Understanding Risks and Insurance Options to Minimize Impact on Revenue

By Jackie Collins Senior Director Real Estate & Hospitality Division, Arthur J. Gallagher | September 30, 2018

For the sixth consecutive year, business leaders worldwide ranked business interruption as the most important global risk in 2018, according to the Allianz Risk Barometer 2018 report. Losses from natural disasters and the increased volatility of weather, both of which can be contributing factors to business interruption, were among the business leaders' other significant concerns.

While Allianz gathers feedback from a variety of industries and businesses, business interruption is likely high on the list of concerns that hotel owners and managers face when considering how to keep their revenues steady. Simply put, if a hotel is not open and able to serve customers, it will not make money.

When considering insurance policies, business interruption is always a top priority for hotel owners and managers in identifying ways to protect revenue. Yet, it is hardly the only insurance that hotels need. Rather, it seems that hoteliers need to review every coverage under the sun: property insurance, general liability, liquor liability, crime, workers compensation, employment practices liability and cyber insurance, just to name a few.

At the end of the day, many of the risks that a hotel may face are based on the individual property and where the establishment is located. The following outlines some of the main risks that hotels should be prepared for, as well as how insurance can often steady a hotel's revenue in the aftermath of an event.

Natural Disasters' Impact on Hotels

2017 will go down as the most costly year for natural disasters in insurance history, with an estimated $145 billion of "HIM" (Harvey, Irma and Maria) driven claims severely impacting hotel operations in Florida, Puerto Rico and the Caribbean. Not only were operators hit by direct physical damage, but in many cases their business interruption claims are ongoing due to lack of materials, labor, delays in permitting and other circumstances out of the insured's control.

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Mobile Technology: The Future is Now

Mobile Technology continues to advance at a relentless pace and the hotel industry continues to adapt. Hotel guests have shown a strong preference for mobile self-service - from checking-in/out at a hotel kiosk, to ordering room service, making dinner reservations, booking spa treatments, and managing laundry/dry cleaning services. And they also enjoy the convenience of paying for these services with smart phone mobile payments. In addition, some hotels have adopted a “concierge in your pocket” concept. Through a proprietary hotel app, guests can access useful information such as local entertainment venues, tourist attractions, event calendars, and medical facilities and services. In-room entertainment continues to be a key factor, as guests insist on the capacity to plug in their own mobile devices to customize their entertainment choices. Mobile technology also allows for greater marketing opportunities. For example, many hotels have adopted the use of “push notifications” - sending promotions, discounts and special event messages to guests based on their property location, purchase history, profiles, etc. Near field communication (NFC) technology is also being utilized to support applications such as opening room doors, earning loyalty points, renting a bike, accessing a rental car, and more. Finally, some hotels have adopted more futuristic technology. Robots are in use that have the ability to move between floors to deliver room service requests for all kinds of items - food, beverages, towels, toothbrushes, chargers and snacks. And infrared scanners are being used by housekeeping staff that can detect body heat within a room, alerting staff that the room is occupied and they should come back at a later time. The January Hotel Business Review will report on what some hotels are doing to maximize their opportunities in this exciting mobile technology space.