As the summer holidays in Europe get into full swing, Impact Investor examines the challenges facing the tourism sector and the opportunities for investment in sustainable travel.
The negative impacts of tourism on society and the environment are well documented, from the CO2 emissions and pollution emitted by aeroplanes, boats and other forms of leisure-related travel, to the often unfair pay and poor working conditions of hotel staff. Most recently, European tourists have witnessed how the negative economic, cultural and social impacts of mass tourism in Spain have led to anti-tourism protests across the country, which show no signs of abating as this article goes to press.
Fortunately, there are companies developing solutions to address some of these problems, and initiatives advocating for a more sustainable approach to tourism.
Hydrogen-electric powered air travel
When you think about the negative impacts of tourism on the environment in particular, flying will invariably feature near the top. Air travel is among the most carbon-intensive activities worldwide relative to the small proportion of the world’s population who can afford to use it. Aviation contributes to around 2.5% of global energy-related CO2 emissions and has accounted for around 4% of global warming to date when combined with other atmospheric gases and pollutants. And whilst improvements in design and technology have made aircraft more energy efficient, these efficiencies are being slowly eroded as demand for air travel rises.
But hope for a more sustainable form of air travel is on the horizon. Several companies in the aviation sector have developed a range of innovative technologies to bring emissions down further, from those developing low carbon e-fuels, to companies working on making aeroplane powertrains more efficient.
ZeroAvia, a pioneer in short-haul hydrogen aviation, is in the second category and has developed what it says are the world’s first zero-emission powertrains for commercial aviation. It has also been one of the portfolio companies in climate tech VC Systemiq Capital’s fund I since 2019.
Irena Spazzapan, managing partner for Systemiq Capital, explained: “ZeroAvia strips out the hydrocarbon-powered propulsion engines from aircraft and replaces them with hydrogen-powered electric powertrains and hydrogen tanks.”
Spazzapan said the company is currently working on the certification of a hydrogen-electric powertrain designed for aircraft that could carry 20 passengers up to 300 miles, planned for rollout at the end of 2025, and a second powertrain for aircraft with 40 to 80 seats that could cover up to 700 miles, with a rollout date of four to five years from now.
“Although these aircraft may seem small in size when compared to the large commercial aeroplanes most of us are used to for long haul travel, a big chunk of global airlines are now working with ZeroAvia,” she said. “The majority of flights taking off today are in the sub 700-mile routes that ZeroAvia is going after. They also have plans to accommodate wide-body aircraft in the future.”
Spazzapan said that hydrogen could also be very cost-competitive.
“Combustion engines degrade faster and need a lot more maintenance, so on a cost basis ZeroAvia’s solution will be cheaper. The million dollar question is where the hydrogen will come from,” she added, referring to the various ways to produce hydrogen, not all of which are sustainable or cost competitive, as well as the logistical aspects of producing hydrogen and storing it close to where airlines will need to refuel.
Making waves with sustainably-designed boats
Sustainable travel investment is not constrained to air travel and a number of companies in the Katapult Ocean Deep Blue fund have turned their attention to making both work and leisure boats more sustainable.
One of the fund’s portfolio companies is Brim Explorer, which operates several tourist boats that have been built with hybrid and electric engines to reduce the environmental impact of exploring Norway’s coastlines and marine fauna.
Ross Brooks, general partner in the Katapult Ocean team, which manages the Katapult Ocean Deep Blue Fund, said: “Brim’s co-founders wanted to remove the emissions of whale watching tourist vessels, many of which are old converted shipping vessels. We invested pre-product and pre-revenue and now they have five vessels in their fleet.”
Brooks explained that whilst Brim Explorer operated as the tourism arm, another arm of the company, Brim Tech, developed the electric propulsion systems, including the newest fully-electric engine.
“The experience for tourists is also a consideration. We noticed when we were on the fully-electric boat, that there were far more whales breaching around us than around any other boat due to the engine’s silence,” said Ross, describing a recent trip he took with Brim Explorer.
Two other companies that Brooks mentioned include Evoy, which has developed sustainable electric motor systems for emission-free electric boating, and Pascal Technologies, which has created a patented solution for boat design to significantly reduce energy consumption at high speeds, increasing the range of electric boats.
“Evoy’s mantra is to make boating irresistible,” said Brooks. “There are no fumes from the boat. It’s fast, high output but silent, allowing you to have conversations without having to shout over the din of the engine.”
Like Evoy, which sells its engines to boat builders and boating brands, Pascal Technologies is also a B2B company addressing what Ross described as a huge emissions problem with small boats, which mostly run on combustion engines.
“Pascal Technologies have created a boat hull design which is concave in shape and has an air cavity between the boat and the water, which can be controlled,” he explained. “When you get to a certain number of knots, the system allows you to reduce the friction with the water, bringing down fuel consumption and increasing the boat’s range.”
Driving the adoption of sustainability in the hospitality sector
Maribel Esparcia Pérez, an academic in sustainable hospitality and an independent sustainability advisor to the hospitality industry in Europe, told Impact Investor that the social impact of the travel industry, especially within the hospitality sector should not be ignored.
Esparcia Pérez said poor working conditions and low pay could be found in hotels and other leisure facilities across Europe but that industry-wide statistics were hard to come by, and that the problems remained largely hidden from view.
“It’s difficult to find the headline grabbing figures, but you only need to dig a little beneath the surface to find human rights abuses in the hospitality sector, including human trafficking. There is also a lot of social and greenwashing, so you have to always be on your guard.”
Nevertheless, Esparcia Pérez said there were brands that really valued their employees and those that did, not only improved staff retention rates but also the guest experience.
“Improving working conditions and pay can have a significant positive impact,” she said. “By ensuring living wages, providing safe and supportive working environments, offering opportunities for career growth, and promoting diversity, equity and inclusion as well as a work-life balance, hotels can enhance the well-being of their employees, their retention rates as well as overall guest satisfaction.”
In 2019, Esparcia Pérez cofounded the European Sustainable Hospitality Group (ESHG), an online community of around 2000 cross-disciplinary hospitality and travel experts with the goal of sharing best practices and promoting sustainability in the hospitality industry. A year later, the ESHG launched the Hospitality Impact Investment Initiative, a framework of sustainability-focused KPIs to drive awareness and action around social and environmental issues in the sector among investors looking to buy into hospitality real estate assets.
“Anyone allocating capital to real estate and real estate development in the hospitality sector can use our framework and map its KPIs against the EU’s Corporate Sustainability Reporting Directive’s (CSRD) targets. By taking action across the areas we suggest, investors can have a meaningful social and environmental impact,” she added.
