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.

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Sales & Marketing: Selling Experiences

There are innumerable strategies that Hotel Sales and Marketing Directors employ to find, engage and entice guests to their property, and those strategies are constantly evolving. A breakthrough technology, pioneering platform, or even a simple algorithm update can cause new trends to emerge and upend the best laid plans. Sales and marketing departments must remain agile so they can adapt to the ever changing digital landscape. As an example, the popularity of virtual reality is on the rise, as 360 interactive technologies become more mainstream. Chatbots and artificial intelligence are also poised to become the next big things, as they take guest personalization to a whole new level. But one sales and marketing trend that is currently resulting in major benefits for hotels is experiential marketing - the effort to deliver an experience to potential guests. Mainly this is accomplished through the creative use of video and images, and by utilizing what has become known as User Generated Content. By sharing actual personal content (videos and pictures) from satisfied guests who have experienced the delights of a property, prospective guests can more easily imagine themselves having the same experience. Similarly, Hotel Generated Content is equally important. Hotels are more than beds and effective video presentations can tell a compelling story - a story about what makes the hotel appealing and unique. A video walk-through of rooms is essential, as are video tours in different areas of a hotel. The goal is to highlight what makes the property exceptional, but also to show real people having real fun - an experience that prospective guests can have too. The June Hotel Business Review will report on some of these issues and strategies, and examine how some sales and marketing professionals are integrating them into their operations.