The Rise of the Green Consumer

It is now a decade since Unilever stopped providing refill pouches for its washing liquid in the UK owing to lack of demand. But it seems that consumers' forgotten environmental conscience is reawakening.

Ecover, a private company based in Belgium that makes ecological washing and cleaning products, says sales are growing at the rate of 20 per cent per year in the UK, its biggest market, reaching £35m ($66m) last year. The company is building a new factory in France to keep up with demand.

A string of household names - including General Electric, Wal-Mart, and Unilever - have been lining up to show off their green credentials in an effort to woo customers, at least at the high end of the market.

"This is becoming a lifestyle choice," says Stephen Parker, managing director of Cred, an environmental consultancy. "We are a consumer- driven society, and consumption is often a more reliable way of seeing what society wants than politics these days."

The UK's Institute of Grocery Distribution reports that sales of "ethical" products are increasing by 7.5 per cent a year, compared with 4.2 per cent for conventional products.

General Electric, the US conglomerate, became the biggest company to "go green" last year, when chief executive Jeff Immelt announced a new push into providing goods that minimize damage to the environment. Mr Immelt insisted there were profits to be made in the market for goods from wind turbines to energy-saving light bulbs.

The results have been clear at GE, which announced in May that revenues from products and services under its Ecomagination brand - for environmental products - had risen from $6.2bn in 2004 to $10.1bn in 2005.

One of the more recent converts to the "green" consumer's cause has been Wal-Mart, the US retail group better known for protests against its employment practices than its environmental concern.

Lee Scott, chief executive, has pledged to invest $500m in "sustainability" projects and to reduce by 30 per cent the energy used in the company's stores, reduce solid waste by a quarter and double the fuel efficiency of the company's vehicle fleet within 10 years.

These companies are driven not just by the desire to cash in on increasing environmental awareness among customers.

There is a practical incentive for companies to act, independently of what consumers think.

Rising fuel bills mean reduced energy use will save companies money, with the attendant bonus of cutting greenhouse gas emissions associated with the burning of fossil fuels.

Companies are also keen to pre-empt any strengthening of environmental regulations, particularly moves to curb greenhouse gas emissions.

The UK government, for instance, is considering a proposal to extend carbon dioxide emissions trading to retailers and other businesses.

US states led by California are forging ahead with plans to limit emissions and bypass the federal government's reluctance to take precautionary measures against climate change.

Against this backdrop, companies warn that customers will make ecologically friendly choices only if they believe they will get the same results from products as they do at present.

A case in point is P&G's "Cool Clean" campaigns in western Europe and North America for its laundry detergent - named Ariel in Europe and Tide in the US - which tell consumers they should lower the temperature at which they wash clothes to save energy.

"Consumers want better products that deliver a better experience. Sustainability has to be an additional benefit," said Gianni Ciserani, managing director of P&G UK & Ireland.

"Whenever sustainable products come with trade- off on performance, we win some [consumers] but we lose others."

Companies have another reason to beware. A previous wave of green consumerism in the 1970s fizzled out, as consumers lost interest.

Just as Unilever stopped providing refill pouches 10 years ago, today's "green" wave could also break if consumers lose interest or the economy falters.

Source: The Financial Times Limited 2006

Hotel Sales Market Humming Along

The rush to buy hotel properties is not slowing down and investors will not soon quench their thirst for investment grade hotels.

According to Jones Lang LaSalle Hotels, there are five buyers for every two sellers in the U.S. hotel market. And nearly half (or 45.9%) of all respondents want to buy assets in 21 of the 26 surveyed markets in North and South America. The survey polled the 2,000 largest hotel investors and owners in the world.

“Across the Americas, the low yield environment over the last two years has been sustained, with cap rates softening by a mere 10 basis points over the course of the last six months [up] to 8.5%,” says Arthur Adler, managing director and chief executive officer (Americas) for JLL Hotels.

To some investors at least, it seems that prices can’t climb much higher—even in the face of such strong demand. The HISS Survey found that 18.9% of polled investors, the highest level recorded in the survey’s six-year history, are looking to exploit capital appreciation by selling their assets. Their willingness to sell assets into this market could help drag sky-high pricing closer to the ground.

Certain markets stand out. For example, more than half of respondents indicated a desire to buy hotels in Hawaii, Vancouver, San Francisco and Los Angeles, Washington, D.C., New York and Chicago. Their interest in these markets hinges on the perception that coastal cities will yield strong performance over the next few years.

Why are these the hot spots? Vancouver, which is a new entrant to the top “buy” market in the survey, will host the 2010 Winter Olympics. On the opposite coast, New York City is poised to boost its already soaring occupancy rate in coming years; the city has been a net loser of hotel rooms, thanks to scant construction and condo conversions. One reason is a lack of new hotel rooms in the city, a trend that has also boosted the national hotel market in recent years. San Francisco and Washington, D.C. are likely to lure an increasing number of domestic and foreign tourists over the next few years, say hotel sources.

The only possible cloud on the horizon is accelerating construction Investors in the HISS Survey indicate greater intentions to develop new hotels since last year. New supply (as a % of inventory) is expected to grow by 1.6% and 2.6% during 2006 and 2007 respectively. Demand should hold firm with this new supply. Yet rising construction costs may keep a damper on new supply: Only 10.8% of polled investors intend to build new projects in 2007. This mixed assessment suggests that new supply won’t be a major problem for at least another three years.

The three markets expected to absorb the most new room supply in the near future are Buenos Aires, the Caribbean and Mexico City. Nearly 28% of respondents indicated a desire to build new hotel projects in the Argentinean capital, followed by 23.4% in the Caribbean and 21.2% in Mexico City.

“ New supply has really quelled due to high construction costs,” says Paider of JLL Hotels. “It’s still cheaper to buy versus develop hotels.”

Source: National Real Estate Investor