In today's turbulent, oftentimes violent world, terrorist groups are turning their attention on softer targets, such as hotels. At the International Hotel Investment Forum, March 7-9 at the InterContinental Berlin, Helen Loughborough, the VP of global safety for InterContinental Hotels Group, will discuss these global threats, and how to keep hotels and guests safe and secure.
Ahead of IHIF, in this report, we take a look at terrorism in our hotels, and what steps can be taken to defend against the scourge.
Terrorism is presently one of the greatest threats facing the hotel industry. As evidenced by last year’s attacks on the Radisson Blu in Mali, Riu’s Imperial Marhaba Hotel in Tunisia and, most recently, the Splendid Hotel in Burkina Faso, hotel-targeted geopolitical violence is clearly not deescalating. From corporate hotels in tier-one cities, to resorts in emerging markets, they all are not immune to threats from armed insurgents. Moreover, the financial implications of an attack to a hotel brand, an individual hotel and surrounding properties can be staggering.
“When a hotel is hit, the loss of property and brand damage is enormous compared with the damage done…and that negative impact can be massively disproportionate, leaving the hotel industry itself quite vulnerable,” said Dr. Jeff Moore, a former Pentagon strategist who supported the U.S. Army’s Plans and Operations Division, and who is currently CEO of threat intelligence firm Muir Analytics and publisher of the SecureHotel Threat Report, an actuary analysis of global hotel attacks. Moore, who has given briefs to the FBI and provided protective services to Angelina Jolie and to VIPs at the London 2012 Olympics, also points out that the effects of a terrorism attack are residual. “One armed man in Tunisia almost single handedly destroyed an entire country’s tourism sector,” he said.
Establishing a Game Plan
Likewise, last November’s terrorism attacks in Paris are taking a toll on the entire French hotel industry, which will have suffered a total €270 or US$247.6 million in lost revenue by the end of March, according to a report from Paris-based MKG Group.
While the potential for terrorism attacks is now an unfortunate cost of doing business, strategizing in anticipation of such an event can mitigate associated losses—from the loss of lives to structural damage and diminished brand standing. “There’s no way to protect against someone doing something unexpected; anyone who’s willing to die is hard to defend against,” said Kirby Payne, president of HVS Hotel Management and HVS Asset Management – Newport. “Hoteliers should have an existing plan in place in order to secure the property should something happen and to handle crisis management following the event, both at the corporate level, as well as for the individual property to protect the brand’s reputation.”
The scenarios that can befall a hotel under siege are myriad, so developing a game plan to defend against several is imperative. Consider the violent incidents in international hotels like those in Mali and Tunisia, as well as the recent shooting in the lobby of the Hyatt Regency at McCormick Place in Chicago. These unfortunate instances dictate that hotels have an active shooter plan in place.
Stephen Barth, attorney and founder of HospitalityLawyer.com and professor of hospitality law at the University of Houston, also suggests planning for a higher scale terrorism-type attack. “You can’t just have a one-size-fits-all crisis management plan,” he said, adding the plan should also include a provision to evacuate or shelter staff. Barth further advises maintaining regular communication with local and national authorities, including the FBI as well as the Overseas Advisory Council. “Establish a baseline of local, state and national resources that are available to keep you apprised of potential issues and available to offer assistance and resources should something occur,” Barth noted.
Payne recommends working with both internal security teams as well as third-party consultants both to determine an adequate level of protection for the property and to conduct periodic risk assessments. “Plan for it in the design if you can, but be strict about the standards of your security operation,” he said.
Secure by Design
Architecture firm HKS has been designing hotels to include various security features for more than 30 years, in destinations such as South America, Africa and the Middle East. As Nunzio DeSantis, EVP of HKS’ hospitality group, said, the U.S. is far behind other regions when it comes to hotel security. “The U.S. has not matured as a hotel region that sees value in security at the same level as other regions that have had to live with decades of security problems,” he said. Yet, DeSantis also attests that the firm now initiates conversations with hotel clients by discussing the value of security and technological features in the property’s blueprint. “You could spend all the money in the world on a property in terms of gold gilded finishes, marble and great art work, but if the property isn’t secure, the investment is at risk,” he said.
DeSantis mentions security considerations such as the distance between the hotel and public roadways and walkways; entry points to the back-of-house as well as for dignitaries; and the lobby layout, including views of the elevator banks from the front desk. DeSantis also points out that security issues vary by location: an urban property, a large conference hotel, a remote island and a casino each pose unique security challenges that should be addressed. “Security isn’t a quality,” DeSantis said.“Whether it’s a two- or five-star hotel, there should be a level of security that guests and the public can expect.”
Risk & ROI
But keeping guests feeling welcomed and secure without a sense of imminent danger or imposition is a delicate balancing act—as is the need to adhere to budget and deliver ROI. “Everyone has a responsibility to provide reasonable care to their guests, but that will depend on financial and human resources bandwidths,” said Barth. “Ideally, security would drive the budget. Realistically, it doesn’t always happen that way and that’s why the science of risk management is so important.”
Of course, risk analysis is equally critical as it should drive risk management and can also gauge latent ROI when carried out as early as the development phase. “If you’re not doing risk analysis for a region and country where you’re planning to open a hotel, you could be looking at severely reduced profit margins,” said Moore. “Actuary data and risk analysis can forecast if insurance premiums could be higher, if there should be more physical security on-site and if the architecture of the hotel should be more robust. Taking the potentially higher costs into consideration, you may be looking at a smaller profit margin.”
In fact, terrorism insurance has been widely available since 2002 when the U.S. Federal Government’s Terrorism Risk Insurance Act (TRIA) required commercial underwriters to offer terrorism insurance coverage by providing a federal backstop to the program. Following a brief lapse in early 2015, the Terrorism Risk Insurance Program Reauthorization Act of 2015 will continue the program through December 2020. Yet, the program trigger applies to certified acts with insured losses starting at $120 million in 2016 and rising steadily to $200 million in 2020. Also required are concurrence among the U.S. Secretary of Treasury, the Attorney General and the Secretary of Homeland Security that the event was “a terrorism act” (the Boston Marathon Bombing of 2013 was not deemed an official terrorism act) and an insurer deductible of 20 percent of the insurer’s direct earned premiums for the previous calendar year. Given these thresholds, and the seemingly increasing frequency of geopolitical violence, commercial terror insurance is now a growing market segment.
As it is, demand for terrorism insurance surged after November’s Paris attacks and with it, the premiums. “It’s Paris and not a minor insurgency problem," Moore said, "so that hit close to home and made terrorism insurance a big bottom line trend."