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

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.