How Large Hotels Are Protecting The Planet And Making Profit

Imagine you are in charge of a massive, global hotel chain. You have thousands of rooms to clean, endless buffets to stock, and millions of guests who want the perfect vacation. But you also have another huge responsibility: taking care of the planet and your employees.

Nowadays, businesses are under intense pressure to prove they are "good citizens" of the world. In the business world, this is measured using something called ESG, which stands for Environmental, Social, and Governance criteria. Luckily many hotels are making change to have less impact on the environment. We have discussed actions hotels are taking to be more green in 2026, such as incorporating nature into their designs.

87% of hotel visitors acknowledge the importance of eco-friendly accommodations, 80% identify as environmentally conscious, and 30% express a strong willingness to pay a premium for green hotel options. Gen Z has been particularly clear about their need to stay at sustainable hotels.

Because the hospitality industry uses a ton of resources—think about all the water used for hotel laundry, the energy needed to power massive cruise ships, or minimizing waste and carbon footprints—these companies face extra pressure to clean up their act.

But here is the million-dollar question: Does a company need to be rich and massive to be sustainable? Do profits naturally lead to a greener business, or do environmental upgrades actually eat away at a company's financial success?

A fascinating 2025 study titled "Financial Strength meets Sustainability: how Profitability and Company size elevate ESG Ratings in the Hospitality Industry" looks at this.

In the world of tourism, ESG is basically a structured way to combine environmental protection, social responsibility, and quality leadership into everyday operations and long-term planning. But saying you care about the environment is one thing; actually putting it into practice is another. The researchers wanted to see if financial numbers could predict which companies are actually walking the walk.

To measure this, the researchers used a tool called the Sustainalytics ESG Risk score. Sustainalytics is a leading global provider of ESG data, owned by Morningstar. They evaluate companies based on their exposure to major ESG issues and how well they manage those risks.

With Sustainalytics, a lower score is better. A score between 0-10 means the risk is "negligible," while a score over 40 means the risk is "severe". You want a low ESG risk score, because it means the company is doing a great job managing its environmental and social responsibilities!

They gathered a sample of 63 publicly listed companies in the hospitality, tourism, and entertainment sectors. This wasn't just small mom-and-pop motels; the list included massive global brands like Marriott International, Hilton Worldwide, Hyatt Hotels, and Wynn Resorts, as well as cruise lines like Norwegian Cruise Line.

To figure out if financial strength connects to sustainability, the researchers tested 12 different financial indicators. Don't worry, you don't need a degree in accounting to understand this! Here are the most important terms you need to know to understand their findings:

• Market Capitalization (Company Size): This is the total dollar market value of a company's outstanding shares of stock. It is basically a measurement of how big and valuable the company is in the stock market.

• EV/Revenue (Enterprise Value to Revenue): This measures how much it would cost to buy the whole company compared to how much money the company brings in. It is a "valuation" metric.

• ROA (Return on Assets): This measures how efficiently a company uses the things it owns (like hotel buildings, beds, and swimming pools) to make a profit.

• ROE (Return on Equity): This measures how efficiently a company uses the money invested by its shareholders to generate profits.

Bigger Usually Means Greener

The study found a strong negative correlation (a Pearson correlation coefficient of -0.7170) between a company's market capitalization and its ESG risk rating. Because a lower ESG risk score is a good thing, this negative correlation means that as a company gets larger, its ESG risk gets lower.

Huge organizations have "deep pockets." They have the cash, the dedicated teams, and the resources needed to invest in major sustainability projects, effectively managing their environmental and social risks. They can afford to hire sustainability officers, overhaul their supply chains, and publish transparent reports.

Highly Valued Companies Have Lower Risk

When looking at the 12 different financial indicators, the computer model singled out three that were statistically relevant. The first was EV/Revenue (Enterprise Value to Revenue).

The data showed that companies with higher EV/Revenue ratios tend to have lower ESG risk, meaning they are more sustainable. If investors highly value a company compared to its sales, that company likely has the financial strength and strategic positioning to invest in socially responsible practices that pay off in the long run.

But, the Profitability Plot Twist (ROA vs. ROE)

Here is where the study gets really interesting. The researchers assumed that high profitability would just systematically correspond to lower ESG risk. But the data revealed a complex tug-of-war between two different types of profitability: ROE (Return on Equity) and ROA (Return on Assets).

Return on Equity showed a significant negative relationship with ESG risk. This means that as ROE goes up, ESG risk goes down by 4.49 units. A high ROE usually means a company is well-managed, easily balancing profits with responsible governance. Companies that give great returns to their shareholders have the financial flexibility to fund green energy, social projects, and better governance.

On the flip side, Return on Assets (ROA) was positively related to ESG risk. That means as ROA goes up, the ESG risk score also goes up, meaning the company is less sustainable! A one-percentage-point increase in ROA was associated with a 0.43 unit increase in ESG risk. This directly contradicted their first hypothesis.

The hospitality industry is incredibly "asset-intensive"—it relies on massive physical buildings, land, and expensive equipment.

Imagine a hotel decides to become super eco-friendly. They take out a massive loan to install solar panels on the roof, upgrade all the building insulation, and put in high-tech water-efficiency systems. What happens to the math? The company's total "assets" have just grown massively because they own all this new, expensive green tech. However, in the short term, their profitability takes a hit because they have to pay interest on the loan and deal with the depreciation of the equipment.

Because ROA is calculated by dividing profit by assets, their ROA suddenly drops. But at the exact same time, because they just installed solar panels and saved water, their ESG risk score plummets (which is a good thing).

So, a hotel that is squeezing every last penny of profit out of its old, non-eco-friendly buildings might have a really high ROA, but they will also have a dangerously high ESG risk because they are ignoring sustainability. Over time, however, the eco-friendly hotel's operating costs will drop, and their ROA will likely recover. This shows that going green requires expensive investments that might hurt short-term asset efficiency, but it secures long-term sustainability.