Investment Board
The EAM Investment Board gives a structured form to the ongoing and responsive
dialogue with and among sustainability research agencies. The Board provides the oppor-
tunity for the consultation process between own research and external research to take
place. It also discusses rating details, the ESG‘s assessment of the IPOs of new issuers
and sustainability issues in general.
Hotels
If you are planning on going away for a bit, you will find it hard to avoid spending the odd night at a hotel. And you
will want it to be both beautiful and affordable – but who will pay the price for that? Erste Asset Management has
discussed the hotel business as part of its Investment Board meeting with its research partners. It became clear
rather quickly that this sector potentially harbours risks in all ESG areas.
Cost savings seem to rank high on the list of priorities in hotel chains. Hotels employ a seasonal workforce at
low cost and tend to cut corners at perks like employee share schemes. Especially in developing countries, long
working hours and low pay is commonplace. But on a global average, labour still makes up more than 30% of total
costs. Erste Asset Management Investment Board believes that these costs are largely caused by expensive trainings
due to high fluctuation.
However, cost savings also come with an upside in terms of sustainability: hotel operators try to minimise their
resource input, with a particular focus on electricity cost savings. The measures taken range from changing the
light bulbs to solar-powered hotel facilities.
Water consumption comes with savings goals too, but they require a longer implementation phase, and the
results are often only moderate. So far only few structures used in tourism have been built in accordance with
the eco standard LEED (Leadership in Energy and Environmental Design). Worldwide there are currently 1,381
LEED-certifi ed hotels and apartments. By contrast, in Germany alone there are almost 35,000 accommodation
facilities.
The Corporate Governance area used to be dominated by the slogan “less is more”, since hotels were mostly
owned by families. Nowadays that situation has changed. The majority of the listed hotels is now not held by a
few major owners anymore, but has an ownership structure similar to that of many other groups. Here, corporate
management is not any better or worse than in other industries. The last remaining family-led hotels such as Hilton
or Hyatt, on the other hand, reveal major defi ciencies in terms of Corporate Governance.
The hotel industry is more signifi cantly affected by political risk than other sectors. Thailand serves as an
example: During the military coup in May 2014 the number of tourists was down by 20%, and hotels recorded
a massive decline in sales due to cancellations.
Status:
With regard to the hotel industry, Environment and Social command equal weightings in the SRI rating model
of Erste Asset Management. Corporate Governance is weighted at 10%. The talks with the Investment Board
confirmed our approach, which is why no adjustments of the SRI rating model need to be made.
(Richard Boulanger)