27914 - KS Hotels

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Environmental & Social Review Summary

Project Number

27914

Company Name

KS Resort Luang Prabang Co., Ltd.

Date ESRS Disclosed

May 22, 2009

Country

Lao People's Democratic Republic

Region

East Asia and the Pacific

Last Updated Date

Jun 3, 2021

Environmental Category

B - Limited

Status

Completed

Previous Events

Approved : Jun 22, 2009
Signed : Jun 25, 2009
Invested : Apr 23, 2010

Sector

Resort Hotel (Including Lodges)

Industry

Tourism, Retail and Property

Department

Regional Industry - MAS Asia & Pac

Project Description

KS is a Thailand-based group with a core business of assembly and distribution of Honda motorcycles and parts in Laos, Cambodia, and Vietnam. The Group diversified and entered the luxury hotel business by developing Alila Cha-Am in Thailand that opened in 2008, and subsequently acquired stakes in two existing luxury hotels, Hotel De La Paix in Siem Reap, Cambodia and Hotel 3 Nagas in Luang Prabang, Laos.

This project involves an IFC loan to develop a 5-star hotel in Luang Prabang, Laos - Alila Luang Prabang. It will be managed by the Alila Hotel & Resorts Group (Alila), a hotel management company.

Potentially two other 4-star hotels may also be developed in the Mekong region as part of this project. If confirmed, supplementary appraisals will be required.

KS Group will be the owner of the proposed hotel assets. It does not directly operate hotels and contracts with professional hotel management companies (“operators”) such as Alila for day-to-day operations of its properties. Alila is focused on environmental stewardship and some of its managed properties such as Alila Villas Hadahaa Maldives are benchmarked and certified against the Green Globe industry standard.

Overview of IFC's Scope of Review

The Environmental & Social (E&S) review of KS Group (“KS”, “the Group” or the “Sponsor”) involved investigating compliance with IFC’s Performance Standards and national regulatory standards of hotels owned by the Group and of relevant hotel operators. The review included assessment of the hotels’ environmental and social management system (ESMS), and their ability to ensure and monitor E&S performance in their operations. The review relied on documents made available by KS and interviews conducted by IFC staff during site visits (13-16 April, 2009) to existing or proposed hotel facilities located in Siem Reap, Cambodia and Luang Prabang, Laos PDR. During the visit IFC staff met key management and operational personnel.

E & S Project Categorization and Applicable Standard

While all Performance Standards are applicable to this investment, IFC’s environmental and social due diligence indicates that the investment will have impacts which must be managed in a manner consistent with the following Performance Standards:

- PS1: Social and Environmental Assessment and Management System;
- PS2: Labor and Working Conditions;
- PS3: Pollution Prevention and Abatement;
- PS4: Community Health, Safety & Security;
- PS5: Land Acquisition and Involuntary Resettlement;
- PS8: Cultural Heritage

During assessment, the following performance standards were not triggered, due to the fact that the hotel will be located in urban areas with limited emissions and discharge of pollutants, hence bringing limited impact:
Biodiversity Conservation and Sustainable Natural Resource Management (PS6); Indigenous People (PS7).

This is a Category B project according to IFC’s Environmental and Social Review Procedures. A limited number of environmental and social impacts would result from the project, which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. Key environmental, health and safety, human resources and social issues that were reviewed included:

- Environmental and social management system (ESMS); Waste discharge and energy efficiency; Labour and working conditions;
- Protection of cultural heritage; Land acquisition; and Community engagement.

Environmental and Social Mitigation Measures

Social and Environmental Assessment and Management Systems:

Alila Luang Prabang: Alila, the selected operator, has a corporate level Hotel & Resorts system for management of environmental, health, and safety risks. This will be applied to the Alila Luang Prabang property. The system keeps track of performance scores under several process-and-control aspects such as greenhouse gas emissions, energy management, waste management, and ecosystem conservation management. Alila also appoints personnel at its managed hotels to oversee implementation of environmental and social sustainability policies.

KS Group: Operators develop an ESMS for specific properties based on their own corporate policies and tailored to the local operating context. The Group is committed to working with hotel operators which place emphasis on managing environmental and social sustainability. As its asset portfolio expands, the Group has committed to developing its own corporate ESMS to manage environmental and social aspects of its properties to ensure that each hotel (and operator) consistently complies with a core set of risk management standards. IFC Performance Standards will be the ESMS benchmark at hotels it owns and where it has leverage. This is part of the Environmental and Social Action Plan (ESAP).

Labor and Working Conditions:

Alila Luang Prabang Construction Site
IFC staff visited the 1-hectare site for Alila Luang Prabang, an old prison which ceased to operate in 2003. Construction had not started at the time of appraisal.

A second visit was also made to a site where construction of another hotel (not associated with KS) was nearing completion. Given that the same project manager is preparing both sites, the second visit was made to inspect conditions at an existing site and to gauge the work of the project manager.

Observation and interviews with workers and a foreman at the second site indicated that the contractor was observing sound construction management practices in terms of occupational health and safety, and working conditions. Workers wore safety helmets and gloves. The contractor has a set of construction safety guidelines covering such issues as safety, excavation, working at elevation, and hazardous materials.

The project manager has been using the old prison site to set up temporary tents to accommodate workers from the second site. There is no UNESCO or local government rule against this. Observation revealed that hygienic and living conditions at the camping grounds were not satisfactory. Workers will be staying at these tents for a few more months before their work finishes. Pools of stagnant water and nails on the ground made it difficult to walk around the site. Toilet and washing facilities were very basic and shared by a large number of workers. Interviewed workers confirmed that sub-contractors procured accident insurance for them. There were several young workers who stated that they were 18 years of age, although this could not be verified as they did not have their identity cards with them.

Through its ESMS, KS will require contractors to ensure that living conditions are hygienic and safe for all workers employed (including sub-contractors), to check and keep records of the identity cards of the entire construction workforce to ensure that all workers are above national minimum working age and to ensure that all workers have adequate accident insurance coverage (refer to ESAP).

Once fully operational, Alila Luang Prabang will employ about 100 staff members while the four star hotels may each employ between 50-100 staff. All staff will be full-time all year round employees. Whilst there will be few physical hazards – including workplace noise - posed to hotel staff, KS and Alila will ensure that occupational health and safety guidelines will be adhered to at all times. Alila human resource policy dictates fair hiring and staff management practices in respect of staff selection, training, working hours and overtime, benefits and other management aspects. Interviews with management and staff at 3-Nagas confirmed that that Alila HR practices were fair and reasonable.

KS Group: KS will employ up to 300 staff at the proposed Alila Luang Prabang and 4-star hotels. It will ensure that each of these hotels will develop a human resource policy consistent with the operators’ corporate HR policies, and which fulfils national regulatory requirements and complies with IFC PS2. KS will require operators to ensure that fair terms and conditions of employment are defined in each employee’s employment contract. As with existing hotels managed by operators, KS’s ESMS will have provisions in place to ensure that operators put into place mechanisms for staff to provide feedback or voice concerns with management in a way which protects their anonymity.

Pollution Prevention and Abatement:

Alila Luang Prabang: There will be limited air emissions from Alila Luang Prabang. Sewage and wastewater will be treated by an on-site Septic-Fixed Film Aerobic Treatment Plant with a capacity of up to 60 cubic meters per day of wastewater and designed to meet specified IFC guideline limits for wastewater quality. The waste water treatment plant at Hotel 3-Nagas consists of a water septic tank with mixed media vertical filter. Treatment plant designs comply with heritage regulations. Each day Alila Luang Prabang is expected to use up to 60 cubic meters of water, and produce about 48 cubic-meters of waste water. After treatment on-site, part of the filtered water coming out of the plant will be reused to water gardens, with the rest being directly discharged to surface water. Hazardous material stocks onsite may include LPG and diesel, which will be kept in storage tanks with secondary containment systems and protection barriers. Solid waste will be separated into plastics, bottles, glass, aluminum and other recyclables and non recyclables. Waste collection will be undertaken by a private waste management contractor, with disposal at approved municipal landfills and recycling facilities.

KS and the project manager - VIKARA ARCHITECTURE Co., Ltd. - are committed to monitoring the waste disposal practices of sub-contractors during construction to ensure proper handling and discharge. Fire-safety measures were adequate at Hotel 3-Nagas and KS-owned hotels visited in Siem Reap – there were unobstructed escape routes, fire extinguishers in place, and staff has received training on fire safety. The project manager has completed and submitted renovation designs to the local Government. It has confirmed that design and construction of the Alila Luang Prabang Hotel will conform to The Life Safety Code (U.S. NFPA).

Alila keeps track of energy and water usage at existing hotels, and is taking measures to conserve energy through for instance the use of energy-efficient light bulbs. Alila Luang Prabang projects an average monthly electricity usage of 15,000-20,000 kWh supplied by the national grid, or approximately 14kWh/m2 serviced space, which is under the IFC guideline level of 190 kWh/m2 for luxury serviced hotels in a tropical climate zone (IFC Environmental, Health & Safety Guidelines for Tourism and Hospitality Development).

The total greenhouse gas emissions (CO2 equivalent) for Alila Luang Prabang and the four-star hotels are estimated at 1,342 tons during construction and 296 tons per year during operation, the latter mainly arising from the use of grid-supplied electricity and from the use of air conditioners. Employee car pooling and consolidated purchases of hotel supplies to reduce deliveries are examples of steps taken at Alila Ubud and Alila Manggis to reduce their carbon footprints. Alila will adopt similar measures at Alila Luang Prabang to reduce its carbon footprint.

Alila Luang Prabang gets its water supply from the city water reservoir. Guests will use approximately 19,000 cubic meters of water per year, or about 1m3/guest per night which is considered satisfactory under IFC EHS guideline which defines satisfactory usage level as 0.9-1m3/guest per night for luxury serviced hotels in a tropical climate zone (IFC Environmental, Health & Safety Guidelines for Tourism and Hospitality Development). At Hotel 3-Nagas, rooms are equipped with low-pressure showerheads and water leakage detection devices. Alila will adopt similar water-saving measures at Alila Luang Prabang. According to the project manager, there are occasional water shortages in Luang Prabang throughout the year but these are short in duration and are not expected to affect hotel operations.

KS Group: The group is committed to ensuring that its corporate ESMS includes guidelines and procedures on pollution management. KS commissioned an energy audit at its luxury hotel in Siem Reap and will mandate Alila to do the same for Alila Luang Prabang to identify further opportunities for energy conservation (refer to ESAP).

Community Health, Safety & Security:

The assessment finds that Alila Luang Prabang and the four-star hotels will have limited impact on the health, safety and security of neighbouring communities. Security arrangements will be in the form of unarmed guards patrolling the premises.

Land Acquisition and Involuntary Settlement:

Alila Luang Prabang: The proposed 1-hectare site was an old prison which ceased to operate in 2003. A business partner of KS acquired the land from the Government. Given that the land was owned by the Laos Government and the prison was in operation for several decades, PS5 is not triggered. Aside from the current contractor construction camp, there have been no informal settlements on the site.

Four-star Hotel:
The potential 4-star hotel site is located in the outskirts of the main Luang Prabang town. The exact location of another potential Mekong region site is not confirmed as yet.

If and once the 4-star hotels are confirmed as part of this investment, KS Group is committed to ascertaining whether any involuntary settlement of local communities had occurred at the sites, when the previous land title holders acquired the land. It will confirm whether proper compensation arrangements were made to local community members, and take necessary steps to fulfill PS5 requirements – including the commissioning of a land resettlement audit where necessary (refer to ESAP).

KS Group: As part of its corporate ESMS, KS is committed to developing a set of land acquisition procedures referencing the IFC performance standard 5 (refer to ESAP).

Cultural Heritage:

Alila Luang Prabang: Luang Prabang was designated by UNESCO as a World Heritage Site in 1996. The prison site contains UNESCO listed heritage buildings. In developing the Alila Luang Prabang property, KS and its designer and project manager - VIKARA ARCHITECTURE Co., Ltd. - have received UNESCO approval and will start construction and restoration once construction permits have been issued. They are committed to following requirements related to cultural heritage protection and restoration, including the use of traditional construction techniques and materials. The project manager has conducted a full survey of all visible parts at the site prior to submitting the application for a construction permit from UNESCO and the Government of Laos. No structure has been brought down since the site was acquired in 2007. Parts of the building wall structures have been eroded by humidity and will be restored using the same types of bricks and mortar as the original ones. Certain small elements of wooden roof structures have been damaged by termites and will be restored.

The project manager of Alila Luang Prabang ha submitted its site development plan to the Luang Prabang Government for review. The Government has an overall development plan for the UNESCO protected areas which defines four different zones (ZPP-Ua; ZPP-Ub; ZPP-M; ZPP-N). The old prison site is located within the ZPP-Ub zone where some heritage buildings are found. The site plan for Alila Luang Prabang has been developed in compliance with the government zoning and heritage protection plan. IFC has reviewed zoning information from the project manager.

During construction, KS is committed to ensuring that the project manager conducts additional surveys of all exposed structural parts where necessary. Survey results will be used as a basis for reproduction of original architecture. The sponsor has voluntarily engaged in a process to interview locals in order to document the history of the site and contribute to preservation of heritage information. The project manager has consulted with local residents on their views of the project. The feedback has been positive as locals felt that the project would create economic opportunities for them. Communications with locals will continue throughout project construction.

The sponsor is committed to ensuring the following undertakings by the project manager and operator (refer to ESAP):

- All survey results and measures taken to preserve, protect and restore cultural aspects of the sites during construction and operation are recorded.
- Retain records of interviews with locals to ascertain the cultural history of the hotel sites.

The potential 4-star hotel site in Luang Prabang falls outside of the UNESCO protected area, and the potential sponsor has found no related cultural aspects which were affected during construction.

KS Group: The group is committed to its ESMS including guidelines and procedures on cultural heritage protection referencing IFC’s PS8 (refer to ESAP).

Stakeholder Engagement

Alila Luang Prabang: Alila as an operator places strong emphasis on community communications and its performance scoring system takes into account social and cultural issues. Its hotels sources local ingredients with a preference to buy from profit-sharing co-operatives. As an example of the operator’s commitment to community outreach, Alila Ubud Indonesia co-organised community development projects with local government counterparts, neighbouring Payangan and Gianyar communities, and hotel associations. Alila Cha-Am in Thailand has in the past organized Children Day activities at the neighbouring Bang Khet School. Alila Manggis participates in Wild Asia’s Responsible Tourism Initiative.

KS Group: KS is committed to ensuring that its corporate ESMS include guidelines and policies on community engagement, communication and grievance mechanisms (refer to ESAP).

Four-star hotels: The operator of the KS-owned luxury hotel in Siem Reap progressively reaches out to local rural communities in the vicinity of its hotels, and has won industry sustainable development awards for one of its hotels which connect guests to rural communities during their stay. Community programs include guests donating sewing machines to local people who are then trained to develop new income sources. It is expected that the proposed 4-star hotels will continue proactive community development efforts like these.

For more information on this project, contact:

Eddie KIASRITHANAKORN
KS Group Building
333 Ekamai 19, Sukhumvit 63
Bangkok 10110 Thailand
Fax: +66 2 391 1834

Local access of project documentation:

Environmental and social information pertaining to the project will be available for access by the locally affected communities outside the project manager’s office in Luang Prabang:

Pascal TRAHAN
VIKARA ARCHITECTURE Co., Ltd.
3/9 Sethathirath Rd., Ban Thongchaleun
P.O. Box 722, Luang Prabang, Lao P.D.R.
Tel: +856 (0)71 260 555

It will also be posted near the main entrance of the Old Prison site.

Disclosure will also be made at a publicly accessible place near the town centre of Luang Prabang.

Client Documentation

File Name	Actions
KS Hotel ESAP 22May200911am_final.pdf

**Information on IFC's Policy and Performance Standards on Environmental and Social Sustainability can be found at www.ifc.org/sustainability

IFC supports its clients in addressing environmental and social issues arising from their business activities by requiring its real sector clients to set up and administer appropriate grievance mechanisms and/or procedures to address complaints from Affected Communities in relation to environmental and social issues arising from IFC's clients' business activities. Since 2012, IFC's Financial Intermediary clients applying the Performance Standards are required to develop External Communications Mechanisms to receive and review inquiries or complaints from any interested party regarding the E&S risks and impacts of their operations.

For IFC projects that are active or under consideration, individual(s), or their authorized representative(s), who allege they have been or will be adversely affected by E&S risks or impacts arising from IFC's clients' business activities, may submit a complaint to IFC directly for consideration. When receiving an E&S complaint, IFC engages with complainants and works with its clients to find solutions to E&S concerns as quickly and efficiently as possible.

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Independent of IFC and MIGA management and reporting directly to the IFC and MIGA Boards of Executive Directors, CAO helps resolve issues raised about the environmental and social impacts of projects through a neutral, collaborative, problem-solving approach via its Dispute Resolution function. It also reviews IFC’s and MIGA’s compliance with environmental and social policies, assesses related harm, and recommends remedial actions through its Compliance function. Additionally, CAO provides advice to IFC, MIGA, and their Boards to enhance environmental and social sustainability performance and minimize the risk of harm.

Complaints may relate to environmental and social harm regarding any aspect of the planning, implementation, or impact of a project or sub-project, and can be made by any individual, group, community, entity, or other party affected or likely to be affected by the environmental or social impacts of an IFC- or MIGA-financed business activity.

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