While European hotel owners can cut operating costs through targeted energy upgrades, investors have yet to establish how consistently sustainability and energy cost savings can also protect asset values, improve financing terms and justify a premium when hotels are sold.
Soaring energy costs have made sustainability not just good practice but an effective way of reducing operational costs and CBRE’s European Hotel Investor Intentions survey, published in May, underlined that sustainability credentials are increasingly reflected in pricing.
Yet for green premium advocates, the impact remains moderate for most investors.
CBRE said that a clear majority (57 per cent) of respondents indicated that assets with weak sustainability credentials would attract a discount of less than 5 per cent, suggesting that pricing adjustments are marginal, with a further 28 per cent expecting discounts in the range of 6-10 per cent and only a small proportion expecting more significant pricing impacts above 10 per cent.
In addition, CBRE found that just 7 per cent of investors would not invest in assets with poor sustainability credentials, while similarly only 6 per cent of investors in its survey were willing to pay a premium for strong sustainability performance, suggesting that pricing is still more sensitive to downside risk than upside reward.
Cushman & Wakefield’s 2026 European Hotel Investor Compass report came to similar conclusions, finding that hotels with strong ESG credentials continue to attract a modest green premium, with investors expecting to pay an average of 4.3 per cent more for assets achieving top tier certifications such as BREEAM Outstanding or LEED Platinum. The 2025 edition put the figure at nearly 5 per cent, so the premium has narrowed slightly over the past 12 months.
JLL models energy saving
With investor sentiment remaining cautious, as part of a programme to show the benefits of improving efficiency and sustainability, a recent JLL analysis developed with Marriott International tried to put numbers to hypothetical interventions and modelled the potential returns from energy and carbon upgrades across luxury resorts, new-build hotels and midscale conversions. Its findings suggested that relatively modest interventions can produce meaningful operating savings, while designing efficiency into new buildings is even more cost-effective.
For upper-midscale hotels, the JLL modelling estimated that additional capex of $1,600-$2,000 per room could cut annual utility costs by $220-$270 per room, with a simple payback period of around seven years. The higher the level of hotel, the higher the potential savings.
Meanwhile, two recent European case studies have also demonstrated what can be achieved in practice within individual hotels. Ireland's Sustainable Energy Authority (SEAI) reported in July that Dublin's 115-room Davenport Hotel had achieved annual energy savings of 421MWh and reduced carbon emissions by 79 tonnes following upgrades to heating, hot-water systems, building controls and monitoring. The project covered approximately 78 per cent of the hotel's energy-consuming systems.
Likewise, at Mullingar Park Hotel, a broader energy-management programme has delivered annual savings of 665,905kWh and €88,776 in energy costs, a 10.8 per cent reduction. The family-owned hotel combined monitoring, ventilation and air-conditioning improvements with more sophisticated building-management controls.
But retrofits come at a cost. In JLL’s modelling, it estimated that delivering equivalent energy and carbon performance through later retrofits can cost from double to five times as much as incorporating efficiency measures during initial design and construction.
As a result, JLL says buyers may adjust underwriting for higher future retrofit costs, regulatory exposure and financing constraints on higher-emission assets, and it anticipates cap rate adjustments of up to 10 to 20 basis points if sustainability becomes more material to investors.
For hotels dependent on corporate accounts, meetings and events, documented environmental performance can help meet client requirements but procurement questionnaires do not automatically translate into more bookings, higher room rates or a greater willingness to pay.
Signs of progress
However, there are encouraging signs that operators are testing the commercial proposition. Radisson Hotel Group announced in March 2026 that it would expand its Verified Net Zero Hotels programme, with a target of 100 hotels by 2030. The company said results from its operational hotels in Manchester, UK and Oslo, Norway showed guest awareness scores above 70 per cent, with around one in five guests indicating that they had booked because of the property's net-zero status.
“The excellent results from the Manchester and Oslo support the expansion of Radisson Hotel Group’s pioneering programme. The hotels show strong carbon reduction across all emission scopes, high guest awareness, and clear support for sustainable meetings and events. They also provide hotel owners with a practical pathway to future-proof their properties and move toward Net Zero,” says Inge Huijbrechts, Chief Sustainability & Security Officer at Radisson Hotel Group.
That potentially creates an opportunity for efficient hotels to stand out. But it does not necessarily mean buyers will pay more simply because a property has an environmental certification.
A trio of European regulatory changes might help the cause, albeit that they are not hospitality specific. The EU’s Right to Repair Directive came in at the end of July, with greater scrutiny of product lifecycles, maintenance and replacement decisions, as well as opportunities to reduce waste and extend the useful life of equipment and furnishings.
Meanwhile, the Packaging and Packaging Waste Regulation (PPWR) came in on 12 August, seeking to reduce unnecessary packaging, improve recyclability and increase reuse and recycled content. Hotels will need to review guest amenities, takeaway food and drink packaging, purchasing contracts, waste handling and suppliers to ensure their products and packaging meet the new requirements.
And the EU’s Empowering Consumers for the Green Transition Directive started on 27 September. It strengthens consumer protection against greenwashing by restricting vague claims such as “eco-friendly” or “green” when they cannot be substantiated and the banning of sustainability labels that are not based on recognised certification schemes or established by public authorities. For hotels and property owners, this raises the bar for marketing statements about carbon neutrality, sustainable operations and environmental credentials.
As ever, encouragement to become more energy efficient is ultimately likely to come from a mix of regulation and commercial pragmatism. The operational cost advantages of improved sustainability are largely proven but the asset value differential remains modest. An EU clampdown on green credentials could move the dial, but for now hot markets and booming sub-sectors are more likely to influence cross border acquisitions in the short term.