The hospitality industry—specifically hotels, motels, and bed and breakfasts—faces a more difficult operating environment than it has in many years past.
A recent HUB International 2023 Outlook report illuminated some of these difficult realities:
- Profit margins are forecast to shrink as supply chain shortages, inflation, and increasing wages chip away at profits.
- Travel and interest in hospitality services rebounded after the pandemic, but high inflation has reduced the revenue available per room to pre-pandemic levels while input costs remain high.
- Increased food and beverage costs will continue to erode profits.
- 87% of lodging operators are experiencing staffing shortages, with 400,000 fewer available workers.
- Technology-based services like remote guest check-in have given hackers greater access to sensitive and proprietary information.
- The hospitality industry is the third most targeted by cybercriminals due to the large amount of personal and financial data these businesses store.
These findings mean that the risk is high for business owners and operators in the hospitality industry on multiple fronts. However, there are steps you can take to protect your business, and it all starts with the right business insurance coverage.
What is Hotel, Motel, and Bed & Breakfast Insurance?
First, let’s define hotel insurance and why it matters for your business. Hospitality owners have many investments attached to their properties, and insurance protects them from litigation and damage. Hotel insurance transfers some of your risk to your insurance company.
However, it’s important to understand that hotel insurance has to go above and beyond the standard coverage for business operations when compared to other industries.
The following areas increase your risk in the eyes of insurers and must be adequately covered:
- Conference Centers
- Event Facilities
- Hot Tubs
- Golf Courses
- Transportation Services
- Entrances & Exits
- Parking Areas
Each property is unique and has different risk factors based on the accommodations and services it offers. For example, one hotel might have a pool and a golf course, while another might offer a conference center, event facilities, and a spa. The risks associated with these offerings differ, thereby impacting your insurance costs and needs.
There’s no one-size-fits-all approach to hospitality insurance, so it makes sense to work with a local expert on insurance policies that work for your unique needs as a business owner. Coverage is generally affordable and can be comprehensive based on your risk factors.
Types of Hotel Insurance
Many guests, employees, suppliers, and vendors come in and out of your establishment on a daily basis, so it is prudent to understand what types of insurance can protect you from which types of risk.
#1 – Commercial General Liability Insurance
Commercial General Liability Insurance is generally recommended for any hotel or hospitality location, regardless of size, scope, location, or operations. This type of insurance covers bodily injury and property damage to third parties at your business, such as vendors and outside contractors.
#2 – Business Property Insurance
Also known as commercial property insurance, this type of insurance protects your business from things like fire, vandals, storms, unruly guests, and more.
#3 – Business Liability Insurance
If a visitor or guest is injured on your property or their property is damaged, this type of business liability insurance will help protect you. Be certain that there are no coverage exclusions for:
- Assault and Battery
- Sexual Abuse and Molestation
- Fungus and Bacteria
- Pool Chemicals
- Cleaning Products
- Pesticides & Herbicides
- Carbon Monoxide
You’ll also want to ensure you’re covered for losses for furniture, fixtures, equipment like landscaping tools, and areas such as swimming pools, paved surfaces and sidewalks.
#4 – Business Personal Property Insurance
What if a guest or contractor steals furniture or art or vandalizes your building? This type of insurance reimburses your business for losses incurred.
#5 – Commercial Auto Insurance
Does your hotel rely on vehicles? Do you transport guests to and from the airport or around town? Your commercial auto insurance policies must have high liability limits to insulate you from lawsuits arising from motor vehicle accidents.
#6 – Equipment Breakdown
Large buildings depend on complicated and expensive equipment such as HVAC, plumbing, electrical, security, and communication systems, just to name a few. The failure of any of these can cause major headaches and even safety issues, opening you up to liability. Equipment breakdown insurance can help you overcome costly and unforeseen circumstances that can hobble your ability to do business.
#7 – Workers Compensation
Workers compensation insurance addresses your legal obligations to your employees if they are injured on the job and unable to work and covers a portion of their lost wages. The laws governing workers compensation insurance vary by state, so it’s prudent to speak to an expert who can define your insurance needs.
#8 – Cyber Liability
The hospitality industry is considered one of the most “at-risk” industries for cybercrimes such as ransomware, phishing, and point-of-sale attacks. Criminals target hotels of all sizes because they’re likely to offer online payment options and use network-connected devices that give criminals more access points to sensitive databases. Cyber liability insurance protects your business from financial challenges stemming from cybercrime.
#9 – Liquor Liability
Serving alcohol on your premises exposes your business to a lot of risks. Luckily, liquor liability insurance can help pay for damages from selling or serving alcoholic beverages. The most common example is an overserved patron leaving your establishment and getting into a motor vehicle accident. If one of your bartenders served the patron too much, your business could be held liable. You may want to consider an excess liability policy that increases your coverage limits if you feel this could be a problem for your business.
#10 – Event Cancellation Insurance
Event cancellations during the pandemic have become a classic example of why event cancellation insurance is a good idea. Many businesses lost significant time, money, and resources when companies pulled out of live events almost overnight. This type of insurance can help protect you from losses, but it’s important to know that there may be a range of exclusions, so make sure you understand what’s in your policy and how it affects your business.
10 Tips to Help Prevent Hotel Insurance Claims
Hotel owners and operators need to be aware of the types of injuries that are most common so they can be proactive in reducing or eliminating them. The following list highlights some of the most common.
- Slips, Trips, and Falls
- Lifting/Handling Heavy Items
- Struck by an Object
- Fall from a High Place
- Acts of Violence
The following ten tips can help you mitigate these risks.
#1 – Follow Strict Cleaning & Safety Guidelines
The American Hotel & Lodging Association has updated cleaning and safety guidelines that all employees should follow here. In addition, hotel operators ought to regularly host safety training for all employees.
#2 – Emergency Action Plans
Insurers love to see a solid, documented emergency action plan because it means you’re taking risk mitigation seriously. Your business is less risky for them to insure, so that you may enjoy lower premiums. More importantly, it can help keep staff and guests safe in an emergency.
#3 – Talk with Your Broker
The pandemic upended traditional norms of conducting business. High inflation, supply chain disruptions, and labor shortages have increased competition and risk. Therefore, it’s a good idea to review your coverage with your broker annually, at a minimum. This will ensure that, as your risks change, so will your business insurance coverage. This will also help you understand your costs and what’s covered in your policy. For example, your insurance provider can adjust your policy to account for your risks if you added or removed amenities.
Inviting your broker or agent to tour your facility can help identify areas of risk you might have missed and reduce your liability exposure.
If possible, work with an agent who specializes in hospitality insurance. Hospitality is unlike other industries and has its own complexities that must be considered from an insurance perspective.
When it’s time to renew your insurance policy, you’ll want to start the process 90-120 days before your renewal date. Insurance is customized and complex, and by giving yourself and your insurer plenty of time to make adjustments, you’ll get the right coverage based on your unique needs.
#4 – Avoid Potential Claims
Once you’ve spoken with your broker, create a documentation plan for incidents at your establishment. You’ll need details such as dates, times, locations, and descriptions to file a claim. Review any claims with your broker quarterly.
#5 – Document Incidents
A system of reporting incidents that may result in having to file an insurance claim is crucial to getting reimbursed. You’ll need informed employees, clear reporting policies, a way to track incidents, and forms that are easy to fill out. Additionally, train employees to document the facts, and avoid providing opinions.
At a minimum, you’ll want to consider the following types of incidents that could occur on your property:
- Customer Incidents (slips, trips, falls, etc.)
- Food Poisoning
- Hygiene Deviations & Concerns
- Safety Observations
- Disruptive Behavior
- Harassment or Discrimination
- Crimes and Fraud
- Property Damage
- IT Security
- Privacy Incidents
- Safety Equipment (fire, lighting, generators, etc.)
#6 – Maintain Your Buildings and Grounds
Keeping your property free of potential hazards needs to happen all year round, every season, and doesn’t just pertain to the inside of your building. You need to ensure indoor safety hazards are reduced or eliminated but don’t let it come at the expense of outdoor safety. You need to do both.
Seasonal maintenance, such as ice and snow removal in the winter and landscaping in the summer, can help your business avoid preventable injuries to customers and staff. Always keep guest safety in mind.
#7 – Communicate Openly About Violence
Panic buttons are gainly popularity in the hotel industry for a very good reason: workers such as housekeepers often work alone in isolated spaces and can therefore become targets of sexual violence.
Keep lines of communication open with your staff members and ensure they can voice their concerns if they feel unsafe or encounter an aggressive guest. Utilize panic buttons, walkie-talkies, cell phones, and other electronic devices to ensure your employees stay safe.
#8 – Breaks for Labor-Intensive Positions
Heavy, frequent lifting and repetitive motions can lead to back, knee, and neck injuries, carpal tunnel syndrome, and more. If you allow employees in positions such as housekeeping or maintenance to take regular breaks, they’ll be less likely to get injured.
#9 – Manage Third-Party Risk
Hotel owners and operators can inadvertently open themselves to risk when working with service providers such as roofers, electricians, plumbers, and other third-party vendors. For example, does your provider subcontract work to another company? Will they be working on your premises?
You need to be aware of how these relationships function and how your business is affected from an insurance perspective to ensure you’re covered in the event of a mishap. Here are five steps to be successful in managing third-party risk:
- Identify All Third-Party Risks
- Classify Vendors Based on Access to Systems/Networks/Data
- Define Third-Party Performance Metrics
- Determine Security & Regulatory Policies
- Assess Risk on Individual Third Parties
If you need further guidance on how to develop an effective third-party risk mitigation strategy, get in touch with one of our local agents today.
#10 – Monitor Digital Innovations
Digital innovations such as remote guest check-in and the increasing adoption of “smart” technologies can improve the customer experience while reducing operational costs. Digital transformation is forecast to continue well into the foreseeable future in the hospitality industry.
However, it comes with certain risks, such as exposure to cyber criminals. For example, the hotel giant Marriot was hacked (again) in 2022. Criminals stole over 20 gigabytes of sensitive information, including customers’ credit card numbers.
As you strive to keep pace with technological changes in the industry, you must also account for how your risks change. We recommend working with your insurer whenever you’re considering implementing new technologies that could put your customers and your business at risk.
Do you have the right insurance coverage for your hotel, motel, or bed and breakfast?
Do you have questions or concerns?
*Disclaimer: We offer content for informational purposes; Co-Op Co-operative Insurance Companies may not provide all the services or products listed here. Please contact your local agent to learn more about how we can help with your insurance needs.