To invest or not to invest in sustainability? Dilemma of a small
hotel
Hui Jun Ling, Michael Quah, Jenson Chong-Leng Goh,
National University of National University of National University of
Singapore, Singapore Singapore,
€0004900@u.nus.edu jenson.goh@nus.edu.sg
Abstract
It is no secret that hotels, while pursuing profitability, are largely responsible for many of our
sustainability challenges today. The hotel industry consumes a huge amount of energy and
resources in its relentless pursuit for customer's satisfaction. In tum, its operations often create
many sustainability problems such as food waste, high energy and water usage and pollution.
While many hotel owners understand their moral responsibility to direct its operations towards
more sustainable practices and often through the adoption of green technologies, they are faced
witha dilemma of choosing between profitability and sustainability. This is especially the case
forsmall hotel owners. In this study, we examine closely a small hotel’ s courage and ingenuity
in adopting and investing on green technologies from a system perspective. We model the
intertwining relationships between the adoption and investment of green technologies and the
hotel’s profits and provide the evidence to shed light on how this delicate balance between
profitability and sustainability can be achieved and sustained.
Word Count: 6610 words
Keywords: small hotel, sustainability, green technologies, small and medium enterprise
Introduction
There is a mounting amount of evidence to indicate that human activities are one of the main
causes of our sustainability challenges today (IPCC, 2007; Stem, 2007). Businesses around
the globe have begun making sustainability as one of its key strategic priorities (McKinsey,
2009). Unfortunately, a huge number of business organizations are still struggling with
implementing sustainability initiatives effectively (IBM, 2008). Successful organizations often
find themselves in a constant state of struggle trying to fulfil its “sense of obligation to
contribute to environment sustainability” (Elliot, 2011, pp. 219), while figuring out the
significant uncertainties involved in estimating the impact of sustainability initiatives towards
its financial bottom lines. This is especially so for small hotel owners.
In recent years, the hotel industry has experienced exponential growth, much of it due to the
huge increase in tourism activities across the globe (Rodriguez-Antén, Alonso-Almeida,
Celemin, & Rubio, 2012). Running a hotel business is a resource-intensive endeavour,
consuming a large amount of energy, water, food and consumables in order to maintain or
create new facilities to delight and keep its customers. At the same time, a hotel also generates
a significant amount of wastes and carbon footprint as compared to buildings of similar size
(Legrand, Sloan, & Chen, 2016). According to GreenHotelWorld (a non-profit organization
that seeks to measure the CO2 emissions of the world hotel business), the intemational hotel
industry is directly responsible in generating 1% of the global CO2 emissions which is
equivalent to the total yearly emissions of the United Kingdom (GHW, 2017). Hence, it is
increasingly important for the hotel industry to adopt sound sustainable practices and green
technologies to minimize its impacts to the environment.
Increasingly, major intemational hotel chains and small hotel’s owners are becoming aware of
the tangible and intangible benefits on being “proactive in mitigating environmental impacts
including real efficiency gains and improved corporate reputation” (Legrand et al., 2016,
Preface). An eco-friendly hotel is gradually becoming a key differentiator in the industry. Ina
study that investigates the moderating effects of environmental knowledge, environment
concem, and the direct and indirect environmental behaviours of tourists, on the relationship
between environmental practices of hotels and tourists’ loyalty, Yusof, Rahman, & Iranmanesh
(2016) found that a hotel’s environmental practices can improve the tourists’ loyalty towards
it especially for those tourists who are environmentally conscious. However, understanding the
benefits and being able to incorporate sound sustainable practices and green technologies are
two different things. Hotel operations consists of many small work tasks that range from
housekeeping, to banqueting, to restaurant’s operations and to spas and activity management.
While these operations individually contribute a relatively small amount of environmental
pollution, they accumulate to significant amount when combined. Fora small hotel’s owner, it
is difficult to find the time and resources to deal with the challenges of minimizing these
environmental pollutions in all its operations, while eaming sufficient profits to keep it afloat.
More often than not, the obvious choice is to focus on profitability at the expense of
sustainability.
In order to address this dilemma, the research and practitioner’ s community has suggested the
adoption of the ‘triple bottom lines’ framework, which consists of economic sustainability,
environmental sustainability and social sustainability by businesses in driving its strategy and
operations (e.g. Adams, 2006; Elliot, 2011; Haugh & Talwar, 2010; Melville, 2010). By
focusing on activities that reside at the intersection of the three dimensions, a hotel operator
can fulfil its corporate social responsibility through the adoption of green practices and
technologies (thus, reducing its carbon footprint) while generating financial and reputational
benefits at the same time (Adams, 2006; Elliot, 2011). Conceptually, this makes a lot of sense
for hotels. Unfortunately, in practice, finding this intersection is not easy. The constant
bombardment of operational mandates often compelled hotel’s operators to place more
emphasis on economic sustainability (i.e. profitability) rather than the other two dimensions.
Over time, the sustained emphasis on economic sustainability would be imbedded into the
organization’ s culture and processes, obstructing them from seeing the value of achieving the
balance among the three dimensions. The challenges faced by small hotel owners are so
daunting that it has led to the rise of many NGOs across the globe with the mission of
encouraging and helping these small hotel owners to adopt environmentally and socially
responsible business practices. One good example of this NGO is the Green Leaf Foundation
(GLF) in Thailand. Led by Professor Chirapol Sintunawa, the Green Leaf Environment
Standard developed by the Foundation provides a framework to help Thailand’s hotels
(especially small hotel owners) to progressively transform its operations towards green
practices (GLS, 2017).
This challenge faced by small hotel’s owners motivates our current study. In our study, we are
concemed with just the balancing between environmental sustainability (for convenience, term
it as sustainability) and economic sustainability (for convenience, term it as profitability). We
have deliberately left out social sustainability in our study because in a context of small hotels,
2
getting to the state of balancing between sustainability and profitability is the first step before
they can generate surpluses to contribute and fulfil its social sustainability mandate. By
adopting a systems approach to analyse how a small hotel can balance the investment of green
technology (i.e. sustainability) and profitability, our study strive to answer the following
research questions: (1) Should small hotel invest in green technology? (2) Will investment in
green technology lead to higher business profitability?
The remaining part of this paper is structured as follow. We will start by reviewing the existing
literature in Systems Dynamics in the context of sustainable development. This is followed by
adiscussion on the methodology approach that we have adopted in our study. After which, we
will present the model that we have developed based on the data from the case organization. A
robust discussion and analysis of the model will be conducted after this. Finally, we will
conclude our paper with a discussion of its potential contributions to both the literature and the
practitioner's world.
Literature Review
Based on avery recent comprehensive literature review of 192 research papers written between
2000 and 2015 on the use of systems dynamics to examine sustainability issues, Moon (2017)
has identified 18 research themes. The themes are listed as follows: (1) Agriculture,
Aquaculture & Livestock; (2) Construction; (3) Ecosystem & Climate; (4) Energy; (5) Human
Health; (6) Information Systems; (7) Land Use; (8) Manufacturing; (9) Mining; (10) Overview
& Review; (11) Social Behaviour, (12) Supply Chain; (13) Sustainable Development; (14)
Tourism; (15) Transportation; (16) Urban and Community Planning; (17) Waste, Recycling
and Reuse; and (18) Water Resources. Together with our own reviews on systems dynamic
modelling on sustainability, we generated a significant number of papers to identify the current
state of the literature.
In order to review this large number of papers in a systematic way, we took the approach of
creating a set of review criteria in order to narrow down the papers to those that are relevant to
our study. The criteria that we have developed are: (1) Does the paper analyse its sustainability
issue through modelling at firm level? (2) Does the paper examines its sustainability issue
through modelling a small and medium enterprise? (3) Does the paper examines its
sustainability issue in a hotel industry? (4) Does the paper use a model to explain how a
company achieves the balance of sustainability and profitability? (5) Does the paper consists
of models and variables that may be of interest to our study?
We read through the abstracts of all the research papers that we have identified and evaluated
them using our review criteria. If we discovered papers that have more than three ‘yes’ or have
a‘yes’ for criteria (5), we will read the paperin more details to draw valuable insights to inform
our model development. Based on this approach, we have identified the following papers that
are relevant to our study and they are presented in Table 1. Analysing our extensive literature
review on simulation for sustainability concluded with the following findings. First, there are
only a few studies on using System Dynamics modelling to tackle sustainability challenges in
the context of small and medium enterprises. The small and medium enterprises are the main
engine behind most country’s economy. They are also often the ones that are faced with
complex challenges. Hence, we thought applying System modelling on these small and
medium enterprises would provide many important insights that can help to grow the economy
of the entire country. Yet, the literature in this area is limited and this gives us a more
3
compelling reason to conduct our study. Second, there are no studies that examine how a small
hotel can balance between sustainability and profitability. Given our earlier assertion on the
importance to examine this topic in an ever growing hotel industry, we believe that this is a
missed opportunity. Hence, we have designed our study specifically to fit this gap in the
literature.
Table 1: Relevant Research Papers from Moon (2017) and Our Own Review
Category Reference Description Firm SME? | Hotel Balance? Of Interest
Level? Industry? to Study?
Energy Hollmann. The paper describes a new energy system that has a high potential of N N N N x
(2006) meeting ecological requirements and sustainability. A systems dynamic
model is being constructed on one power supply unit and the effectiveness
of the energy system is being analyzed
Energy Reddi, The paper examines the adoption of hybrid renewable energy system. ¥ Y N Y ¥
Weilin, (HRES) and a combined heating and power generator into a SME
Bochao, & | manufacturing company. It uses a system dynamic model to identify
Yo components of HRES that creates a conflict between cost and environmental
(2013) benefits which requires the company to make trade-off decisions
Overview & | Stemman The paper describes a set of interactive web-based management flight N N N N y
Review (2014) simulators designed specifically to teach ideas in business, strategy, and
sustainability.
Sustainable | Duran- The paper proposes a system dynamic model to explain the implementation | Y N N N ¥
Development | Encalada& | and development of business sustainable policies of a decentralized
Paucar- govemment organization that is one of the largest oil producers in the world.
Caceres
(2012)
Sustainable | Nikolaou, The paper describes a system dynamic model that is developed through six | Y Y N Y Y
Development | Evangelinos, | case studies of companies in agribusiness and ski sectors. The model
& Leal Filho | explains the evolutionary trends of the relationships between climate change
(2015) tisks, financial performance and the operational processes of firms
Sustainable | Todorov & | The paper suggests a general classification of the models being developed in | N N N N bid
Development | Marinova the area of sustainability and proposed that any sustainability model should
(2011) be allowed for dynamic representation, including the co-evolution of the
sustainability systems and human actors.
Sustainable | Hsiao, The paper establishes a set of attributes of an environmental management N N ¥ N Y
Development |} Chuang, system (EMS) for the hotel industry in Taiwan using the Delphi method. It
Kuo, &Yu_| provides interesting variables that help us fine tune the variables used in our
(2014) model especially when measuring the performance of the green technologies
used in our case.
Tourism Yusof etal | The paper proposes a study that investigates the moderating effects of N N ¥ Y Y
(2016)
environmental knowledge, environment concem, and the direct and indirect
environmental behaviours of tourists, on the relationship between
environmental practices of hotels and tourists’ loyalty. The study provides to
support that the more environmental practices incorporated by hotels, the
higher their tourist's loyalty especially among tourists who are
exvironrentally conscious.
Tourism Blersch & The paper uses an EX CEL worksheet to create a computer simulation model
Kangas, that is used to study the possible long-term pattems of ecotourism at the
(2013) country scale for Belize, Central America. The paper highlighted the
challenges involved in balancing sustainability and profitability as
conversation efforts often will slow the income generated from ecotourists
rendering it commercially not viable.
‘Waste, Antmann, The paper proposes a simulation-based decision making and optimization
recycling & | Celik, Shi, framework for the analysis and development of effective solid waste
reuse &Dai and recycling programmes under uncertainty which has been.
(2012)
management
successfully demonstrated for the Miami-Dade County Solid Waste
h nt Systems in the State of Florida
Methodology
The study adopts an iterative process in developing its system model through literature review,
case study, system dynamic modelling and system validation and testing. This is shown in
Figure 1.
System
validation
and
testing
System
dynamic
modelling
Literature
review
Figure 1: Research Approach
The case study and system modelling approaches are particularly suitable for this study because
of two reasons. First, the investigation surrounding the investment and adoption of green
technologies within a small hotel inevitably involve complex interactions between people,
processes and technologies that are inseparable from its organization context (Pentland, 1999),
this makes case study and systems modelling ideal research methods in uncovering and
interpreting the shared mental model among key stakeholders (Klein & Myers, 1999). Second,
according to the Moon (2017)’s comprehensive review of the literature on using systems
modelling to address sustainability challenges, there is little research to date that look into
developing insights about whether a small hotel should invest in green technology and if so,
how will it contributes to its business profitability. A case method centred on developing a
system model on this unexplored phenomenon through the collection of rich data in real world
context is highly recommended (Eisenhardt & Graebner, 2007; Pan & Tan, 2011).
To select the appropriate small hotel to conduct our study, we adopted the following selection
criteria. First, the hotel must be sufficiently small to be classified under the category of small
and medium enterprise in Singapore. According to SPRING Singapore (2017) (a Singapore
Statutory Board), the definition of small and medium enterprise follows these definitions:
1. Annual Sales tumover of not more than S$100 million OR
2. Employment size of not more than 200 workers
Second, the hotel must have sufficient evidences to prove that it has successfully achieved the
balance between sustainability and profitability. Based on these two criteria, we scouted
Singapore's hotel industry to find a matching hotel. After a series of shortlisting process, we
7
have narrowed down to the Siloso Beach Resort in Singapore as our case organization. One of
the key reasons why Siloso Beach Resort was selected is because it was recently awarded the
top regional Asia’s Best Sustainability Report (SME) Award selected from a list of 68
companies from 14 countries nominated by members of an independent judging panel
(CSRWorks, 2016). Thus, providing credible result to demonstrate that they have successfully
balanced profitability and sustainability in its hotel’ s operations. Another reason is because its
sustainability report is available online for us to review before the site visit. This allowed us to
triangulate our observations and field notes during the site visit with what was being reported.
Thus, improving the validity of our model.
Access to the case organization was granted through its Executive Director, Mr. Sylvain Ricker
de Forges. Before the site visit, data were collected from secondary sources such as websites,
and newspapers and literature to aid in the process of developing an interview protocol and
strategy. The collected data were being used in the production of a set of potential variables
and probable relationships among these variables that may be important to our systems model.
During the site visit, key stakeholders of the hotels were interviewed. Questions used in the
interview protocol were open-ended questions designed to solicit or affirm the presence of
important variables and/or relationships from the interviewees (Nikolaou et al., 2015). Detailed
notes were being documented throughout the interview process. This was followed up with an
onsite hotel’s tour to help us understand how the green technologies were being invested and
rolled out across the organization. A large amount of data ranging from websites, field notes,
interview s records, photos and company’s reports were collected.
Upon retuming from the site visit, the collected data were reconciled and analysed to
corroborate the interpretation of the key variables and its relationships to help us develop a
system model to answer our research questions. The data analysis process were conducted in
an iterative fashion oscillating among examining the large amount of data closely for
theoretical insights, reviewing the existing literature for validation and developing and testing
the model incrementally (Eisenhardt & Graebner, 2007; Locke, 2001; Sterman, 2000). A
number of reference mode scenarios were also being developed to test the rigor of our model
in its predication. This process is repeated until a stock and flow model comprising of the
potential endogenous and exogenous variables and their relationships were derived and a state
of model’s confidence was achieved (i.e. confidence that the derived model can be used to
explain most of the collected data especially in relation to the reference mode) (Sterman, 2000).
We made use of a variety of quantitative and qualitative data and techniques to help us validate
our model. First, we compared the structure of our model against the structure of the real
systems examined during our case study visit to ensure our model’ s technical correctness. This
is similar in approach as adopted Reddi et al. (2013). Second, we made use of a simplified
layman model along with flowchart and field notes to describe the important assumptions,
variables and the relationships among variables to the key stakeholders to validate if we have
understood and captured these important information correctly. Third, we ran our simulation
and compared the model behaviour with the real system behaviour obtained from secondary
sources, e.g. the case organization’ s corporate documents, govemment websites and published
articles.
Case Organization Description
Siloso Beach Resort located in Sentosa Island of Singapore is a self-sustaining eco-resort that
is dedicated to corporate social responsibility as well as environmental sustainability efforts
(SBR). The resort is ‘one of the few hotels which was purposely built, fromits conception, to
beaneco hotel and to apply best sustainable practices throughout all its operations’ (SBR-SR,
2015, pp 15).
Unlike traditional small and medium hotel, the resort operates based on a sustainability
business model that strives to direct all its operations towards the intersection between
sustainability and profitability right from the start. Not surprisingly, the resort has a rigorous
set of key performance indicators to measure its progression towards the sustainability and
profitability.
Given its relentless emphasis to become a top sustainability resort, the resort has implemented
a suit of unique eco-innovations. These innovations had helped the resort balances between
sustainability and profitability. One of such eco-innovations is its experimental wom
composting system that is being managed onsite its resort. The system involves an innovative
‘waste management technology that recycles food wastage for increased profitability. Womns,
as shown in Figure 2, were fed with food waste generated through the hotel’s dinning
Operations.
Figure 2: Wommery to decompose food waste into organic fertilizer
The womns helped to naturally compose these food wastes into organic fertilizers. These
organic fertilizers were then being used to fertilize the organic vegetables produced in its in-
9
house rooftop garden (as shown in Figure 3). These organic vegetables were being used as raw
cooking ingredients forits resort’s dinning operations. In this way, instead of spending money
to dispose the food waste, the resort was able to tum the food waste into useful fertilizers for
its garden. This in tum allows the resort to cut its kitchen ingredient’s cost. Thereby, further
increasing the profit generated from its dinning operations.
Figure 3: Organic Vegetable Farm in Rooftop Garden
Apart from many similar eco-initiatives implemented in the resort, the hotel had also invested
heavily on green technologies. For instance, the resort has been constantly upgrading its chiller
system. According to Mr. Sylvain, the Director of Sustainability at Siloso Beach Resort, the
chillersystem in the resort has been through three upgrades within last 10 years. This is because
they believe that it makes business sense to obtain better chiller technology to assure greater
energy efficiency in its operations. Despite the high initial cost of investment, the resort
believed that in the long run, such investment would inevitably generate positive retums.
Another example is the resort’s heat recovery system which is specially designed to hamess
the heat generated from its air-conditioning units and channeling it to its hot water heater and
resort’s hot spa. Waters that were being used by the resort for washing floors, watering plants
and trees and for swimming pools, were extracted from underground spring water after going
through an advanced filtration system (see Figure 4). As a result, the resort has been able to
successfully convert the energy/waste generated through its operations into tangible cost
reduction implementations.
10
Figure 4: Water used to create waterfall comes from underground spring water with.
advanced filtration system
Model Discussion
Using data collected from our case organization, we developed a stock and flow diagram to
analyse how investment in green technology is able to contribute to the profits of a small hotel
through saving from operational costs. Our system dynamic model is shown in Figure 5.
11
“Average Systenr
Bey ra tonnes,
cost per kWh,
consumers’
number of rooms
preference ecailable Operational Hours (CS), Electrical energy
consumption of chiller Number of chillers
system °
occupancy rate, Utility Expenses <_
Total electrical energy
Purchase, usage of chiller system,
‘Average Daily Number of rooms
te, oruPied per day,
peraiing costs
©
Earnings from FnB
Peak sun hours ¢~,
Electrical
solar panel module
Power generated by a =.) er
Investment start year,
Investment in Green _—+
SS. fer generated by
solar panels
i Investments,
= Number of solar =
air den:
cost a solar panel,
cost of wind “a
Atscetva! Fuel,
year ‘ purchase
of wind turbine ,
Average annual usage,
Light Energy e
a Consumption pet
. energy efficient light,
win
power generated by
rine
Unit cost of light,
‘swept area ¢f
wind
Cost \ ‘energy
efficient lighting,
ity,
average wind speed,
turbine,
<Time:
ee ee
Investment in a:
Green Building
Operational hours,
cost of chiller system,
Figure 5: System Dynamic Model on Small Hotel Using Our Case Study
12
There are three main sections in our stock and flow diagram and they are explained in details
below:
1. Profits - this section on profit focuses on modelling the dynamism that generates profit
through the product and services of ourcase organization. The source of the company’ s
eaming largely comes from the sales of room and from food and beverages.
2. Green technologies - this section describes the dynamism involved in the adoption
and implementation of green technologies in our case organization. The management
of the resort has decided to only invest in a wind turbine. Hence, the number of solar
panels that the resort invested in is computed using this fonmula: (“Investment in
Altemative Fuel” - “Cost of Wind Turbine”)/”Cost of Solar Panel”. The energy
generated through altemative fuels from solar and wind becomes an inflow into the
“Electrical Energy” stock.
3. Green Building - this section models the dynamism surrounding all the key
infrastructure green technologies used in our case organization. It includes more energy
efficient lightings and chiller systems. These infrastructures consume electrical energy
and hence serve as an outflow to the “Electrical Energy” stock.
When the amount of electrical energy generated by the green technologies is insufficient to
meet the energy demand required to maintain the hotel, the case organization would make a
purchase from the power company to cover the shortfall and this is represented through the
inflow “Purchase”. The inflow “Purchase” is unlike any typical inflow. It’s value during
simulation is based on the current value of the “Electrical Energy” stock. If the stock is less
than or equal to zero, the same amount of inflow from “Purchase” will be added to the stock
(simulating that the shortfall in energy is covered by the power grid). If the stock is less than
zexo, the amount of inflow from “Purchase” will also be zero.
However, if the electrical energy generated by the green technologies exceed its energy demand,
the surplus electrical energy generated by green technologies will be wasted since it cannot be
channel back to the power grid.
The adoption of green technologies in solar and wind and green building will over time reduce
the overall operating costs in maintaining the resort. This means that the hotel will generate
more profits, which in tums will increase the amount of money being invested into the green
technologies. A reinforcing cycle is formed. Figure 6 shows the behaviour over time graph
generated for the stock ‘Profits’. The profit over time increases and maintains at a steady state
from around 20" years onwards. This implies that the profitability (denoted by the eaming
section) and sustainability (denoted by the green technologies and green building sections)
within the model has reached dynamic equilibrium. Providing evidence to support that
balancing between profitability and sustainability is a real possibility for a small hotel. The
drop in the stock ‘Profit’ is the initial capital cost that is being used to purchase the green
technologies. We can see from the Figure that this cost is being recovered in around 5 years
time.
13
3 10 IS 20 25 30 35 40 45 + Si
Time (Year)
Profits : Base
Figure 6: Behaviour over time of Profit
To mimic the real-world situation, we have made the following assumptions:
1.
Since the investment of altemative fuel is often a large amount of one-time capital cost,
we made an assumption that the resort does not make any investment in green
technologies in the first five years of its initial operation. This will help the resort save
up sufficient amount of its profits to finance the capital investment.
. We further assume that a constant 20% of the case organization’s profits is being
invested into green technologies after the first five years of operation. This amount is
justified by testing the model with varying percentage to look for situation when the
drop in profit is not too drastic and the retum of investment is the shortest.
. Weassume that lighting and chiller system infrastructure is already in place. The green
building investment is used to replace the existing lighting and chiller system with
more energy efficient one.
. Wealso made an assumption that the existing lighting and chiller system do not add to
the ‘Electrical Energy’ stock as the cost of financing the purchase and maintenance of
them is covered by the other 80% of the profit.
The definition of each of the variables used in our model is provided in Table 2. Within this
table, we have also included sources that we have used to derive the formula and/or data for
the variables in our system.
Table 2: Variables, its definition and sources
Variables Definition Source
Profit The main stock of the modal. Siloso Beach Resort:
hhttp://silosobeachresort.com/
Taken to be the Eamings - (Operating costs +
Investrents).
14
Table 2: Variables, its definition and sources
Variables Definition Source
Earnings The total of Eamings from Sale of Rooms +
Eamings from FnB
Eamings from Sale of The sum of Average daily room rate *
Rooms Number of rooms occupied per day.
- Average daily room rate | Calculated estimate of 258.1 SGD per room. Referenced the average room rate reported.
in the hotel statistics produced by
Singapore Tourism Board as well as
Siloso Beach Resort's and similar scaled
hotels under the Far East Organisation.
Singapore Tourism Board Hotel Statistics:
hittps://www.stb.gov.so/statistics-and-
market:
insights/marketstatisticy/2014hs(updated”%
2007apr15).pdf
Far East Organisation:
http; fareast. jitalib
Siloso Beach Resort:
http,//silosobeachresort. cony
Interview data and field notes
- No. of rooms occupied ; The product of Occupancy rate and the
perday | Number of rooms available.
- Numberof rooms : Set parameters : 200 rooms Based on research on number of rooms
available available in Singapore’ s resort/commercial
‘The number is set to mimic the average type hotels.
rex type hotels in Si
Far East Organisation:
http: fareast.cc jitalit
Siloso Beach Resort:
pbeachresort.com/
Occupancy rate ; Affected and dependent on Consumers’ Based on an interview conducted at Siloso
Preference.
Taken an estimate of 74.95% ( the average of
Siloso Beach Resort and the average reported
on Singapore Tourism Board.
Beach Resort
Singapore Tourism Board Hotel Statistics:
ttps://www.sth.gov.sq/Statistics-and-
market:
insights/marketstatisticy/2014hs(updated7/
2007apr15),
15
Table 2: Variables, its definition and sources
Variables
Definition
Source
Consumers’ Preference
Adjustable variable in the model that serves to
experiment with the correlation between.
consumers’ preference and the sustainability
actions of a company.
“What motivates consumers to make
ethically conscious decisions?’ (12 August
2011):
https: OC
Built on the es urrrmon thet wil growing business motivates consiarers:
of need to be sustainable, ethical-decisions
cons¢
consumers’ are leaning towards eco-friendly
consumptions.
‘Global consumers are willing to put their
money where their heart is when it comes
‘to goods and services from companies
committed to social responsibility’ (17
June 2014):
‘hhttp://www.nielsen.com/us/en/press-
roony2014/qlobal-consumers-are-willing-
to-put- their money-where- their heart-
is.html
Do customers care:
http://www.greenhotelier.org/our-
themes/community-communication-
engagement/do-customers-care/
Eamings from FnB Profit company eams from offering food and re Hotel Industry Survey 2012
‘beverage services. (Financial Y ear 2011)
Operating Cost
Utility Expenses The product of Cost per kWh and total amount
of Electrical Energy Purchased.
- Cost per kWh } Taken as 22.1 cents per kWh as recorded in ‘Singapore Powers:
the first half of 2015. ‘https://www.spqroup.comsc/home
Energy Market Authority:
ttps://www.ema.gov.sq/cmsmedia/Public
ations and Statistic ication 01
Electrical Energy The balance of and energy
used - (Generation - Usage)+Purchase. If
generation is more than usage, no electrical
energy is
Generation | The total of Power Generated by Solar Panels
and Power Generated by Wind Turbines.
Usage
The total of Light Energy Usage and Total
Energy Usage of Chiller System.
16
Table 2: Variables, its definition and sources
Variables Definition Source
- Purchase | Amount of Energy purchased is the difference
of usage-generation when usage >generation.
Investments The main flow of the model.
Investments are placed in Investment in Green
Technology.
- Investment start year | Set at 5.
Investment to start at the five years mark
taking into account that it is in the interest of
the company to invest with accumulated
interest.
in Green in Green Technology is placed in
T in Altemative Fuel as well as
Investment in Green Building.
in Altemati in Altemative Fuel is used to fund
Fuel | the purchase of inventory for solar panels and
wind turbines.
Determined as the product of Power
Power Generalod by Solar’ Generated by a Solar Panel, the Number of
Solar Panels and, Peak Sun Hours.
- Number of Solar panels | Is calculated to be the remainder of Investment
in Altemative Fuel, after subtracting Cost of
Wind Turbine, over the cost of solar panel.
- Cost of a Solar Panel | Estimated as 1500SGD per solar panel. Solar panels yet to shine:
https://www.ema.gov.sg/reply to forum |
etter.aspx?news_sid=20140626AxqskVny
aR3k
Feasibility of Renewable Energy in
Singapore:
/kwww.dive.
portal 2: 4AAT54/FULL
TEXTO1
Power Generated by a | Taken estimated value: A Study of Solar Installation in Singapore:
Solar Panel
0.1 kWh ‘http://www.schneider-
electric.com sq/documents/company/event
/fm_seminarfa_study_of solar installation
_in_singapore.pdf
17
Table 2: Variables, its definition and sources
Variables Definition Source
- Peak Sun Hour per day | Defined as the number of hours per day when | A Study of Solar Installation in Singapore:
solar irradiance = 1000w/m2. ‘http://www.schneider-
electric.com: (cor levent
/fm_seminarfa_study of solar installation
in_singapore.pdf
Estimated to be 4.5 hours per day in
Singapore.
Cost of Wind Turbine | Taken to be 15000SGD for i: ion of ility of Energy in.
: A s
‘hhttp://www.diva-
portal.org/smash/get/diva2:444754/FULL,
TEXTO1,
Power Generated by Wind Turbines is taken | Feasibility of Renewable Energy in
to be the product of air density, swept areaof | Singapore:
Power Generated by Wind | turbine, and average wind speed. :
Turbines ‘http//www.dive-
P=1/2* Air Density * poet Area of Turbine portal. org/smash/get/diva2:444754/FULL,
* Avg Wind Speed ** TEXTOI,
Year of Purchase of Wind S#at5.
Tonbine Investment to start at the five years mark.
AirDensity | Estimated 1.164. ko/m’3 Feasibility of Renewable Energy in
Singapore:
http://www.dive-
Portal. org/smash/get/diva2:444754/FULL,
TEXTO1
- Swept Area of Turbine | 8 m2 Feasibility of Renewable Energy in
‘Singapore:
‘hittp://www.diva-
portal. org/smash/get/diva2:444754/FULL
TEXTO1
- Average Wind Speed | 2: m/s National Climate Change Secretariat
‘Strategy Group, Prime Minister’ 's Office:
https, nocs.gov.sq/cli change-
and-si ional-
circumstances
altemative-energy
Investment in Green | Investment in Green Building is channeled to
Building | the use of Energy Efficient Lighting as well as
to the chillersystem.
The multiplication of Energy Efficient
Light Energy Usage _ Lighting with Unit Cost of Light and Energy
Efficient Lighting
18
Table 2: Variables, its definition and sources
Variables Definition Source
Operational hours | 24 hours
Assuming that areas in the hotel such as the
front desk, main lobby, lift lobbies, corridor,
and wesh room areas are to remain lighted.
throughout for the safety of guests and for
operation purposes.
Unit Cost of Light _ Taken to be 43 SGD National Climate Change Secretariat
‘Strategy Group, Prime Minister's Office:
‘https://www.nocs. gov.sg/news/straits-
times-light-bulbs-filament-fading- out
- Cost of total Energy | Investment in Green Building minus the Cost
Efficient Lighting | of Chiller System
Energy Consumption per! 10W The Simple Dollar:
unit http, i lar. light-
Energy Efficient Light bulb-showdown-leds-vs-cfls-vs-
- Cost of Chiller System ; Taken an estimate of 500,000SGD. Interview conducted at Siloso Beach
Resort,
a Bee Energy Tt product of Average ‘System Efficiency
of Chiller or Tonnes of the chiller system.
Refrigerator tonnes per 650 tonnes Eco-Business:
Chiller ‘http://www.eco-business.comynews/W-
= oom aie
comfort/
Hotel-Online:
‘http://www.hotel-
online.cot Ath/Oct03_Chi
alt lacement. html
Number of Chillers | Adjustable variable
- Average System | 0.6 kWh/ ton. Energy Design Resources:
Efficiency ‘https://eneryydesi qnresourves.cony/media/
1681/edr_designbriefs_chillerplant.pdf?tra
cked=true
- Operational Hours (CS) | 24 hours
- Average Annual Usage | 2170000 kWh Siloso Beach Resort:
Average of annual energy consumption of hhttp://silosobeachresort.com/
Siloso Beach Resort from years 2009-2013.
19
Potential C ontributions and C onclusion
Fuelled by the rapid growth of tourism across the world, the hotel industry has been growing
exponentially in recent years. In order to meet these needs, more small hotels are springing up
across the globe. Consequently, the hotel industry faces not just the issue of increased business
competition but also a greater competition for scarce resourves (such as energy, food and water)
to maintain its operations. It seems certain to us that hotels should consider leveraging upon
green technology to maintain this delicate balance between sustainability and profitability as
they grow.
Our research questions were ‘should a small hotel invest in green technologies?’ and ‘will
investment in green technology lead to higher business profitability?’. Based on our case study
of Siloso Beach Resort and the system dynamic model that we have generated, we have
provided evidence to support that small hotel should invest in green technologies and that
investing in them will lead to higher business profitability.
Inso doing, we believe our model provides a clear roadmap for many other small hotel owners
on what they can do to achieve the balance between sustainability and profitability. This is
particularly important as it helps to alleviate the current sustainability and resource challenges
inthe hotel industry. Furthermore, we believe the insights drawn from our case study and model
can also be extended to other small and medium enterprises from other industries.
From the research point of view, as far as we know, our study is the only study that helps to fit
the existing literature gap by providing a system dynamic model that describes the dynamism
in asmall hotel when it strives to pursue sustainability and profitability at the same time. We
believe our study will spur interesting discourse in this area among the research community.
No research is without limitations and we feel it is important for us to discuss some of the key
ones here. First, the model is based on a unique case that has already successfully achieved the
balance between sustainability and profitability and has the advantages of embedding the
culture of sustainability throughout its organization since its inception. These two factors are
not simple to achieve for existing ‘profitability’-driven small hotels that have been in
operations forsome time. Further study can look into modelling how an existing ‘profitability’ -
driven small hotel can effectively transform to a ‘profitability-sustainability’ balance one.
Second, many of the variables within our model are context specific and some of its values
built on assumptions. This means that it will not be wise to generalize our model to any small
hotels. However, our model does serve as a starting point where other researchers can build
upon. Future study on this topic can draw insights from our work and consider developing a
system model that is potentially generalizable across all small hotels.
References
Adams, W. M. (2006). The future of sustainability: re-thinking environment and development
in the 21st century: The World Conservation Union.
Antmamn, E. D., Celik, N., Shi, X., & Dai, Y. (2012). Simulation-based Optimization of Solid
Systems neering
Blersch, D. M., & Kangas, P. C. (2013). A modeling analysis of the sustainability of ecotourism
in Belize Environment, Deveopment and Sustainability, 15(1), 67-80.
doi: 10.1007/s10668-012-9374-4.
20
CSRWorks. (2016). Siloso Beach Resort wins Asia's Best Sustainability Report (SME) Award.
Retrieved from http://www.eco-business.cony/press-rel eases/siloso-beach-resort-wins-
asias-best-sustainability-report-sme-award/
Duran-Encalada, J. A., & Paucar-Caceres, A. (2012). A system dynamics sustainable business
model for Petroleos Mexicanos (Pemex): case based on the Global Reporting Initiative.
The J ournal of the Operational Research Society, 63(8), 1065-1078.
Eisenhardt, K. M., & Graebner, M. E. (2007). Theory building from cases: opportunities and
challenges. Acadeny of Management Journal, 50(1), 25-32.
Elliot, S. (2011). Transdisciplinary perspectives on enviromental sustainability: A resource-
based and framework for IT-enabled business transformation. MIS Quarterly, 35(1),
197-236.
GHW. (2017). Green Hotel Word Website. Retrieved from
https://www.greenhotelword.com/
GLS. (2017). Green Leaf Standard. Retrieved from
http://www.greenleafthai.org/en/green_standard/
Haugh, H. M., & Talwar, A. (2010). How do corporations embed sustainability across the
organization. Academy of Management Learning and Education, 9(3), 384-396.
Hollmann, M. (2006). System Dynamics Modeling and Simulation of Distributed Generation
of the Analysis of a Future Energy Supply. Paper presented at the Intemational
Conference of the System Dynamics Society.
Hsiao, T.-Y., Chuang, C.-M., Kuo, N-W., Ya 8 M-E. (2014). Establishing attributes of an
environmental a" sae evaluation. International Journal of
Hospitality 36, 197-208.
doi he doi.org/10. 1o16jii en 201S 09.005
IBM. (2008). Enterprise for the future: Global CEO study. Retrieved from Somers, NY:
IPCC. (2007). Climate change 2007: Synthesis report. Intergovemmental Panel on Climate
C
hange.
Legrand, W., Sloan, P., & Chen, J. S. (2016). Sustainability in the Hospitality Industry:
Principles of sustainable operations: Taylor & Francis.
Locke, K. (2001). Grounded theory in management research. CA: Sage, Thousand Oaks.
McKinsey. (2009). Tackling socipolitical issues in hard times (McKinsey global survey).
Retrieved from
Melville, N. P. (2010). Information Systems innovation for environmental sustainability. MIS
Quarterly, 34(1), 1-21.
Moon, Y. B. (2017). Simulation modelling for sustainability: a review of the literature.
International J ournal of Sustainable Engineering, 10(1), 2-19.
Nikolaou, I., Evangelinos, K., & Leal Filho, W. (2015). A system dynamic approach for
exploring the effects of climate change risks on firms' economic performance. Journal
of Cleaner Production, 103, 499-506.
doi: http://dx.doi.org/10.1016/ .jclepro.2014.09.086
Pan, S. L., & Tan, B. C. C. (2011). Demystifying case research: A. structured-pragmatic-
situational (SPS) approach to conducting case studies. Information & Organization,
21(3), 161-176.
Pentland, B. T. (1999). Building process theory with narrative: From description to explanation.
Academy of Management Review, 24(4), 711-724.
Reddi, K. R., Weilin, L., Bochao, W., & Young, M. (2013). System Dynamics Modelling of
Hybrid Renewable Energy Systems and Combined Heating and Power Generator.
International J ournal of Sustainable Engineering, 6(1), 31-37.
21
Rodriguez-Anton, J. M., Alonso-Almeida, M. M., Cdemin, M., & Rubio, L. U. (2012). Use of
different sustainability management systems in the hospitality industry. The case of
Spanish hotels. Journal of Cleaner Production, 22(1), 76-84.
SBR-SR. (2015). Siloso Beach Resort Sustainability Report 2015. Retrieved from
Www. |obalcot o) fattachments/cop_2015/200231/original/SB
R_Sustainabili t_2015 %28Final - 25 Oct_2015%29.pdf?1445831613
SBR. Siloso Beach Resort Sustainability Portal. Retrieved from
hittp://silosobeachresort.com/eco_tour.aspx
SPRING. (2017). Factsheet on New SME _ Definition Retrieved from
hittps://www.spring.gov.sq/NewsEvents/PR/Documents/Fact_ Sheet on New SME D
efinition.pdf
Sterman, J. (2000). Business Dynamics: Systems Thinking and Modeling for a Complex World:
Trwin/McGraw- Hill.
Sterman, J. (2014). Interactive Web-based Simulations for Strategy and Sustainability: The
MIT Sloan Leaming Edge Management Flight Simulators, Part I. System Dynamics
Review, 30(1-2), 89-121.
Stem, N. (2007). The economics of climate change: The Stern review. Cambridge, UK:
Cambridge University Press.
Todorov, V., & Marinova, D. (2011). Modelling sustainability. Mathematics and Computers
in Smulation, 81(7), 1397-1408. doi:http://dx.doi.org/10.1016/j.matcom.2010.05.022
Yusof, N. A., Rahman, S., & Iranmanesh, M. (2016). The environmental practice of resorts
and tourist loyalty: the role of environmental knowledge, concem, and behaviour.
Anatolia, 27(2), 214-226. doi:10.1080/13032917.2015.1090463
