Understanding the Financial Issues of a Business Interruption in the Aftermath of a Hurricane

By John Welty Practice Leader, SUITELIFE, Venture Insurance Programs | December 18, 2016

Hurricanes can be frightening experiences, particularly for those on the coast. For hotels, which occupy much of the country’s coastal landscape, they can bring revenue to a halt. Business interruption coverage is key to help hotels get through these catastrophes without having to board up their businesses for good. To ensure they are properly protected, hotels should understand the financial issues that could arise as a result of a hurricane, and the myriad coverages that are available to assist with those costs. In this article, we explore the ins and outs of business interruption coverage to help hotel owners question their coverage and ensure they have the protection they need to come out on top after a major loss.

Hurricane Matthew – Business Interruption in the Aftermath

It brought winds of 105 miles an hour to Cape Canaveral, Fla., nearly 17.5 inches of rainfall to Savannah, Ga., and a storm surge of nearly 10 feet above normal to Fernandina Beach, Fla., according to Weather.com Insurance Journal" damage along the southeastern coastline reported by the insurance industry could reach $10 billion'.

Hurricane Matthew brushed the coasts of Georgia and the Carolinas at a distance of 50 miles.
But, despite its strength as a Category 2 and 3 storm, Hurricane Matthew didn’t cause nearly the damage many had anticipated, or even close to the damage achieved by its predecessors – Super Storm Sandy, Hurricane Katrina, or Hurricane Andrew just to name a few. For coastal communities, major storms like this can present not only a danger to life itself, but a threat to livelihoods and businesses – and hotels are no exception. One way hotels can protect themselves from these major storms is by identifying the right insurance and understanding their coverage options. Business interruption coverage can be especially critical to hotels during and after a major catastrophe.

Making the Best of Business Interruption

Getting the most from business interruption coverage after a catastrophic loss requires – from the beginning – a thorough working relationship with the hotel owner, risk manager, a forensic accountant specializing in insurance claims, broker and insurance carrier. Hotels are a unique business within the insurance industry and must be treated as such.

Coming up in April 2018...

Guest Service: Empowering People

Excellent customer service is vitally important in all businesses but it is especially important for hotels where customer service is the lifeblood of the business. Outstanding customer service is essential in creating new customers, retaining existing customers, and cultivating referrals for future customers. Employees who meet and exceed guest expectations are critical to a hotel's success, and it begins with the hiring process. It is imperative for HR personnel to screen for and hire people who inherently possess customer-friendly traits - empathy, warmth and conscientiousness - which allow them to serve guests naturally and authentically. Trait-based hiring means considering more than just a candidate's technical skills and background; it means looking for and selecting employees who naturally desire to take care of people, who derive satisfaction and pleasure from fulfilling guests' needs, and who don't consider customer service to be a chore. Without the presence of these specific traits and attributes, it is difficult for an employee to provide genuine hospitality. Once that kind of employee has been hired, it is necessary to empower them. Some forward-thinking hotels empower their employees to proactively fix customer problems without having to wait for management approval. This employee empowerment—the permission to be creative, and even having the authority to spend money on a customer's behalf - is a resourceful way to resolve guest problems quickly and efficiently. When management places their faith in an employee's good judgment, it inspires a sense of trust and provides a sense of higher purpose beyond a simple paycheck. The April issue of the Hotel Business Review will document what some leading hotels are doing to cultivate and manage guest satisfaction in their operations.