Hospiteum

Environmental & Social Review Summary

This Environmental and Social Review Summary is prepared and distributed in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board of Director’s decision. Board dates are estimates only.
Any documentation which is attached to this Environmental and Social Review Summary has been prepared by the project sponsor and authorization has been given for public release. IFC has reviewed this documentation and considers that it is of adequate quality to be released to the public but does not endorse the content.

Project number	27741
Country	Central America Region
Sector	Accommodation & Tourism Services
Department	Global Manufacturing & Services
Company name	Hospiteum Corporation
Environmental category	B
Status	Pending Signing

Date ESRS disclosed	May 4, 2009

Previous Events	Approved: June 30, 2009

View Summary of Proposed Investment (SPI), click here

Overview

Category & Applicable Standards

Key Issues & Mitigation

Community Engagements

Client's Documentation

Overview of IFC's scope of review

The Environmental and Social (E&S) review of the project focused on existing operations with site visits to the Princess Hotel in Guatemala and the Hilton Princess hotels in San Pedro Sula, Honduras and San Salvador, El Salvador; (one other Princess Hilton operates in Managua, Nicaragua). IFC’s review involved meetings with the Hospiteum’s Board, corporate management staff and the operational staff (human resources, maintenance) at each of the hotels. In addition the E&S appraisal reviewed the following documents: (i) human resource management policy, induction manuals, contracts and training programs; (ii) Life and Fire Safety (L&FS) certifications, audits and emergency response plans; (iii) food safety manuals and Hilton food handling and preparation guidelines; and (iv) Hilton audit reports and other periodic analyses performed by contracted companies and local authorities.

Project description

Hospiteum Corporation (“Hospiteum”) is one of the few established Central American hotel chains. Currently, it owns and operates four properties: (i) a four-star Princess Hotel in Guatemala City, Guatemala; (ii) a five-star Hilton Princess Hotel in San Salvador, El Salvador; (iii) a five-star Hilton Princess Hotel in Managua, Nicaragua; and (iv) a five-star Hilton Princess Hotel in San Pedro Sula, Honduras. All properties are managed by Imperial Hospitality Management Company, a fully-owned subsidiary of Hospiteum, which also owns the Princess brand.
The company proposes to expand its hotel network with up to four budget, 120-room greenfield hotel developments in the Central America region

Identified applicable performance standards

While all Performance Standards are applicable to this investment, IFC’s environmental and social due diligence indicates that the investment will have impacts that must be managed in a manner consistent with the following Performance Standards:
PS1: Social and Environmental Assessment and Management Systems
PS2: Labor and Working Conditions
PS3: Pollution Prevention and Abatement
PS4: Community Health, Safety and Security
PS5: Land Acquisition and Involuntary Resettlement

Depending upon project circumstances, issues covered by PS6 Biodiversity Conservation and Sustainable Natural Resource Management and PS8 Cultural Heritage may also be encountered from time to time.
PS7 Indigenous Peoples does not apply as the project works in urban/peri-urban settings where the mainstream population resides and the mainstream economy is operational (including the existence of functional land markets and land acquisition processes based on a willing buyer-willing seller basis).

Environmental and social categorization and rationale

The key E&S issues have been identified as the existence of a social and environmental assessment and management system, and specifically a site screening/assessment procedure, contractor management and management of hotel operations. E&S issues to be considered in the existing and planned hotels include: labor and working conditions; efficient use of energy, water and resources; life and fire safety (L&FS), food safety; and solid waste management, reduction and disposal. Furthermore appropriate procedures and protocols need to be developed to address potential impacts from land acquisition, biodiversity and cultural heritage when these are brought into effect on specific projects.

Visits to the land plots identified as potential sites for development demonstrated that these plots were located in urban, developed, commercial environments within the city. The key impacts associated with the construction and operation of the proposed hotels would be limited in number and site specific (i.e., labor, waste management, traffic). As a result of its due diligence, IFC has concluded that the potential adverse environmental and social impacts presented by the project are few in number, site-specific and can be readily addressed through mitigation measures. It is therefore concluded that this is a Category B project.

Key environmental and social issues and mitigation

PS1 Social and Environmental Assessment and Management System

Social and Environmental Assessment:
Hospiteum does not have a comprehensive Environmental and Social Assessment procedure. Design and construction of new hotels will be contracted on a competitive basis. Hospiteum will formalize and document a process to screen potential E&S impacts arising from each development, considering impacts which might be anticipated at an initial review. This screening should identify:

- whether detailed Environmental and Social Impact Assessments (ESIAs) are necessary, based on national requirements and assessment of impacts;
- any issues which should be subject to detailed E&S assessment; and/or
- site-specific general and specific E&S management requirements to be implemented by contractors.

The screening process will (a) be implemented by a qualified person; (b) occur prior to development of project tenders so as to ensure that necessary mitigations can be included in contractual requirements; and (c) include relevant aspects of the IFC’s Performance Standards, which includes, but is not limited to: (i) site-specific pollution prevention and abatement screening, (ii) Structural and L&FS compliance with local and international standards (e.g. NFPA); (iii) potential economic and physical displacement associated with land acquisition; (iv) Site-specific biodiversity assessment (if applicable); and (v) potential discovery of cultural property.

Results of the review may require specific actions and will be included in the construction contracts and contractor compliance will be monitored.

Hospiteum will submit to IFC their own and any formal site appraisals and ESIA required by local government before any construction takes place. Such appraisal should be acceptable to IFC.

Management program:
Hospiteum does not have a formal Environmental and Social Management System (ESMS) applicable to the whole company although some components of such a system exist. The group of hotels under the Hilton brand is required to meet Hilton standards (e.g., food handling and preparation, Life and fire safety). This group benefits from six-monthly audits by Hilton which generate corrective action plans against the requisite standards. No such system exists for the Guatemala Princess hotel.

Hospiteum human resource (HR) manual has been developed for and is applied across the company. While all hotels have substantially similar HR manuals and procedures, some hotels have more comprehensive documentation. However, Hospiteum has not defined an E&S Management System (ESMS) outside of the Hilton framework that would be applicable to developments not involving the Hilton group. Hospiteum will define an Environmental, Social and Health and Safety (ESHS) Management System framework applicable across the company and for all its new developments. These documents will specify compliance with national law, define E&S management, monitoring and reporting requirements and contractor obligations.

Hospiteum will also develop an E&S policy applicable to all construction-phase and operational phase contractors and will ensure that tender documents include the requirement for appropriate labor management and an occupational health and safety OHS assurance/management plan.

Organizational capacity
Hotel operations are managed by a general manager and an executive team including human resources, maintenance and security. The company has a qualified, client oriented team ensuring proper operation of the hotels, however, there is no consistent specifically dedicated function at the corporate level dedicated to addressing environment, LF&S, and (OHS). Hospiteum will ensure clear definition and consistent assignment of roles and responsibilities across the company to facilitate development of a corporate function.

Monitoring and Reporting
The operating hotels have little regular E&S monitoring or reporting, for example information on energy and water consumption, fire drills, and water quality parameters was not always available for review. The newly appointed environmental coordinator will define data monitoring and reporting requirements consistent with the ESHS management system for the existing and new properties.

PS2 Labor and Working Conditions

Hospiteum comprises a number of organizational entities including the Board, a limited number of corporate level management staff, and the management and operational staff for each of the hotels. Staff numbers for the existing hotels range from 110-250 employees. Given the construction and operation of the new hotels retrenchment is not expected from this project.

Human Resources Policy and working conditions
Hospiteum has a corporate level human resource policy that is adapted at the country level to suit country and operational specific circumstances. Hospiteum operations comply with national laws regarding equal opportunity, non-discrimination, prohibition on use of child and forced labor, etc. However within the corporate human resource manual statements are not consistent across the operations in different countries. Hospiteum will ensure that the HR manual includes specific statements regarding its position on key human resource management principles.

Minimum wages are above that required by law. All employees are covered by the benefits required by local legislation and some additional benefits such as food at affordable prices, health insurance and employee support through a worker’s association are provided.

All staff attends induction training. Hospiteum staff is provided with a detailed induction manual providing an outline of operations, responsibilities and privileges. The document includes a description of the operations, the organizational structure, and details regarding working hours, appearances, salary, payment, disciplinary measures, etc. The induction manual includes a procedure for raising concerns, grievances and/or suggestions such as frequent meetings and suggestion boxes. In essence the HR policy maintains an ‘open door’ policy with regard to grievances with staff able to approach their department manager, the HR manager or the general manager in turn depending on the nature of the grievance. Hospiteum will develop a stand-alone formal employee grievance mechanism and ensure its implementation in all operations.

As a consequence of its affiliation with Hilton, the three 5 star operations have been required to develop and strengthen their staff training programs, staff satisfaction surveys and implement annual staff evaluations. The Guatemala Princess Hotel replicates these initiatives, demonstrating the nascent development of a corporate level approach to staff management.

Worker’s organizations
In all countries where Hospiteum operates there are no restrictions on the establishment of workers’ organizations although no such organizations have been established at any of the operations. There was no evidence of restriction on the development and participation of workers associations. Management expressed that employees haven’t expressed interest in forming working organizations and there would not be any retaliation for those workers interested.

Occupational Health and Safety
An OHS assurance/management plan is only variably developed. The Princess Hilton in San Salvador has a demonstrated commitment to OHS with specific training programs promoting better practice. Other hotels did not have such a program. All hotels did not monitor incidents, choosing to focus on monitoring accidents (requiring medical attention). Hospiteum will develop and implement a system for monitoring and reviewing OHS aspects across its operations, including new hotels. It will include risk assessment, prevention of accidents, reporting and investigation of accidents and incidents, within other measures.

With regard to future hotel development, Hospiteum will require that construction contractors adhere to the HR principles and policies of the company. Hospiteum will ensure that construction contractors have established functional grievance mechanisms. In addition, Hospiteum will provide workers with an avenue to confidentially raise grievances directly with Hospiteum and ensure that these are then addressed by the contractor.

PS3 Pollution Prevention and Abatement

Pollution Prevention, Resource Conservation and Energy Efficiency
Hospiteum has in place basic energy and water savings programs, which include for example the use of energy saving bulbs and linens-towels program, replacement to cleaner fuel sources (e.g. LPG). In some hotels low flow faucets and toilets were observed. Hospiteum has done some initial experimentation with solar water heating (e.g., solar heating of spa in Princess Hilton in San Salvador). For future projects the company might benefit from installing high efficient equipment in the market and the associated lower operational costs. Water and energy consumption from these hotels are normal to high when compared to the benchmarks provided in the IFC’s Guidelines.

Water supplies are derived from municipal suppliers, although the Managua Princess Hilton and the Guatemala Princess Hotel use their own well to secure requisite water supplies. All water supplies are chlorinated prior to use.

The company will implement energy and water monitoring and savings initiatives in the current operating hotels and will ensure that best practice energy and water conservation measures are included in new developments with a view to ensuring that key benchmarks are achieved.

Air Emissions
Emissions to air from the hotels are mainly from heaters used to provide hot water and from the electricity generators used as backup, ranging in size from 750 – 1,135 kVa and which are used on rare occasions. Given the small size of the heaters, the hotels are not required to monitor air emissions. Greenhouse gas emissions from this project are minimal and are derived from the use of electricity and heating of the water. The new hotels are expected to have similar or even lower air emissions levels.

Effluent Management
Liquid effluents are discharged to municipal sewage systems in the operating hotels. Discharges are mainly domestic waters and discharges from the laundry and catering services. All hotels operate grease traps, with the Princess Hiltons operating enzyme based processing systems. The visited hotels use eco-friendly washing detergents and work in close collaboration with the suppliers to ensure proper handling of the products. Hospiteum will ensure that waste water of the new and operating hotels is discharged in accordance to municipal requirements and if there is not a municipal wastewater treatment, Hospiteum will treat or install a system that complies with IFC’s requirements.

Solid Waste Management
All hotels have recently initiated the implementation of a solid waste recycling program allowing for separation of various materials including cardboard, aluminum, glass, plastics and organic waste derived from kitchens. The company will reinforce and implement its current solid waste management program and expand it to all the hotels. The program will focus on reduction of waste generated and will aim to segregate wastes, reuse and recycle the generated waste. Hazardous wastes are not to be expected from the hotel operations, some oils might be generated from maintenance but they are not expected to be significant.

PS4 Community Health, Safety and Security

Life and Fire Safety
The design of existing hotels has, to a large extent, incorporated relevant national and international standards including structural and fire safety requirements. All hotels demonstrated existence of fire detection equipment (smoke detectors), good signage of emergency exits, placement of fire suppression equipment (sprinklers, fire extinguishers and fire hoses), multiple emergency exits and muster points. Affiliation with the Hilton brand has required the development of additional L&FS measures in the hotels in San Salvador, Managua and San Pedro Sula (e.g., addition of fans to create positive air pressure in emergency stairwells). The Princess Hilton hotels had additional fire safety measures in kitchens including the ANSULL system, allowing foam suppression of gas fires and emergency shut-down of gas supplies. The Hilton brand carries out at least once a year a revision against the “Hilton International Fire and Life Safety Standards.” Hospiteum will commission a L&FS audit of the Guatemala hotel operations and will implement the recommendations from such audit. Hospiteum will include in the tenders for the design and construction of new hotels requirements to guarantee compliance with an international standard for L&FS (e.g. NFPA) and structural safety.
Diesel and LPG are stored at each hotel, overall storage of LPG in the Hilton hotels is adequate and has cooling/fire suppression systems. LPG (Liquefied Petroleum Gas) storage tanks in the Guatemala Princess Hotel do not have cooling/fire suppression systems in place. The company is planning to change such system and will ensure proper fire protection is in place.

Emergency Response
All hotels have well developed emergency response plans addressing various possible eventualities including fire, earthquake, medical emergencies, etc. These plans are based on the identification and training of a core team responsible for the implementation of the emergency plan. Fire drills were implemented, and although not highly documented in all the hotels, they are done once or twice every year with participation of local authorities (i.e., fire fighters and local police). In addition evidence of regular monitoring of the fire detection and suppression equipment was verified during appraisal.

Food Safety
All hotels operate kitchens that cater to hotel guests as well as operate as catering services. The Princess Hilton hotels are required to operate under the EcoSureSM program requiring use of appropriate food hygiene standards and periodic monitoring. The Guatemala Princess Hotel does not adhere to these standards. Hospiteum will ensure implementation of a food safety program for the Guatemala Princess Hotel. Hospiteum will develop and adopt a food safety program to apply to all the hotels operating food and catering services, including monitoring of potable water.

Security Personnel and Systems
All hotels have close-circuit television systems allowing security monitoring of key public areas including the entrance, public spaces and corridors of each floor. Hotel security staff monitors the security situation and have established response plans to address security incidents. None of the hotel security staff carry arms. Generally each hotel contracts an external security provider to provide security at the entrance of the hotels. These security providers are selected from reputable security providers. While the guards posted at the entrance bear arms they operate under defined codes of conduct/guidelines for engagement. In most countries, the hotel operations also have links to local police force providing for regular monitoring and ready access.

PS5 Land Acquisition and Involuntary Resettlement

Hospiteum operates in urban settings in Central America with active, reliable land markets (with title deeds). The plots identified as potential sites for hotel development are either already part of the Hospiteum group (as is the case in San Pedro Sula) or accessible through established business networks (as is the case in Guatemala). These plots are currently in use, either as part of the existing hotel operations (as is the case in San Pedro Sula) or as a vacant plot used as a car park (as is the case in Guatemala).
In recognition of the fact that site selection is not yet finalized and that, in any event, Hospiteum intends to expand its low cost, limited service hotel chain throughout Central and South America, the company shall develop a specific policy and protocol addressing potential economic displacement and physical displacement associated with all land acquisition. Such a policy and protocol will require Hospiteum to incorporate explicit consideration of the potential for or occurrence of economic and physical displacement in support of land acquisition into their land acquisition due diligence process, and where such risk exists, ensure that people adversely affected are adequately compensated. Compensation of economically and/or physically displaced people will occur in accordance with the requirements of PS5.

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