Insurance Coverage for Hotels & Resorts: Policies to Consider and Potential Pitfalls

By Dana Kravetz Firm Managing Partner, Michelman & Robinson, LLP | May 20, 2018

For many, just the mention of the word is enough for eyes to glaze over and minds to wander. Bring it up as fodder for cocktail party conversation, and the universal response is oftentimes a collective yawn. But insurance, though much maligned and not the sexiest of topics, is a critical cog in the wheel of commerce, and one that cannot be ignored. And that is because this intangible product is an invaluable tool that allows businesses, including those in the hospitality space, to manage the risk of financial loss - catastrophic and otherwise - by transferring it to third parties (read: insurance companies).

Of course, this transfer of risk comes at a cost, in the form of insurance policy premiums, which is not insignificant. Neither is the complexity of coverages that can leave hotel and resort owners and operators scratching their heads. With that in mind, this article seeks to demystify the subject and provide practical considerations for insureds in the hospitality industry.

Why Insurance Is So Vital

For any hotelier - large or small - the import of adequate insurance protection cannot be overstated. Why? Because inherent in the hospitality business are risks to guests, employees, property and revenues that can have severe and lasting financial consequences if left uninsured.

The possibilities for loss are endless: hotel guests or employees injured on site, resort property destroyed by natural disaster, diminished revenues on account of business interruption, costly data breaches that reveal customers' private customer information, embezzlement - the potential for exposure, both legal and to the bottom line, seems to lurk around every corner. This is particularly true given the extraordinarily litigious nature of our society. Lawsuits and liability claims are an unfortunate inevitability for hotels and resorts, and without proper insurance coverage, the associated costs could be insurmountable. Hence the necessity for each and every hotelier to avail itself of a comprehensive insurance portfolio that serves as a financial safety net in the event of a damaging occurrence.

The reasons why hospitality businesses need insurance do not end there. For instance, the law in most states obligates employers to obtain certain types of coverage (e.g., workers' compensation, unemployment and disability), and the failure to carry legally required policies could result in civil or even criminal penalties, among other things.

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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.