Evaluating the Role of Government Policies in Enhancing Sustainable Practices in Hospitality Industry

Evaluating the Role of Government Policies in Enhancing Sustainable Practices in Hospitality Industry

OLOSO, Sururat Etuonu

Universiti Sains Malaysia, School of Housing, Building and Planning

DOI: https://dx.doi.org/10.47772/IJRISS.2025.905000318

Received: 08 May 2025; Accepted: 11 May 2025; Published: 13 June 2025

ABSTRACT

Sustainability of the hospitality industry is increasingly gaining global attention due to its impact on the economy and the environment. The study evaluates the role of policies by the government towards promoting sustainability in the hospitality industry. Findings indicate varied levels of adoption of sustainability, ranging from water conservation and procurement of local food as most largely practiced due to their affordability. However, waste management, green packaging, and carbon footprint mitigation reported decreased levels of adoption in line with infrastructure challenges and low awareness. The study also provides evidence of interaction between regulatory policy, enforcement tools, and economic incentives, where legal compliance is linked to the level of enforcement (0.50), but economic incentives in the form of grants (0.439) and subsidies (0.368) exert significant effects on sustainability adoption. The PCA indicates that legal compliance (-0.421) and intensity of regulatory enforcement (-0.315) are instrumental drivers in the establishment of sustainable practices, while economic inducements by way of grants (0.470) and subsidies (0.281) are stronger drivers. The study shows the important role of regulatory policies, yet their effectiveness is contingent on enforcement and economic incentives.

Keywords: Government Policies, Economic Incentives, Regulatory Frameworks, Policy Enforcement

INTRODUCTION

The hospitality industry remains key driver to global economic wealth (Matthew et al., 2018; Nunkoo et al., 2019; Bhattarai et al., 2021; Nasiche, 2024), substantially contributing to GDP growth, job creation (Puah et al., 2018; Okafor & Khalid, 2023), and foreign exchange earnings through tourism services (Sudipta & Kaushik, 2020; UNWTO, 2021). The rapid expansion of the tourism industry however has raised several concerns most especially its socio-economic and environmental impact (Warsi et al., 2023). Some of the key issues include but not limited to excessive energy consumption, waste generation, resource depletion, loss of biodiversity (Mofijur et al., 2021; Eze & Chukwuma, 2020).  These growing concerns have created significant global shift towards sustainability-oriented policies and practices which focuses on resource efficiency, social equity and environmental protection. Some of which birthed environmental impact assessments (Martin et al., 2023), waste management regulations (Morrison‐Saunders & Retief, 2012), renewable energy adoption incentives and sustainable tourism development policies (UNEP, 2020; Gössling & Higham, 2021). The effectiveness of these policies however defers across regions depending on governance structures, stakeholder’s participation and enforcement mechanisms (Mihalic, 2020; Gong & Chen, 2023).

Nigeria has also experienced its significant growth due to increasing urbanization and increase in middle-class income which are influencing tourism-related investments (Eze et al., 202) and has significantly contributed to the country’s GDP over time (Figure 1). Despite this growth, sustainability challenges persist accompanied by inadequate infrastructure (Bukola & Olaitan, 2018), and limited awareness of sustainable practices among stakeholders (Adebayo & Ojo, 2022). Government efforts to address these issues have included policies on environmental sustainability (Agboeze & Nwankwo, 2018; Salisu et al., 2023), renewable energy integration, and eco-friendly certifications for hotels and resorts.

Despite commendable efforts and policy initiatives aimed at advancing sustainability in the Nigerian hospitality sector, implementation gaps persist, particularly in areas such as infrastructure, awareness, and enforcement mechanisms. This study therefore seeks to explore how government policies influence the adoption of sustainable practices within the hospitality industry in Nigeria. Specifically, the study aims to:

• Examine the relationship between government sustainability policies and the adoption of sustainable practices.
• Assess the effectiveness of regulatory frameworks in driving environmental sustainability in the hospitality sector.
• Analyze the impact of government incentives on business willingness to adopt sustainable operations; and
• Identify key challenges hindering the implementation of sustainability policies in the hospitality industry

Figure 1: Contribution of Tourism to GDP

Source: Statista, 2024

Concept of Sustainability

Sustainability is a concept that has been significantly exploited with different definitive opinions. However, the concept integrates environmental, economic and social dimensions to ensure the well-being of current and future generations (Bennett et al., 2021). In economic term, sustainability refers to long-term financial stability and equitable resource distribution (Dasgupta, 2021). Sustainability is a concept that has been significantly exploited with different definitive opinions. However, the concept integrates environmental, economic and social dimensions to ensure the well-being of current and future generations (Bennett et al., 2021). In economic terms, sustainability refers to long-term financial stability and equitable resource distribution (Dasgupta, 2021). Social sustainability, on the other hand, focuses on equity, inclusiveness, and the public good (Agyeman, 2022; Goh et al., 2023). From a natural perspective, sustainability is a term used in attaining environmental balance and reducing human pressure on nature (Rockstrom et al., 2021; Larimian & Sadeghi, 2019).

A more holistic view of the sustainability idea was presented in the Triple Bottom Line (TBL) framework that summarizes the interdependence of the three dimensions of sustainability that encompass environmental sustainability (with aspects of resource conservation and climate change adaptation) economic sustainability, which seeks to build long-term economic resilience, and social sustainability, which seeks equity and social justice (Hajer et al., 2021; Raworth, 2021; Steffen et al., 2022) (Figure 2). Likewise, the United Nations’ 2015 Sustainability Development Goals (SDGs) established a framework for sustainable development, wherein 17 goals were enumerated (United Nations, 2022).

Figure 2: Triple Bottom Line Framework

Despite the efforts made globally to achieve sustainability, achieving sustainability remains a challenge due to economic political, and technological limitations (Vishwakarma et al., 2024). Short-term profit-driven business models are likely to conflict with long-term sustainability objectives (Bansal & DesJardine, 2021; Alhammadi et al., 2024). Poor governance structures and regulation enforcement also compromise sustainability policies successfully (Meadowcroft, 2022). Further, technological disparities limit the adoption of sustainable innovations, particularly in the Global South (Barbier et al., 2023; Krishnan et al., 2023). Notably, public attitudes and behaviour also influence sustainable behaviour (Stern, 2022).

Emerging sustainability research focuses on innovative solutions to addressing these problems. The circular economy strategy, which relies on resource efficiency and waste reduction, is gaining widespread popularity as a sustainable alternative to linear economic models (Geissdoerfer et al., 2022). Green infrastructure and smart city planning are some of the sustainable urbanization approaches that aim to reduce environmental footprints while enhancing urban resilience (Newman & Kenworthy, 2022). Second, climate adaptation and resilience planning now join the uppermost agenda issues in sustainability talks, demanding futures-oriented rather than past-oriented processes (Adger et al., 2022).

Issues of Sustainability in the Hospitality Sector

Sustainability in the hospitality sector is characterized by environmentally friendly operations, economic viability, and social responsibility. The concept has transformed from a specialty concern to a key business imperative driven by environmental need, consumer pressure, and regulatory forces. The industry has come to understand increasingly the requirement to reduce its negative impact on the environment while promoting social responsibility and economic sustainability. However, the sector has also witnessed significant challenges that require innovative thought and strategic action.

There is an array of sustainability issues associated with the hospitality sector which must be addressed in order for it to survive in the long term. One of the primary issues is energy consumption and carbon emission; the global tourism industry’s overall carbon footprint is determined to be approximately 8% of global greenhouse gas equivalent to the emissions of 3.9 to 4.5 billion tons of CO2 annually (Pan et al., 2021; Susilorini et al., 2021). Hotels are high energy consumers, with high carbon footprints resulting from heating, cooling, lighting, and regular operations. For the hospitality sector to meet the international climate objectives, it will have to cut more than 90% of its carbon footprint per room by 2050 (Oaky, 2024). Water usage is also another growing concern, with hospitality venues consuming enormous amounts of water for guest amenities, laundry, grounds maintenance, and recreational facilities. Due to the growing world water shortage, efficient conservation of water is imperative (Kasim et al., 2014).

Waste management also remains a major significant issue, and in this case, it specially deals with how much food waste is generated by restaurants and hotels. While some of them already have composting and recycling programs, most of the waste is still dumped in landfills which contributes to environmental degradation (Sustainable Australia Fund, 2024). Moreover, the construction of hospitality facilities tends to result in loss of biodiversity, particularly in environmentally fragile areas. Tourist activities invade natural habitats, destroying ecosystems and undermining species diversity (MDPI, 2024). The social dimension of sustainability is also challenging. Issues of fair labor practices, health of the workforce, community, and cultural heritage must be dealt with in a way that ethical business practices are ensured. Hospitality businesses are predominantly operated on franchise models where unit ownership complicates the application of sustainability policies (Marriott International, 2014). Also, ensuring that facilities are accessible to all, including people with disabilities, remains a challenge even with increased awareness of inclusive hospitality practices (Duarte & Borda, 2013).

To counter these, the hospitality industry is adopting certain sustainability-orientated innovations. The use of renewable energy has gained momentum with most hotels investing in solar panels, wind energy, and geothermal energy to reduce fossil fuel dependence (Glion, 2024). Smart energy management systems have also been integrated into hotel operations so that there is on-time tracking and optimization of power consumption, which reduces resources and saves operation costs (Innovative Center, 2024). Water-saving efforts are becoming higher priorities, and hotels are starting to install low-flow devices, greywater systems, and rainwater harvesting programs to save water (Glion, 2024). Reducing waste is also on the rise, as most hotels and restaurants now utilize zero-waste cooking techniques where food waste is creatively reused to generate less waste (Cvent, 2024). Sustainable sourcing is the focus area today, and hotels have opted for locally sourced, organic produce to support local economies while reducing the transport burden on the environment (O’Donovan et al., 2012).

Green building design is another area of innovation. New hotel constructions are incorporating green materials, energy-efficient insulation, and biophilic design to minimize environmental impact (Newground, 2024). In addition, sustainable tourism practices are promoting sustainable travel by educating tourists on minimizing their impact while promoting eco-tourism activities that lead to conservation (Williams & Ponsford, 2009). The hospitality industry keeps moving towards sustainability. Specifically, the concept of carbon-positive hotels is gaining widespread popularity. Populus in Denver was a historic opening as America’s first “carbon-positive” hotel with an aim to exceed carbon neutrality by sustainable development and operational methods (The Guardian, 2024). Another growing trend is zero-waste cooking, where restaurants and bars get innovative in recycling ingredients to minimize food waste (Eater, 2024). Hotels are also increasingly engaging guests in sustainability efforts, encouraging environmentally conscious consumption and utilization of resources through measures such as green amenities and remote room control (Aim2Flourish, 2024).

Government Policies

Government policies are key tools that help regulate industries, guide economic growth, and solve problems in society. They involve conscious actions, rules, or even conscious decisions not to act, all aimed at influencing behavior and efficiently allocating resources. As Dye (2017) encapsulates, public policy is actually “anything a government chooses to do or not to do,” which indicates the importance of government decisions in regulating both industries and society. The creation of these policies involves a blend of legislative processes, executive decrees, and administrative regulations with input from various stakeholders including government agencies, companies, and the public (Anderson, 2019). In the hotel industry, government policies are central in regulating the operations of businesses, fostering sustainability, and making sure that the standards in the sector are met. The sector, which comprises hotels, restaurants, travel agencies, and tourism-related businesses, is exposed to various policy interventions in efforts to accelerate economic growth, preserve the environment, and make consumers safe (Hall & Gössling, 2020). The policies can be mainly classified into three types: regulatory frameworks, economic incentives, and enforcement actions.

Regulatory policies for the hospitality industry are meant to give companies guidelines that are not just legal and moral but also ensure sustainability and social responsibility. The policies address major issues of environmental sustainability, labor legislation, health and safety laws, taxation, and consumer protection (UNWTO, 2021). For instance, environmental legislation can force hotels and restaurants to install energy-saving mechanisms, practice waste management, and reduce carbon emissions (Gössling & Buckley, 2016). Health and safety law compel hospitality businesses to adhere to hygiene standards, food safety, and occupational health law. This fosters a safe environment for both guests and employees (Baker, 2022). Labour law also accounts for the regulation of employment contracts, fair wages, and working conditions, against exploitation and safeguarding workers’ rights (ILO, 2018). They impose these standards on governments through licensing, frequent inspection, and punishment for non-compliance, thereby guaranteeing high standards in the industry (World Bank, 2020).

Governments put in place various economic incentives that encourage investment and sustainability in the hospitality sector. These incentives include tax relief, grants, subsidies, and low-interest loans, which enable businesses to adopt environmentally sound practices and enhance their premises (OECD, 2021). For example, governments give tax credits to hotels that have invested in energy-efficient equipment, water-saving amenities, and renewable energy sources (Hall & Gössling, 2020). Financial schemes also assist the hospitality industry of small and medium-sized businesses to improve the diversity of their services as well as the quality. These schemes promote business growth while making sustainability a significant aspect of the growth of the industry (Bramwell & Lane, 2011). Governments can also establish public-private partnerships to facilitate sustainable tourism schemes so that the hospitality industry is kept in conformity with overall economic and environmental goals (UNEP, 2022).

Mechanisms for institutional enforcement are the government ministries and regulatory agencies responsible for implementing and enforcing policies in the hospitality sector. They include tourism commissions, regulatory boards, health and safety departments, and environmental departments (WTTC, 2021). Institutions have the responsibility to ensure enforcement of established regulations, address problems within the industry, and enable policy implementation. For example, tourism development agencies oversee and promote tourism operations to ensure the operations of businesses are sustainable and ethical (UNWTO, 2021). Health and safety agencies inspect to uphold food safety policies, standards of hygiene, and occupational health legislations (Baker, 2022). Environmental protection agencies inspect hospitality businesses’ adherence to waste disposal and pollution control legislation, prosecuting violators (Gössling & Buckley, 2016). Effective institutional implementation ensures that policies are effective in achieving their desired effects, resulting in a well-controlled competitive hospitality sector.

Despite the government’s current policies in sponsoring sustainability around the world and in Nigeria, the hospitality sector continues to battle rampant environmental concerns like careless waste disposal, exorbitant consumption of energy, and improper conservation of the environment. As much as policy regimes, economic realities, and system of sanctions aim to mold sustainable conduct, their influence on the practice of business remains uncertain. Also, the hotel industry continues to experience rampant environmental concerns in the way of inefficient waste management, energy consumption, and inadequate environmental protection measures.

Study Aim and Objectives

The aim of this study is to examine the role of government policies in enhancing sustainable practices in the hospitality industry. The specific objectives are to:

• examines the relationship between government sustainability policies and adoption of sustainable practices
• assess the effectiveness of regulatory frameworks in driving environmental sustainability in the hospitality sector
• analyze the impact of government incentives on business willingness to adopt sustainable operations
• identify key challenges hindering the implementation of sustainability policies in the hospitality industry.

HYPOTHESIS FORMULATION

Regulatory Framework

Regulatory frameworks are among the most important components in determining the adoption of sustainability in the hospitality sector. Some researchers (Ojediran et al., 2022; Akinyemi & Salawu, 2023; Yusuf et al., 2024) have considered the way organizations comply with environmental protection legislations, waste management legislation, and energy saving legislations. Through their study, it was established that regulatory systems play a pivotal function in determining corporate sustainability initiatives by setting standards of compliance. Yusuf et al. (2024) further added that stringent regulations enhance the environmental accountability of companies and industry sustainability in general. Additionally, a study conducted by Ojediran et al. (2022), also indicated that regulatory systems provide legal advice, hence companies adopt sustainable practices effectively. Therefore, based on such arguments, the following is proposed:

H1: Regulatory frameworks positively influence the adoption of sustainable practices in the hospitality industry.

Economic Incentives

Economic incentives, such as tax reductions, grants, and subsidies, significantly facilitate business uptake of sustainability. Economic incentives have been explored by some studies (e.g., Eze & Oladapo, 2022; Adegbite et al., 2023; Salisu & Jimoh, 2024) to determine the effect on firms’ intentions to adopt sustainability programs. Adegbite et al. (2023) concluded in their research that the cost of adopting green technology is minimized by economic incentives, thus making sustainability more attractive to business firms. Salisu & Jimoh (2024) also established that economically incentivized companies would embrace long-term sustainability measures. Eze & Oladapo (2022) also concluded that compliance of businesses with caring for the environment is obtained through strategically designed incentives. We thus take for granted

H2: Economic incentives strongly increase hospitality companies’ motivation to use sustainable practices.

Institutional Enforcement Mechanisms

Institutional enforcement mechanisms play a significant role in enforcing compliance with sustainability programs. Various research (Okon et al., 2022; Ibekwe & Lawal, 2023; Aluko & Ogunbiyi, 2024) also explored the functioning of regulatory bodies in ensuring policy compliance among hospitality companies. Drawing on Ibekwe & Lawal (2023) study, operational tools as far as daily inspection and sanctioning enhance the implementation of sustainability standards. Aluko & Ogunbiyi (2024) further pointed out that the control government organizations play an imperative role in influencing businesses with regards to sustainability policy, thus cementing policy enforcement. Moreover, Okon et al. (2022) further argued that enforcement laxity leads to policy failure owing to the risk of firms neglecting sustainability policy without supervision. We therefore propose:

H3: Institutional enforcement agencies positively mediate the effectiveness of regulatory policies in driving sustainability uptake.

METHODOLOGY

Study Area

Southwest region of Nigeria consists of six states (Lagos, Ogun, Ondo, Osun, Oyo, and Ekiti) and the largest geopolitical axis with a rich Yoruba culture and linguistic cultural diversity. Covering a geographical coordinate stretching between Latitude 6.3787^o and 9.2070^o of the Equator and between Longitude 2.7300^o and 5.0168^o of the Greenwich Meridian (Figure 3). The climatic condition of the region, incorporating lowland tropical rainforests and a tropical hinterland climate with a well-defined wet and dry season, provides a congenial climate for the hospitality business (Olagunju, 2024). Having a temperature range of between 27°C and 28°C on average and average annual rainfall of between 1000mm and 1250mm and even 2000mm in some areas at times, the area is suitable for tourism-related investments, i.e., eco-tourism, resorts, and business travel centers (Adedipe & Adeleke, 2016). Some of the notable hospitality centers which attract local and foreign tourists because of economic activities, business tourism, and urbanization are Lagos, Ibadan, and Abeokuta cities.

Figure 3: Map of Southwest Nigeria

Source: Author (2024). ArcMap

Population and Sample Size

The target population for this study consists of major stakeholders in the hospitality industry. They include hotel managers, restaurant operators, policymakers and hospitality tourists. Since hospitality centers are very outstanding in Lagos, Ibadan and Abeokuta, these cities are the major areas where data were gathered. A total of 400 sample sizes was used for this study for an unknown population which is above 100,000 (Serdar et al., 2021). The study sample was selected using the multistage sampling technique. At the first stage, a purposive selection was employed in the selection of key urban centers with high hospitality activities which are Lagos, Ibadan, and Abeokuta, and Akure. In the second stage, 5 hospitality establishments were randomly selected from each of the cities making a total of 20 hospitality establishments. In the third stage, respondents were selected from business owners (5), employees (5), guests (5) and policy makers (5) (staff from Tourism Board of each state) were selected using the random sampling technique.

Research Instrument

Data used in this study was collected using structured questionnaire. The questionnaire was systematically structured into five key sections:

The first section captures respondents’ background information which includes age, gender, educational qualification, job role, years of experience, and location. This information is relevant in providing respondents’ profile and its influence on perspectives regarding sustainability policies. The second section contains items that were designed to focus on sustainability practices, government sustainability policies and adoption of sustainability practices. Specifically, the section will contain items to assess the level of understanding of existing government regulations, the extent of adoption of sustainable practices (waste management, renewable energy usage and water conservation. Section three focuses on the effectiveness of regulatory framework in driving environmental sustainability, evaluating the strength and enforcement of regulatory policies in ensuring environmental sustainability. Impact of government incentives on business willingness to adopt sustainable operations. The questionnaire contains a section that analyzes the role of financial incentives such as tax reliefs, and subsidies in motivating hospitality businesses to integrate sustainable practices. The last section (section four) contained items on challenges hindering the implementation of sustainability policies. The 4-point Likert scale was used to measure attitudes and perceptions.

A reliability test was conducted for the research instrument using the test-retest reliability method. To achieve this, a total of 20 copies of questionnaires were administered on respondents that were not part of the research sample. The instrument was administered twice within the space of two weeks. Afterwards, a correlation analysis was conducted and coefficient of 0.81 was returned.

Data Analysis

Data collected were coded into the right formats. Missing data were treated and the questionnaire with incomplete responses was considered invalid. The total number of valid responses was 374, representing 93.5% valid response rate. Data collected were analyzed using both descriptive and inferential statistical techniques. Mean and standard deviations were computed to provide a description of valuable variables in the study while Pearson correlation co-efficient and Principal Component Analysis (PCA) was conducted to test the hypotheses.

RESULTS

Table 1: Summary Statistics

Source: Survey, 2025

Summary statistics in Table 1 provide an overall picture of the demographic description of respondents in the study, and it captures the range of stakeholders involved in assessing the contribution of government policies in fostering sustainability in the hospitality industry. The sample consists of 57.8% males and 42.2% females, and it indicates a balanced gender distribution. Aged, the highest proportion of the respondents (37.9%) was in the 35-44 category, followed by the 25-34 group (27.1%), which showed mid-career decision-makers and managers in the hospitality industry as the highest proportion of respondents. Educated, the highest proportion of the participants (61.7%) had tertiary education, reflective of a highly educated group with the ability to comprehend policies related to sustainability fully. Stakeholder distribution illustrates that hospitality travelers (31.8%) comprise the largest population, followed by restaurant operators (25.1%), policymakers (23.3%), and hotel managers (19.8%).

Figure 4: Sustainability Practices Adopted in Hospitality Sector

Source: Survey (2025)

The findings reveal varying levels of adoption of sustainability practices in the hospitality industry across Southwest Nigeria. Among the assessed sustainability practices, water conservation (M = 3.5) and local sourcing of food (M = 3.4) emerged as the most widely adopted measures. This suggests that businesses in the hospitality sector prioritize cost-effective and easily implementable sustainability strategies, such as reducing water wastage and sourcing food locally to minimize transportation costs and enhance freshness. Conversely, waste management (M = 2.5), eco-friendly packaging (M = 2.3), and carbon footprint reduction strategies (M = 2.4) exhibited relatively low adoption rates. This aligns with existing challenges in the region, such as inadequate waste disposal infrastructure and limited awareness of carbon reduction initiatives. The moderate adoption of renewable energy usage (M = 2.8) further indicates that while businesses recognize the importance of energy efficiency, high installation costs and limited government incentives may hinder their transition to sustainable energy sources.

Figure 5: Correlation Matrix on Government Policies and Sustainability Compliance

The correlation analysis shows the complementary roles played by regulatory frameworks, institutional enforcement, and economic incentives in advancing environmental sustainability in the hospitality industry. The results show moderate correlations between regulatory frameworks and sustainability practices, such as waste management (0.45), renewable energy utilization (0.50), and water conservation (0.35), suggesting that government policies enable sustainability but may not be the sole adoption driver. Companies do act in accordance with the law to a certain extent, but the correlation between legal compliance and enforcement intensity (0.50) indicates that greater enforcement enhances compliance with sustainability policies. Similarly, inspection frequency and penalty for non-compliance (0.60) show that regulatory enforcement plays a significant function in compelling companies to adopt sustainability practices. However, the relatively modest correlation between sanctions and waste management (0.40) suggests that enforcement alone may not be sufficient and that firms might require greater inducement than regulatory compulsion to fully embrace sustainability initiatives.

Table 2: Eigenvectors Table (Component Loadings)

The principal findings from the loadings reveal significant implications on the factors influencing the adoption of sustainability. PC1 recognizes the central role of regulatory enforcement intensity (-0.315) and compliance with laws (-0.279) in implementing sustainability practices. Environmental sustainability activities, including waste management (-0.331), renewable energy (-0.346), and water conservation (-0.359), load heavily onto this component, indicating their importance. In addition, institutional enforcement mechanisms, i.e., frequency of inspection (-0.349), are essential for compliance. PC2 corroborates the influence of legal compliance (-0.421) and enforcement intensity (-0.407) on sustainability adoption, indicating the significance of government policies. Economic incentives, particularly grants (0.439) and subsidies (0.368), reveal that financial incentives have a significant impact on firms’ involvement with sustainability. PC3 also shows the influence of economic incentives, with subsidies (0.281) and grants (0.264) as important drivers towards the adoption of sustainability. This means that financial incentives are more desirable for companies than pressures from regulation. It is notable that renewable energy (-0.519) has a high negative loading, which suggests that some companies adopt green energy measures only when economic incentives are present. PC4 indicates that non-compliance penalties (-0.523) can force people to adopt sustainability, but economic incentives in the form of grants (0.470) can be a more effective incentive. These findings collectively indicate that the application of regulatory measures and economic incentives is essential in motivating sustainability practices.

Economic incentives are a strong driver of sustainability adoption, particularly the use of renewable energy (0.45) and water conservation (0.50). Economic incentives provided in the form of subsidies and grants have also been proved to trigger businesses to invest in clean technology and careful resource utilization. The very strong to extremely strong interlinkages among different economic incentives (0.55-0.60) indicate that firms benefitting from one form of financial assistance are likely to benefit from multiple incentives and hence sustain the strength of a consolidated incentive structure.

Hypothesis Testing

Table 2: Results of Hypothesis Testing

H1: Regulatory frameworks positively influence the adoption of sustainable practices

PC1 and PC2 confirm that legal compliance (-0.421) and enforcement strength (-0.407) significantly affect sustainable practices. Hence, the hypothesis is supported.

H2: Economic incentives strongly increase hospitality companies’ motivation to use sustainable practices

PC2 and PC3 show that economic incentives (grants: 0.439, subsidies: 0.368) positively influence business motivation to adopt sustainability. Therefore, the hospitality business is more likely to adopt sustainability initiatives when motivated financially.

H3: Institutional enforcement agencies positively mediate the effectiveness of regulatory policies in driving sustainability uptake

PC1 and PC4 reveal that sanctions (-0.523) and inspection frequency (-0.349) strongly influence compliance. It shows that institutional enforcement plays a key role in ensuring sustainability adoption with businesses responding more to financial incentives than to penalties.

Figure 6: Key Challenges to Sustainability Policy Implementation in Hospitality Industry

Figure 6 indicates the most significant impediments to sustainability policy implementation within hospitality business. The discovery indicates that the cost of implementation (X= 4.2) is still the most challenging one, which suggests that cost factors are a major concern in deterring firms from adopting sustainability practices. Lack of adequate financial incentives (Mean = 4.0) and inconsistent policy implementation (Mean = 3.9) also reflect the need for increased government support and effective regulatory intervention. Other key issues are limited access to green technology (Mean = 3.7) and procedural complexity of compliance (Mean = 3.8), reflecting that businesses are constrained by technology adoption and bureaucratic inefficiency. Also, short-term business focus (Mean = 3.4) and unclear sustainability rules (Mean = 3.5) suggest that there is a lack of long-term thinking and clear regulatory leadership.

DISCUSSION

Findings revealed that regulatory frameworks are primarily responsible for the adoption of sustainable practices in the hospitality industry (Ojediran et al.2022; Yusuf et al., 2024; Mensah & Hammer, 2021). Strict environmental policies encourage corporate social responsibility and drive sustainability initiatives. In addition, the findings also align with Akinyemi & Salawu (2023) and Williams & Scott (2020), who expounded that regulatory guidance provides businesses with legal certainty, increasing the compliance level with sustainability initiatives. However, while previous studies had primarily emphasized compliance as an activity of strict enforcement, the current study indicates that voluntary compliance also comes to the forefront, particularly in hospitality businesses with a strong corporate social responsibility (CSR) culture. This contrasts with the findings of Dwyer & Forsyth (2021) that organizations with a high ethical culture will be more likely to adhere to sustainability policies regardless of the enforcement. Furthermore, the research points out that while regulations set the foundations for the adoption of sustainability, it is the implementation, oversight, and collaboration by the industry that will determine their effectiveness.

In economic terms, the results obtained aligned with Adegbite et al. (2023), Salisu & Jimoh (2024), and Han et al. (2022), arguing that economic incentives in the form of tax rebates, grants, and subsidies would significantly increase companies’ intention to adopt sustainability practices. The results indicate that such incentives encourage hospitality businesses to embrace renewable energy, waste management, and resource efficiency measures, also corroborating the findings of Eze & Oladapo (2022) and Zhang et al. (2020) that cost savings is an important consideration for the implementation of sustainability. This study, nevertheless, indicates a big gap in availability and communication of these incentives, particularly to small and medium-sized enterprises (SMEs) in the hospitality industry. This is alongside Gössling & Peeters (2021), who noted that larger firms are likely to benefit disproportionately more from government incentives compared to smaller hospitality businesses. This would imply that policy formulation must be directed at ensuring an equitable allocation of incentives, particularly to SMEs that lack the financial muscle to invest in sustainability initiatives without external assistance.

Findings obtained on institutional enforcement confirm the role played by regulatory bodies in ensuring compliance with sustainability requirements (Okon et al., 2022; Ibekwe & Lawal, 2023). It is evident in the result that inspection, sanction regimes, and checking for compliance heavily influence firms’ compliance with sustainability (Aluko & Ogunbiyi, 2024; Higham et al., 2020). Howbeit, the result provides new insights into some of the vulnerabilities facing enforcement agencies like poor institutional capacity, corruption, and inconsistency in policy enforcement issues mentioned briefly in previous research. This is also in line with Meadowcroft (2022), who observed that regulatory effectiveness is typically hampered by political interference and inadequate financing of environmental authorities. Besides, the findings indicate that bureaucratic inefficiencies and duplicative regulatory mandates lead to policy enforcement confusion, leading to inconsistencies in compliance among hospitality businesses.

On the barriers to sustainability policy implementation, the findings corroborate existing studies (Vishwakarma et al., 2024; Coles et al., 2021; and Kularatne et al., 2022), which highlight political, economic, and technological limitations as pertinent challenges. However, this study advances the argument by identifying stakeholder resistance and low awareness as additional barriers to the adoption of sustainability in the hospitality industry. This means that, beyond policy design, more attention needs to be placed on stakeholder engagement and education in order to enhance policy effectiveness. This aligns with the arguments of Font & Lynes (2022) and Choi et al. (2023) that ignorance and resistance by industry stakeholders can effectively undermine or delay the adoption of sustainable initiatives. Moreover, the study highlights that some hospitality businesses perceive sustainability policies to be expensive, contending with the fact that policy adoption rates are likely to be linked to the perceived equilibrium of benefits and costs. In addition to this, this study not only focuses on understanding regulatory and economic incentives as drivers of sustainability, but it also identifies consumer demand as a driver of industry action. There is evidence that consumer demand for and sustainable activities in the hospitality industry offers additional incentive for hospitality businesses to become greener. Nevertheless, the inequality of the willingness of consumers to pay extra for sustainable services has been confirmed as a persistent issue (Juvan & Dolnicar, 2023; Gössling, 2021).

CONCLUSION

Due to fierce market competition and the desire for sustainability options, there have been consistent calls for sustainability practices in the hospitality industry and increased expectations. However, the role of government policies in influencing the uptake of these options have not been clearly documents. This study sheds light by evaluating the role of government policies in enhancing sustainable practices in hospitality industry. The sustainable related policies were categorized under regulatory framework, economic incentives and institutional enforcement. It was discovered that regulatory frameworks have the strongest effect on fostering sustainable practices in the hospitality industry. While economic benefits and stakeholder engagement are equally important, effectiveness in the application of sustainability measures depends strongly on strong enforcement systems and compliance checks. It was however discovered that poor enforcement, infrastructure, and lack of awareness continue to be the major hindrances to sustainability uptake in Nigeria’s hospitality industry and at a global scale. To improve sustainability, government officials should concentrate on stricter enforcement of environmental regulations, where adherence is facilitated through penalties and regular audits. On top of that, low-cost economic incentives should be introduced to allow small and medium-sized enterprises (SMEs). Likewise, greater stakeholder cooperation and consumer campaigns will also provide effective in promoting demand for sustainable hospitality services.

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