After more than two years of shutdowns and significant restrictions from the COVID-19 pandemic, hotels and restaurants are back in business. However, new risks from increased catastrophic exposure, diversified operations and staffing shortages are creating complex insurance challenges. Carriers concerned about these evolving risks have reduced capacity, raised premiums and increased underwriter scrutiny in nearly all lines of insurance, including property, employment practices liability, cyber and workers’ compensation.

In 2021, extreme weather events — including floods, heatwaves, a southern deep freeze and a major hurricane — led to $105 billion in insured losses, the fourth highest amount since 1970.1 Hotels and resorts in catastrophe-prone locations, such as the southern coastal U.S. or drought-riddled southwest, are expected to face above average hurricane and wildfire seasons in 20222 and increasing difficulty finding property coverage.

In addition, the hospitality industry’s adoption of technology solutions — such a mobile apps for delivery, remote check-in and smart guest services — create additional risks and make the industry a popular target of cybercriminals looking for financial transactions and stored personal data.3

These exposures, along with increasing costs of these claims and high levels of litigation, have created a tighter, more competitive insurance market for hotels and restaurants.

4 steps to reduce complex risks in the hospitality industry

It’s more important than ever for hospitality companies to mitigate their exposures to find the best insurance coverage at the right price. To prove they’re worth the risk, organizations should:

  1. Implement best practices. Hospitality companies face myriad business challenges each day. These may include maintaining the property, protecting employees and guests, safeguarding personal and financial information, maintaining food and liquor controls and updating emergency response protocols. Insurers want to know their policyholders are prepared for the unexpected and experienced in effectively managing exposures. Being able to provide documentation that explains the organization’s risk management approach can show underwriters the organization is doing everything within its control to prevent claims. An organization that can demonstrate it is best in class will be able to secure the most competitive coverages and program pricing.
  2. Make a long-term plan. Hotels and restaurants that can show their long-term goals and the strategies for meeting those objectives are more attractive risks. Be able to show projected growth, how any capital plans can be managed given current supply chain disruptions and inflation, and what steps the organization will take to mitigate future dips in the economy.
  3. Prioritize training. Finding qualified staff is the number one issue facing the hospitality industry, with 97% of hotels reporting inadequate staffing levels,4 and the U.S. restaurant industry operating with 750,000 fewer workers than before the pandemic.5 This staffing deficiency, resulting in longer wait times and deficient service, has led to increases in assaults on hospitality workers. Train employees on the organization’s safety protocols, how to deescalate situations and what to do if an incident occurs. Ensure workers know how to report altercations or threats, both from fellow workers and customers, and investigate claims promptly to reduce the risk of employment practices liability insurance claims.
  4. Enlist outside expertise. Hospitality businesses may need to embrace unique solutions to find adequate coverage, particularly if their properties are in high-risk locations. Partner with experts familiar with catastrophic modeling who can map out the property’s risk and explore non-traditional insurance markets for coverage, such as captives, excess and surplus lines, or other alternative risk financing.

Contact HUB International’s complex risk experts to learn more about how we can help navigate the challenging hospitality marketplace.

1 Swiss Re Global insured catastrophe losses rise to USD 112 billion in 2021, the fourth highest on record, Swiss Re Institute estimates, Dec. 14, 2021.
2 National Oceanic Atmospheric Administration, “NOAA Predicts Above-Normal 2022 Atlantic Hurricane Season,” May 24, 2022.
3 SmartBrief, “How the travel industry can fight back against cyberthreats," Aug. 11, 2021.
4 American Hotel & Lodging Association, “As 97% of Surveyed Hotels Report Staffing Shortages, AHLA Foundation Expands Recruitment Campaign,” June 30, 2022.
5 CNBC, Restaurants are short-staffed, and that’s taking a big toll on customers and workers alike, July 17, 2022.