Emerging Risks in the Insurance Industry

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By Roy Reichold

The hospitality industry has and always will face a unique set of risk management challenges as it strives to provide the services that guests require for travel and vacations. Emerging risks are always appearing as regulations and trends change; even familiar risks and exposures that have been at the forefront for many years may continue to present new challenges. Customers now have new expectations, assets need to be re-evaluated, and sustainability has become a business essential.

These changes, paired with uncertainty over when the sector will reach pre-pandemic sales levels, require businesses to consider a wider range of emerging risks and opportunities to ensure greater resilience in the future. Continue reading to learn about emerging risks in the insurance industry and how it relates to meetings and events.

Guest-focused Technology

Not a week goes by without a hospitality client facing a ransomware attempt (for example, attempts to compromise reservation or operations systems). Of course, with this surge of connected technology comes new levels of risk, one cyber expert states. Vulnerabilities in connected devices raise the risk of attackers unlocking digitally keyed doors to steal guests’ valuables or find a path into hotel systems.

Consumer Perception of Risk

Terrorist attacks, biological outbreaks, and incidents of political or social violence can not only significantly impact specific locations but can also have a widespread chilling effect on leisure travel behavior.

Reputational risk often lingers long after these events happen and can dramatically affect travel and business. Related losses are impossible to predict and difficult to insure against since they are typically observation-based and time sensitive. Companies that suffer business interruption losses without any property damage have, as a result, find it more challenging to protect against these occurrences.

Shortage of Experienced Personnel

The hospitality industry has its work cut out for it keeping up with customer demands and changing technologies. As the industry continues to grow, staff will have more options, both inside and outside the industry, and the poaching of experienced personnel will become a competitive sport.

Travel and hospitality companies must identify and address wage and worker satisfaction issues to keep their people happy and motivated. Finding the right people may be difficult especially for small hospitality providers. High-end luxurious accommodation providers recruit trained professionals at a high cost, which is challenging for hotels with low budgets. Companies can focus on referral-based hires and adopt retention programs that help boost employee morale and productivity such as attractive incentive programs.

The Sharing Economy Risk

Recent years have seen a spike in sites like Airbnb, Homestay, HomeAway and HouseTrip. Airbnb, with about 150 million users, is the most significant threat.

More troubling for the industry’s future is Airbnb’s popularity with college students and millennials. This group places heavy value on experiential travel, and the sharing economy may represent for them an experience more unique than a traditional hotel.

Continuously Changing Consumer Demands

Technology has dramatically changed the nature of customer expectations and raised the bar in terms of the type of experience and engagement customers consider the norm. This is a particular challenge in hospitality, where reputation and customer satisfaction are vital.

Consumers– particularly millennials– have grown accustomed to customized and streamlined shopping experiences. Clean, well-designed guest suites are no longer enough. In fact, several hotel brands have taken the step of branching out to boutique hotels that specifically cater to the millennial ethos.

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Active Shooter Risk

The U.S. Department of Homeland Security defines a mass casualty event as “an individual actively engaged in killing or attempting to kill people in a confined and populated area, typically through the use of firearms.” These events can happen anywhere people gather. Property managers should review their current security staffing levels and equipment to make sure they provide adequate protection for guests. Cameras in indoor and outdoor public spaces need to be strategically placed to maximize their effectiveness and serve as a useful deterrent for crime.

Minimizing Risks

Neglecting to manage risk properly can have negative effects on your business and, in some cases, catastrophic consequences. Here are some questions for companies to consider: What risks will be assumed? What risks will be financed? How will your organization mitigate risks if an incident occurs? What can be done to prevent risks? The goal here is not to start with insurance, but rather to identify and manage risks appropriately.

While times of prosperity are ideal for making bold business decisions, they can also allow complacency to set in. Instead, changes often do not occur until a period of crisis arises. It is ironic that the motivation to do something different and to make radical revisions to current business practices is strongest in periods of greatest stress, when change is most difficult and resources are stretched.

MEET

Roy Reichold is a Senior Risk Advisor at Lakenan Agency in St. Louis. For 25 years he has specialized in assessing risk specifically for the hospitality industry across the Midwest.

For 20+ years, the MEET family of products have provided regional and national resources that have kept corporate, association, medical, education, independent, and religious meeting and event planners informed about relevant vendors, industry news, tech innovations, and resources that impact and influence how and where they plan their group business.

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