Risk Management in the Hospitality Industry

By: Advocate Brokerage

risk management in hospitality


While there are certainly risks in any industry, one of the industries that face a large amount of risk is the hospitality industry. When you own and operate a hospitality-based business, managing these risks is crucial to making sure they run smoothly. In the following blog, we will review some of the risks the hospitality industry face and provide some thoughts on how to make sure your business does what it can to mitigate the risk.


Property Risk

Businesses in the hospitality industry face a large level of property risk. There are multiple ignition sources in hotels and restaurants. Not to mention the fact that much of the contents are highly combustible. To reduce this risk, ensure that all smoke and fire alarm systems are functioning and meet National Fire Prevention Association (NFPA) requirements.


Important Thought From Your Insurance Advocate:

Be sure your coverage includes a replacement cost valuation and make sure the coverage limits are regularly reviewed for adequacy. If your building and contents are damaged, a policy that is lacking adequate coverage faces a catastrophic loss.


Premises Risk

The risk of injury on premises is very high in the hospitality industry. Due to the high number of guests that go through your doors each day, it is essential to minimize this exposure by taking certain precautions.


Important Thought From Your Insurance Advocate:

  • It is essential to implement safety codes in hazardous areas such as stairways, elevators, railings, and floor coverings.
  • Make sure that all exits are clearly marked.
  • Be sure to have backup lighting systems in place in the event of power outages.


Liquor Liability

Many businesses within the hospitality industry sell alcohol. You could be held liable if someone becomes overly intoxicated and gets into an altercation or a car accident upon leaving your establishment.


Important Thought From Your Insurance Advocate:

When it comes to alcohol, employees who are serving alcohol should be trained to know when a customer has consumed too much alcohol to prevent excessive drinking.


Automotive Liability

If your hotel or restaurant has a valet service, you increase your exposure to automotive liability. The risk becomes even higher if you offer transportation services to and from airports or other venues.


Important Thought From Your Insurance Advocate:

To lower the risk of Automotive Liability, restrict driving to only qualified employees. If you are hiring for a position that includes these driving responsibilities, be sure to review their Motor Vehicle Records as part of the interview process.

Many automotive services can be outsourced. When outsourcing, be sure to have a contractual transfer of risk to the independent contractor providing the services for you.


Data Privacy

With virtually all customers utilizing credit cards to pay for products or services, the risk of for a data breach remains very high. Whether it is a customer paying with a credit card, maintaining a database that includes personal information for a loyalty club, or booking a reservation with a credit card number, there are many opportunities for a data breach to occur.


Important Thought From Your Insurance Advocate:

  • Stay on top of security protocols and keep your systems up to date to keep your risk low.
  • Be consistent with employee training so they can help detect fraudulent credit card use.
  • Be sure you have Cyber Liability or Data Breach coverage in place


Infectious Diseases (Such as Legionella)

Occurring naturally in the environment, legionella can sometimes be found in portable water systems. It can also enter a plumbing system during construction or repair. Additionally, any mist that is produced by legionella-contaminated water or ice can be aspirated into the lungs by susceptible individuals. In the hospitality industry, shower heads, decorative fountains, spas, faucet aerators, and cooling towers all become a source of potential exposure.


Important Thought From Your Insurance Advocate:

Consult with indoor air quality professionals to develop practices and procedures that help to control the presence of Legionella and protect the health of your guests.


We are committed to helping our clients protect their businesses as if they were our own. Our goal is to provide useful information to help prepare our clients so that they can take steps to ensure they are properly protected. Advocate Brokerage works with several businesses in the hospitality industry. We have extensive experience of the industry and understand the unique risks hotels and other hospitality-related businesses face. If you would like to have a conversation about your hospitality insurance coverage, please don’t hesitate to give us a call.

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