Determinants and Consequences of Green Investment in the Saudi Arabian Hotel Industry

Abstract

Hotels in today’s business environment are no longer solely concerned with profit, but rather with profit, people, and the planet (3Ps). In corporate terms, green investment (GI) is regarded as a strategy that aims for maximum profit with minimal environmental impact. As a result, the current study primarily aims to empirically investigate the impact of internal and external drivers on GI adoption in Saudi Arabian eco-friendly hotels. Additionally, it explores to what extent GI affects eco-friendly hotels’ environmental, economic, and social performance. To achieve these objectives, a web-based questionnaire was developed and addressed to the senior manager/director in charge of environmental management in all four- and five-star eco-friendly hotels in Saudi Arabia. The total number of certified eco-friendly hotels in all regions of Saudi Arabia was 403. Only 298 forms were received and were valid for statistical analysis. A structural equation modeling (SEM) technique with maximum likelihood estimation was employed to test the study hypotheses. The findings of this study illustrate that GI is significantly positively affected by external as well as internal drivers. Adaptation to/mitigation of climate change was the highest perceived driver. Additionally, GI has a significant positive contribution to enhancing hotels’ environmental performance, increasing economic performance, and boosting social performance. Based on the study findings, eco-friendly hotel operators should consider GI in their strategic plans, as a corporate strategy aiming at maximizing profit and enhancing the quality of social life without harming the environment.