Green Premium? The Impact of Energy Efficiency on Hotel Transaction Values

Rene-Ojas Woltering, David Downs and Seong Wook Park

ERES from European Real Estate Society (ERES)

Abstract: As the real estate sector grapples with its substantial environmental footprint, quantifying the economic value of sustainability has become imperative. In fact, hospitality is the segment of the real estate industry with the highest carbon footprint. Yet, there is scant evidence assessing the presence of a “green premium” for hotels. Our paper is the first to address this shortcoming. Utilizing a dataset of 811 UK hotel transactions from 2007 to 2022, we estimate a hedonic regression model to quantify the price differentials attributed to Energy Performance Certificates (EPCs) ratings. We find a significant price premium for hotels with higher EPC ratings: a 16% premium for A and B ratings (i.e., the two highest ratings), and a 10% premium for C and above ratings, and a nearly 10% discount for D through G (i.e., the lowest ratings). These findings are indicative of the tangible economic value associated with higher degrees of energy efficiency and, perhaps more importantly, suggest increased investor attention to energy efficiency.

Keywords: Energy Efficiency; Green premium; Hedonic valuation; sustainability (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2025-01-01
New Economics Papers: this item is included in nep-eff, nep-ene and nep-env
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