How to prepare your hotel for regional risks

During California's recent wildfires, Aimbridge Hospitality had multiple hotels fall in the wildfire evacuation zone, including Las Alcobas, a Luxury Collection Hotel, Napa Valley in St. Helena, Calif. Photo credit: Aimbridge Hospitality (Las Alcobas, a Luxury Collection Hotel, Napa Valley)

Dealing with a crisis isn't an everyday task for a hotel, but should an adverse event arise, management must be prepared to respond quickly and ensure it has as little impact on operations as possible.

The biggest mistake a hotel can make when setting up a crisis-response plan, according to Melissa DiGianfilippo, a partner at Serendipit Consulting, is to simply use the corporate document they’ve been given and never looked at twice.

“It’s critical for hotels of any size to have their own personalized crisis response plan that is not generic,” said DiGianfilippo, who also is president of public relations at the brand marketing and PR company. “It’s so specific into the people who are in charge, whether it’s named by position or by person, the incidents that could occur based on their markets ... with actionable items that people can actually do and implement once a crisis has occurred.”

Jackie Collins, senior director/VP at Gallagher, a company specializing in insurance, risk management and consulting, also stressed the importance of having a crisis-management plan in place, one that addresses everything from the natural disasters of that area to infectious diseases to ransomware.

“Whatever area that you’re in, whether you’re looking at wildfires or whether you’re looking at earthquakes or hurricanes, you need to have plans in place that get you back into business as quick as possible,” said Collins.

Regional Differences

One of the most notable localized risks might be wildfires. As recent years have shown, dry weather can spell disaster for certain places, especially in California.

Ahead of the rapid growth of major wildfires that occurred in 2018 and 2019, Chris Koppang, SVP of risk management at Aimbridge Hospitality, said the operator activated its corporate crisis-response team to prepare hotels in the event of a mandatory evacuation. A number of the company's properties did fall within evacuation zones in both cases, but fortunately none were directly impacted by the fires.

After the danger had passed, Koppang said Aimbridge then deployed its risk-management team to negotiate business-interruption claims to assist owners with their financial recovery, which it managed to do for several properties.

Collins advised hotels located in wildfire areas to ensure that they actually have coverage. “Many carriers are pushing back on writing coverage in the wildfire area because of the exposure that’s out there, so you want to make sure that there’s no exclusions for that,” she said. Additionally, she said she’s seen some carriers put exclusions on the liability policy so if the property caught on fire due to brush being close to the hotel, then the carrier would not cover any liability stemming from the incident. “So you want to make sure that you are actually getting a policy that’s specifically designed for your business,” said Collins.

With the risk of hurricanes in the Southeast, hotels there need be prepared for potential water and wind damage. Collins said this means thinking about swimming pools, sidewalks and paved surfaces and ensuring that a policy covers all those things. A typical insurance policy may not provide coverage for those items as well as the landscaping, the foundation or the underground pipes. “You want to make sure that you address all those items that are specific to a hotel,” said Collins.

Other Considerations

Collins also raised several risk-management considerations that may not be as dramatic as a hurricane or wildfire but are still worth considering. In California, Texas and Arkansas, for example, she raised the issue of potential hail issues. “You’re going to want to make sure you’ve got hail guards on the roof to protect all the [air conditioning] systems that are up there and other equipment,” Collins said. In the Northeast, when a hotel is preparing for a winter storm, she said part of the hotel’s crisis-management plan should be protecting the pipes in the attic, ensuring they don’t freeze and flood the hotel.

Koppang also raised the issue of flooding, whether because of frozen pipes and storms or because of accidental tub overflow. “A hotel team's rapid response to a water event, including how quickly the source of the water is shut off and water extraction begins, are main factors in mitigating the extent of damage,” he said.

To prevent water damage, which he described as the “No. 1 cause of property damage losses in hotels,” Koppang said Aimbridge is proactive in developing training programs and best practices for responding to a water event, including labeling shutoff valves on each floor. “We have sourced our own “Do Not Hang” stickers and provide them to hotels that have fire sprinkler heads that appear to guests to be conveniently located hanger hooks,” he added.

Public Relations During a Crisis

If and when a crisis happens, DiGianfilippo stressed the importance of protecting the hotel’s image. She advised hotels to have more than one person on staff who is trained to communicate with media and internal and external stakeholders. Though many employees might assume they would handle the responsibility well, that may not be true.

“In the midst of a crisis we are not at our best,” DiGianfilippo said. “We are not naturally at our best, so we have to practice being at our best.”

Should a hotel find itself in a serious crisis, DiGianfilippo said it is “critical to shut down proactive marketing efforts on social media so that [it doesn’t] look insensitive, that [the hotel does] respond to the media with details that we’re allowed to share.”

Increasing Disasters Raise Insurance Rates

Collins said the company has noticed an uptick in the number of claims being paid out over the past few years. “We’ve had multiple hurricanes on the East Coast, as well as Puerto Rico, the Bahamas and Bermuda,” said Collins. “There’s been a number of storms that have come through and then also the earthquake activity as well as the wildfires.”

With insurance companies paying out more claims, Collins said the property market is tightening and rates have been going up. “Last year, we saw increases, after the first quarter we saw significant increases in rates, and then it’s continuing on into this year,” she said.

In particular, Collins pointed to the effect wildfires—and the amount of money they’ve forced insurance companies to pay out—have had on rates: “Some carriers are not wanting to ride in the region, which means that the capacity is shrinking and so therefore the carriers that are still willing to provide that coverage, they are charging more rate for their premium, for their limit that they’re giving out.”

Koppang also noted rising insurance rates. “The commercial insurance market is now in an upswing in the cycle, and this side of the cycle drove higher premium rates in 2019 and forced larger market-imposed deductibles for the hospitality industry,” he said. With the market capacity appearing still limited, he said rates are increasing again in 2020. “In an era of increased intensity, frequency and duration of natural disasters, we are seeing underwriters focus more on the age, construction and location of the hotel,” he said.