Hotel Business Review (2014)

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Breaking Down Your Sustainable Design to Increase Return on Investment

A Look at Incentives for Your Hotel Project

By David Ely, President, CEO, Energy Design Service Systems

Recently, I was introduced by a hotel management and development company to a new construction project in Pittsburgh, Pennsylvania. They had just started construction on their 78,000 sq. ft. energy efficient hotel design, and were interested in ways to increase their return on investment. Immediately, my team set to work, researching incentives they might be missing that would do just that. After initially identifying six possible programs, we narrowed the list to three incentives for which this project would qualify.

Incentives Can Have a Significant Impact on your Return on Investment

Federal, State, and Local government agencies offer a number of incentives to businesses. Some incentives are put forward to guarantee that developmental benefits will be sustained. Other incentives support decreased energy usage in buildings to encourage investment in underdeveloped areas and to reward environmentally friendly building practices. These incentives not only reduce out-of-pocket project costs, but provide the additional benefit of enhancing the community in which the project is located. Several types of incentives are offered; from tax incentives (like the 179D Federal Tax Deduction) and state/local property tax exemptions, to state and utility rebates. By encouraging enhanced design such as effective illumination and comfort controls, the economic impact of the development is magnified. It’s imperative that project managers don’t overlook these incentives, as they can add up quickly. Let me show you how these incentives apply to a sample project like the hotel project in Pennsylvania-

What City/State Governments Won’t Tell You

First and foremost, it’s important to start looking at incentives as early as practical. A business new to an area/state has the most amount of negotiating power during the project planning phase. Before selecting which state or city you are locating in, it’s good to contact the state and/or city to find what incentives are available. Oftentimes, a city/state may put together a custom package of incentives and/or financing options that aren’t marketed publicly. While larger companies typically know of this practice, it’s important for businesses of any size to engage their city/state early on. A developing hotel will not draw as many incentive options as a new manufacturing facility, but don’t diminish your value. A hotel still has a lot to offer its community- capital investment, job creation, sustainable development, and often can encourage the potential for additional business growth (shops, restaurants, etc.) Location is important in any successful endeavor, and a supportive city/state can make a big difference in your decision.

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