Kimpton Hotels: Earthcare Programs
Michael Pace faced a dilemma. He was Kimpton Hotel’s West Coast Director of Operations and
Environmental Programs, General Manager of its Villa Florence Hotel in San Francisco, and the
main catalyst for implementing its “EarthCare” program nationally. He was determined to help the
boutique hotel chain “walk the talk” regarding its commitment to environmental responsibility, but
he also had agreed not to introduce any new products or processes that would be more expensive
than those they replaced. Now that the first phase of the program had been implemented nationwide,
he and the company’s team of “eco-champions” were facing some difficult challenges with the
rollout of the second, more ambitious, phase.
For example, the team had to decide whether to recommend the purchase of linens (towels, sheets,
pillow cases, etc.) made of organic cotton, which vendors insisted would cost at least 50% more than
standard linens. It would cost an average of $100-150k to switch out all the linens in each hotel. If
they couldn’t negotiate the price down, was there some way they could introduce organic cotton in a
limited but meaningful way? All linens are commingled in the laundry, so they can’t be introduced
one floor at a time. Maybe they could start with pillowcases – though the sheets wouldn’t be organic,
guests would be resting their heads on organic cotton. Would it even be worth spending so much on
linens? From a PR perspective, would it make that much of a difference? Should they wait and see,
phase it in over time, or drop the idea altogether? They would face similar issues when deciding
whether to recommend environmentally friendly carpeting or furniture.
And then there was recycling. The program had been field tested at Kimpton hotels in San Francisco,
a singular city in one of the most environmentally progressive states in the U.S. Now the ecochampions team had to figure out how to make it work in cities like Chicago, which didn’t even have
a municipal recycling program in place. In Denver, recycling actually cost more than waste disposal
to a landfill, due to the low cost of land in eastern Colorado. Pace knew that the environmental
initiatives most likely to succeed would be those that could be seamlessly implemented by the
General Managers and employees of the 39 unique Kimpton hotels around the country. The last thing
he wanted to do was to make their jobs more difficult by imposing cookie-cutter standards.
Kimpton had recently embarked on a national campaign to build brand awareness by associating its
name with each unique property. Pace knew that the success of Kimpton’s strategy would rest
heavily on its ability to maintain the care, integrity, and uniqueness that customers had come to
associate with its chain of boutique hotels. Other hotel companies had begun investing heavily in the
niche that Kimpton had pioneered. To differentiate itself, the company had to continue to find
innovative ways to offer services that addressed the needs and values of its customers, and EarthCare
was a crucial part of its plans. But could Pace find a way to make it happen within Kimpton’s budget,
and without adversely affecting the customer experience? Would Kimpton be able to keep the
promises made by its new corporate brand?
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The U.S. Hotel Industry
By the summer of 2005, the absence of any major terror attacks since September 11, 2001 had
encouraged Americans to begin traveling again. Buoyed by a rebound in business travel and
continued growth in leisure related spending, the lodging industry had shown steady growth since
mid –2003. In 2004, the industry posted impressive gains in room occupancy levels, REVPAR
(revenue per available room) and average room rates (see Exhibit 1). In the previous year, demand
had been dampened by the outbreak of the war with Iraq and the soft US economy. Industry pre-tax
profit increased in 2004 to $14.5B over $12.8B in 2003, but was still far below the recent peak of
$22.5B in 2000.
The US hotel industry was comprised of 55,000 properties and 4.5 million rooms. Its 2004, $112B
revenues included room sales (75%), food and beverages (18%) and miscellaneous such as phone
charges, movies, etc. (7%). Revenues in 2003 were $105B. There were many large hotel chains (see
Exhibit 2), however, no single lodging company accounted for more than 15% of all US hotel rooms.
Hotels can be segmented into luxury ( Four Seasons, Fairmont, Carlton), upscale (Embassy,
Sheraton, Radisson, Courtyard), mid-market (Holiday Inn, Ramada, Comfort Inn) and economy
(Motel 6, Days Inn, Red Roof). Within the upscale segment there are two strategic niches: boutique
hotels in urban areas which differentiated themselves through unique décor, amenities and service
and bed & breakfasts (B&B’s) which were typically small, independent properties featuring unique
settings and décor.
Kimpton Hotels built a portfolio of unique properties in the upscale segment of the industry, and they
are credited with inventing the “boutique” hotel segment in 1981. 1 By 1999, boutique hotels
accounted for about 15% of San Francisco’s estimated 31,000 rooms, according to PKF Consulting.
Boutique hotels constituted about 1% of the industry nationwide and the segment was growing. The
Starwood Hotel chain entered the segment with its ‘W’ hotels and Continental Hotels PLC with Hotel
Indigo. In San Francisco, Kimpton was the recognized market leader with 67 % of the city’s boutique
hotels. Joie de Vivre Hotels had 20% of the local market, and Personality Hotels on Union Square
had 12%. With 2004 sales of $400 million, up from $350 million in 2003, Kimpton planned to add at
least three to five properties per year in major markets such as New York, Boston, Washington, D.C.
and Miami.
Approximately 55% of hotel customers were individuals attending a business meeting, conference or
group meeting. Foreign travelers contributed significantly to room demand, especially in major
cities. Competition for these customers was based on many factors including price, location, brand
loyalty, customer service and value added services. It appeared that the industry’s earning recovery
had been limited by consumer price-shopping on the Internet, and by cost pressures driven by rising
healthcare costs, energy costs and property taxes. Companies were intensifying efforts to win
customer loyalty. Efforts included reward programs for frequent visitors and targeting a hotel’s best
customers for direct marketing programs.
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The longer-term outlook for the industry seemed very positive. US demographic trends were highly
favorable. Baby boomers, then in their peak earning years, would be seeking elaborate or expensive
vacations. In addition, more and more Americans would be retiring and traveling in their leisure time.
The Greening of the U.S. Hotel Industry
The U.S. hotel industry with its 4.5 million rooms, common areas and lobbies, conventions,
restaurants, laundry facilities and back offices have a significant environmental impact. According to
the American Hotel and Lodging Association, the average hotel toilet is flushed 7 times per day per
guest, an average shower is 7.5 minutes long, and 40% of bathroom lights are left on as nightlights. A
typical hotel uses 218 gallons of water per day per occupied room. Energy use is pervasive, including
lighting in guest rooms and common areas, heating and air-conditioning and washing and drying
towels and linens. The hotel industry spends $3.7 billion per year on electricity. 2
Guestrooms generate surprisingly large amounts of waste, ranging from one-half pound to 28 pounds
per day, and averaging 2 pounds per day per guest. In California, 2% of all food waste comes from
the hotel and lodging industry. A short-list of other environmental impacts of the hotel industry
includes: non-refillable amenity bottles (shampoos, etc.) generate large amounts of plastic waste;
products used to clean bathrooms and furniture contain synthetic additives; paints contain high levels
of volatile organic compounds; back office and front desk activities generate large amounts of waste
paper; and furniture, office equipment, kitchen and laundry appliances are usually not selected for
their environmental advantages.
Opportunities for reducing a hotel’s environmental footprint are plentiful, and many can yield
bottom-line savings. Reduced laundering of linens, at customer discretion, has already been adopted
enthusiastically across the spectrum of budget to luxury hotels, to the point that 38% of hotels
currently have linen reuse programs. Low-flow shower heads can deliver the same quality shower
experience using half the water of a conventional shower head. Faucet aerators also can cut the water
requirements by 50%. A 13 watt compact fluorescent bulb gives the same light as a 60 watt
incandescent, lasts about 10 times longer and uses about 70% less energy. Waste costs also can be
significantly reduced. For many hotels, 50-80% of their solid waste stream is compostable, and a
significant part of the remaining waste is recyclables, such as paper, aluminum and glass.
Fairmont Hotels & Resorts, a Canadian based hotel chain, generated considerable savings since
implementing its environmental programs in the early 1990’s. While concern for the environment
drove Fairmont’s program, many of its initiatives resulted in bottom line benefits. Examples of the
types of environmental initiatives and their associated savings at the Fairmont Hotels & Resorts are
listed in Exhibit 3. Fairmont Hotels also pursued initiatives and made investments that did not
produce readily apparent bottom line benefits. For example, one of their hotels purchased 20% of
their energy as renewable energy (solar, wind and hydro) even though the cost was higher. They
supported the expense of a Corporate Office of Environmental Affairs and a Manager of
Environmental
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Affairs. They also financially supported efforts related to habitat restoration and preservation of
endangered species.3
In addition to bottom line savings, environmental programs held the potential to generate new
business. Governmental bodies and NGO’s, corporations and convention/meeting planners were
showing increased interest in selecting hotels using environmental criteria. California had recently
launched its Green Lodging Program. State employees were encouraged to select from the GLP’s list
of certified hotels. The state’s $70 million annual travel budget was an incentive for hotels to be
certified by the program. The criteria for certification include recycling, composting, energy and
water efficient fixtures and lighting, and non-toxic or less toxic alternatives for cleaning supplies.
State governments in Pennsylvania, Florida, Vermont and Virginia also had developed green lodging
programs.
CERES, a well respected environmental non-profit, had developed the Green Hotel Initiative,
designed to increase and demonstrate demand for environmentally responsible hotel services. Some
major corporations endorsed the initiative, including Ford Motor Company, General Motors, Nike,
American Airlines and Coca-Cola. CERC, the Coalition for Environmentally Responsible
Conventions, and the Green Meetings Industry Council were encouraging meeting planners to
‘green’ their events by, among other things, choosing environmentally friendly hotels for lodging and
meeting sites. This trend toward booking lodging and meeting sites based on green criteria was in its
very early stages. Industry insiders believed that environmentally driven demand was extremely
limited at this point and the ultimate impact of this movement was uncertain.
Environmental progress in the U.S. hotel industry has been very limited. With a few exceptions, most
hotels were doing very little beyond pursuing the low hanging fruit, in the form of easy-to-implement
cost-saving initiatives. Those hotels have been reducing their environmental footprint as a welcome
consequence of their cost-cutting efforts, but they were not necessarily committed to a
comprehensive environmental program. During a 1998 effort by Cornell University’s School of Hotel
Administration to identify hotels employing environmental best practices, researchers were
“surprised by the dearth of nominations.” The four U.S. hotels selected as champions – The Colony
Hotel, Hotel Bel Air, Hyatt Regency Chicago and Hyatt Regency Scottsdale – were primarily focused
on cost savings in energy and waste streams. 4 In contrast to the US, hotels in Canada and Europe
seemed to be embracing the hotel greening process, as exemplified by the Fairmont Hotel & Resorts
effort to institutionalize innovative approaches to reducing their environmental footprint throughout
their operations.
Kimpton’s Business Philosophy and Strategy Kimpton Hotels was founded in 1981 by the late Bill
Kimpton, who once said, “No matter how much money people have to spend on big, fancy hotels,
they’re still intimidated and unsettled when they arrive. So the psychology of how you build hotels
and restaurants is very important. You put a fireplace in the lobby and create a warm, friendly
restaurant, and the guest will feel at home.” By 2005, Kimpton had grown to include 39 hotels
throughout North America and Canada, each one designed to create a
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unique and exceptional guest experience (see Exhibit 4). Every hotel lobby had a cozy fireplace and
plush sitting area, where complementary coffee was served every morning, and wine every evening.
Guest rooms were stylishly decorated and comfortably furnished, offering amenities such as specialty
suites that included Tall Rooms and Yoga Rooms. Every room offered high-speed wireless internet
access, and desks with ample lighting. Rather than rewarding customer loyalty with a point program,
Kimpton offered customization and personalization. “We record the preferences of our loyal guests, “
said Mike Depatie, Kimpton’s CEO of real estate, “Someone may want a jogging magazine and a
Diet Coke when they arrive. We can get that done.”
Business travel (group and individual) accounted for approximately 65% of Kimpton’s revenues, and
leisure travel (tour group and individual) the other 35%. The selection of hotels for business meetings
and conferences was through meeting and conference organizers. Around 35% of all rooms were
booked through their call center, 25% through travel agents, 25% through their web site, and the
remainder “came in off the street.” The internet portion of their business continued to grow, but they
didn’t cater to buyers looking for the “steal of the century.” Rather, they were increasingly being
discovered by the 25% of the customer pool that market researchers called “unchained seekers,”
many of whom used the internet to search for unique accommodations that matched their particular
needs or values. Steve Pinetti, Senior Vice President for Sales and Marketing noted, “If I were to
drive a customer to the airport after their stay and ask them what their experience was like, the right
answer would be, “It felt great.” They don’t have to know why; it could be the bed, the room, the
wine, or the friendly employees. The next time they want to book a room, though, they’ll come to
us.” Kimpton’s REVPAR tends to meet or exceed norms within its upscale segment, due primarily to
its relatively high occupancy rates. Occupancy rates rose to 68% in the fourth quarter of 2004, up
from 63% during the same quarter in 2003. REVPAR during the same period rose from $87 to $102. 5
Historically, Kimpton prospered by purchasing and renovating buildings at a discount in strategic
nationwide locations that were appropriate for their niche segment. The hotel industry in general had
been slow to enter the boutique niche, and Kimpton enjoyed a substantial edge in experience in
developing value-added services for guests. ”All hotels are starting to look alike and act alike, and
we are the counterpoint, the contrarians,” according to Tom LaTour, Kimpton president and CEO.
“We don’t look like the brands, we don’t act like the brands, and as the baby boomers move through
the age wave, they will seek differentiated, experience-oriented products.”
Kimpton’s top executives took pride in their ability to recognize and develop both undervalued
properties and undervalued people. Kimpton’s hotel general managers were often refugees from large
branded companies who did not thrive under hierarchical, standardized corporate structures. At
Kimpton, they were afforded a great deal of autonomy, subject only to the constraints of customer
service standards and capital and operating budgets
This sense of autonomy and personal responsibility was conveyed down through the
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ranks to all 5,000 Kimpton employees. Kimpton’s flexible corporate structure avoided hierarchy,
preferring a circular structure where executives and employees were in constant communication. 6
Steve Pinetti liked to tell the story of a new parking attendant who had to figure out how to deal with
a guest who felt that he had not been adequately informed of extra charges for parking his car at the
hotel. The attendant decided on the spot to reduce the charges, and asked the front desk to make the
necessary adjustments. He had heard his general manager tell everyone that they should feel
empowered to take responsibility for making guests happy, but he fully expected to be grilled by his
GM, at the very least, about his actions. A sense of dread took hold as he was called to the front of
the room at a staff meeting the very next day, but it dissipated quickly when his general manager
handed him a special award for his initiative.
Establishing the Kimpton Brand
While Kimpton was known for designing hotels that reflected the energy and personality of their
distinct locations, by 2004 the company’s top executives realized that uniting its hotel portfolio under
a single recognizable brand could add considerable value. Cross-selling of hotel rooms in different
cities, for instance, would be easier for salespeople handling corporate accounts if the properties all
shared the Kimpton name. So the company launched what it called the first Lifestyle Hotel
Collection, with the theme “Every Hotel Tells a Story.” One aspect of the branding effort was to add
the Kimpton name to each property, as in “Hotel Monaco San Francisco, a Kimpton Hotel.”
According to CEO LaTour, “We think of our hotels as a family, all having their own first names and
sharing the last name Kimpton. We are ready to tell the world the Kimpton story.” 7
The distinctive value proposition associated with the Kimpton brand guaranteed the customer a
unique and satisfying experience along five different dimensions, what the company referred to as
Care, Comfort, Style, Flavor, and Fun.
• Care- Just as Kimpton treated its guests with a strong dose of friendly personal attention and TLC,
its culture also emphasized concern and responsibility for the communities in which it did
business, and the people it employed. Each hotel’s GM and staff expressed this sense of care by
engaging in their own forms of community outreach, employee diversity, and environmental
quality initiatives
• Comfort – Kimpton focused intently on making its guests feel comfortable, their plush rooms and
intimate public spaces providing a home away from home. They kept overhead costs in check by
limiting the range of services they provided, forgoing the gyms, spas, swimming pools, and other
space-hungry amenities that larger chains regularly offered.
• Style – No two Kimpton hotels were alike. Each attempted to draw upon the distinctive character of
the city and neighborhood in which it was located. Interiors tended to be upscale and stylish
rather than opulent or ornate.
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• Flavor – The restaurants located in each hotel were designed to stand on their own, catering to local
clientele rather than rely on hotel guests for the bulk of their business.
• Fun – Employees were encouraged to bring their personalities to work, and to make sure that guests
enjoyed their stay. According to Mike Depatie, “We don’t try to make people Kimpton people.
We want them to express the best of what they are.”
An important part of Kimpton’s story was its longstanding commitment to social responsibility. Staff
at each hotel had always been encouraged to engage with local community non-profits that benefited
the arts, education, the underprivileged and other charitable causes. Kimpton maintained these local
programs even in periods of falling occupancy rates and industry downturns. These local efforts
evolved into the company-wide “Kimpton Cares” program in 2004, as part of the company’s
corporate branding effort, expanding their social and environmental commitments to the national and
global arenas. At the national level, Kimpton supported the National AIDS Fund (in support of its
Red Ribbon Campaign) and Dress for Success (which assisted economically disadvantaged women
struggling to enter the work force) by allotting a share of a guest’s room fee to the charity. At the
global level, Kimpton embarked in a partnership with Trust for Public Land (TPL), a non-profit
dedicated to the preservation of land for public use. In July 2005, Kimpton committed to raising
$15,000 from its total room revenues to introduce the TPL Parks for People program, and created
eco-related fund raising events in each of its cities to further support the campaign. Kimpton’s
EarthCare program was designed to be instituted through a comprehensive environmental program
rolled out to all of Kimpton’s hotels. “As business leaders, we believe we have a responsibility to
positively impact the communities we live in, to be conscious about our environment and to make a
difference where we can,” says Niki Leondakis, Kimpton’s Chief Operating Officer.
Kimpton’s top executives consider the “Kimpton Cares” program, and its Earthcare component,
essential parts of the company’s branding effort. Steve Pinetti noted, “What drove it was our belief
that our brand needs to stand for something. What do we want to stand for in the community? We
want to draw a line in the sand. We also want our impact to be felt as far and wide as it can.
Hopefully, through our good deeds, we’ll be able to influence other companies.”
The early evidence suggested that the branding effort also had financial payoffs. Kimpton was
receiving significant PR coverage of its Earthcare program in local newspapers and travel
publications. According to Pinetti, “The number of people who visit our Kimpton web site has tripled
in the year since we began the branding effort. Membership in the company’s ‘InTouch’ guest loyalty
program, which markets to previous guests via email, rose from 86,000 in the 1 st quarter of 2004 to
112,000 in the 4th quarter.8 Consumer surveys showed big gains in awareness that each hotel is part of
a bigger organization, with properties in other cities.” As for the firm’s “Kimpton Cares” program
and its new EarthCare initiative, anecdotal evidence pointed to top line benefits. “We’ve booked
almost half a million dollars in meetings from a couple of corporations in
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Chicago because of our ecological reputation,” said Pinetti. “Their reps basically told us, ‘Your
values align with our values, and we want to spend money on hotels that think the way we do.’”
Kimpton believed that companies that identified with being socially responsible would look for
partners like Kimpton that shared those values; and that certifications like the California Green
Lodging program would attract both individuals and corporate clientele.
However, Pinetti noted, “The cost-effectiveness wasn’t clear when we started. I thought we might get
some business out of this, but that’s not why we did it. We think it’s the right thing to do, and it
generates a lot of enthusiasm among our employees.“ Kimpton’s Real Estate CEO Mike Depatie
believed that incorporating care for communities and the environment into the company’s brand has
been a boon to hiring. “We attract and keep employees because they feel that from a values
standpoint, we have a corporate culture and value system that’s consistent with theirs. They feel
passionate about working here.” While the hotel industry was plagued with high turnover, Kimpton’s
turnover rates were lower than the national averages.
The Hotel Triton
Kimpton’s environmental consciousness reaches back to 1985 when they introduced the Galleria
Park Hotel in San Francisco as an urban retreat with an open space “ park” within the hotel. In 1995,
Kimpton ‘s commitment picked up steam as they converted an entire floor of the 140-room Triton
hotel in San Francisco into an ‘eco-floor’. With assistance from Green Suites International, a supplier
of environmental solutions for the lodging industry, the Triton introduced the following initiatives in
the 24 rooms on its eco-floor:
• Energy efficient lighting solutions including compact fluorescent bulbs and sensor nightlights
(c…
