Green premiums: assessing the revenue impact of eco-certification in the hospitality sector

Abstract

Purpose Although eco-certification is a valuable tool for the hotel industry in its pursuit of environmentally friendly operations, the factors that influence consumers’ willingness to pay a premium for such certification remain unclear. This paper aims to investigate whether eco-certification allows a hotel firm to charge a premium price that compensates for the costs involved in adopting “green” practices. Design/methodology/approach By using a stochastic frontier Bayesian model with random coefficients, the authors analyse the revenue efficiency of 79 hotels in the Canary Islands over the period 2010–2021. Findings The results reveal that eco-certification has a positive effect on revenue efficiency, supporting the hypothesis that eco-certification allows hotels to charge premium prices, although this impact is not consistent across hotels. The results suggest a positive relationship between eco-certification and revenue generation in hotel firms. Practical implications These insights deepen the authors’ understanding of how eco-certification can bolster the economic sustainability of environmentally conscious hotel operations. In a highly competitive market, eco-certification can be a differentiating factor. Managers should leverage eco-certification to differentiate their hotels from those of their competitors, potentially capturing a niche market segment that prioritizes environmental sustainability. Although the initial costs of eco-certification may be significant, the potential for premium pricing and brand enhancement can offer substantial long-term benefits. Originality/value This research fills a research gap by examining how sustainable practices affect premium pricing in the hotel industry, specifically on an individual hotel basis, a perspective not extensively explored in the literature.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 25 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.