on increased importance at all levels in our communities. Companies clearly face the risk of being excluded from these investment mandates if they do not actively address these ESG issues.

For REIT markets in the region, July’s rally lasted until the Jackson Hole meeting in August. The Fed reiterated its hawkish stance in its annual symposium, which sparked a selloff in the region’s markets. Geopolitical tensions also cast a pall on the region’s equities. Most central banks in the region continued to raise rates to keep pace with the Fed and rein in inflation; Thailand and Indonesia raised their respective policy rates for the first time in almost four years to join the list of central banks that are unwinding Covid-induced stimulus measures.

E-commerce has grown rapidly over the past five years, with expansion accelerating since the pandemic. Despite e-commerce penetration moderating from pandemic highs after restrictions were lifted, CBRE expects future growth in Asia Pacific to continue to outpace the rest of the world. Of the six key e-commerce drivers identified by CBRE, Asia Pacific possesses a distinct advantage in three: Urban population growth, adoption of digital wallets and a vibrant e-commerce ecosystem.

As the retail industry continues to evolve toward omnichannel, so too will the role and functions of physical stores. Retailers and landlords need to re-invent themselves to prepare for the evolution of retail and the rise of omnichannel.

The growth of e-commerce is also driving robust industrial & logistics property demand, although the supply pipeline is unlikely to meet future demand. Logistics occupiers are advised to explore build-to-suit developments and invest in the latest warehouse technologies. 

Key highlights from this report include:

• CBRE forecasts Asia Pacific’s e-commerce penetration rate to grow to 35% by 2026. However, e-commerce penetration will vary across different product categories.
• Korea, mainland China, Indonesia, Australia and Taiwan are expected to be the five most penetrated e-commerce markets in Asia Pacific by 2026.
• While physical stores will remain essential, the rise of omnichannel is prompting many traditional brick-and-mortar retailers to consider new formats and locations.
• Over the next five years, 100 to 130 million sq. m. of additional dedicated
• e-commerce logistics space will be required to support the growth of online sales in Asia Pacific.

This report was originally published in https://www.cbre.com/insights/reports/Asia-Pacific-Report-Omnichannel-Retail-and-its-Impact-on-Asia-Pacific-Real-Estate-October-2022