Zero-Energy-Hotels
The Marcel Breuer Building
Among the real estate sector, the
hospitality industry has lagged in enacting energy-efficient
measures, especially hotels. The industry in fact has missed
opportunities to take advantage of energy-saving methods and in
turn, failed to save on building operating costs in numerous
cases. It does not come as incognizance or disregard for
energy efficiency but, lack of knowledge in the subject as well
as diagnostics that have made the implementation of energy
efficiency in the industry difficult.
On the flip-side however, developers,
architects, etc. of hotel properties are shifting their efforts
to significantly reduce energy costs and carbon footprints. The
industry is coincidentally well-positioned to gain from the
benefits of energy sustainability. This stems from
investors' insight into environmentally and socially friendly
practices.
Effects of COVID-19
As with the majority of
industries, the Hotel Industry has taken a hit from the pandemic
with little to no travel for months. Unlike retail which was on
the decline prior to the pandemic, hotels were relatively stable
which gives lenders confidence to fund the recovery and to be
paid back as a result. While investment is hesitant in
several sectors, hospitality presents an opportunity for
long-term emergency loans to garner high return rates in a
post-pandemic future where the general public will be free to
travel and lodge.
Distressed Hotels and Assets
There has been an added
pressure on the industry as distressed property owners are
selling off their properties and lenders sell off their notes
creating an unknown potential market left in the wake of
COVID-19. Hoteliers are attempting various methods from discount
purchases, repositioning, and selling of hotel assets. Near term
outlook is still hopeful for the industry as investors are
gearing capital interest into the distressed assets with
intentions of waiting out a hotel value reset in hopes a
recovery is on the horizon. Given the uncertainty and bleak
outlook the pandemic left on many industries, there appears an
aura of confidence within the hotel sector still.
Hotel Marcel Project
At the outset of the
pandemic, comes the Hotel Marcel project coming from Connecticut
architect and developer Bruce Becker of Becker + Becker based in
Westport, Connecticut. The unique project not only comes at an
investment of $50 Million but, a current pandemic project that
is also aiming to be the most energy-efficient hotel in the
country. The hotel which is overtaking space that used to be the
headquarters of Armstrong Rubber and later an IKEA outlet is a
compact building ideal for a natural energy-efficient envelope.
The goal of the project according to Baker is to meet net-zero
energy standards which entails a building generating as much
energy as it uses. This case if successful presents current and
future developers' consideration to effectively commission hotel
operations with sustainability programs encouraging investors
and customers alike.
EPAct 179D for New Construction & Energy
Efficiency Retrofits
The often-overlooked
EPAct 179D benefit allows a tax deduction of up to $1.80/sq.ft.
for any building that was newly constructed or has completed
interior lighting, HVAC or building envelope projects. With this
retroactive extension, any building that completed construction
or retrofit from January 1, 2006 through December 31, 2020, can
now take advantage of the benefit on their current tax returns.
This means that there is a 15-year window of past energy
efficiency projects, including LED upgrades, HVAC upgrades, and
roof/window replacements, that a company can currently advantage
of.
Hotels are a favored building category
for the EPAct 179D tax incentive. If a hotel or apartment
building installs a central HVAC system or efficient lighting,
it has a high chance of qualifying for the full $1.80/sq.ft. tax
benefit. Many companies completed eligible projects from
2006-2020 and are unaware of this lucrative tax incentive.
Acting now, companies can still take advantage and receive a
further tax benefit for their energy-efficient design and
investments, potentially freeing up capital for further energy
investments.
Hotel and Resort Energy Benefits
Although
energy-efficient opportunities are underutilized currently in
the industry according to the New York Times, there are cases
where hotel and resort companies are committing to significant
reduction in carbon footprints. One such case is Host Hotels and
Resorts who pledged an impactful reduction by 2025. In contrast
to the New York Times’ sentiments towards underutilized energy
sustainability, we have processed numerous hotel companies' tax
benefits such as EPAct 179D, including geothermal heating and
cooling. These hotel properties include:
- Marriott
- Fairfield Inn
- Hyatt
- La Quinta
- Hilton
- Hampton Inn
- Holiday Inn
Conclusion
Hotel owners and
designers have tremendous opportunity to benefit from energy tax
savings. Whether it is a solar PV installation, geothermal
heating and cooling, LED upgrades, building envelopes and more,
there is a range of benefits to adopt. Alternative Energy Tax
Credits and EPAct 179D exist to help reduce the initial costs of
investments. Conducting these studies with a professional firm
can help maximize the available benefits.
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