Maximize recovery after a catastrophic loss interruption claims requires expertise in the preparation of hospitality business, combined with a thorough understanding of the hotel's unique market and operation.
In an article published by IRMI on "business interruption claims for the hospitality sector - is your hotel protected?," Michael Speer and Christopher Brophy explore certain issues that are typical in the hospitality industry and deserve careful consideration pending a catastrophic loss.
The hospitality industry has seen hard times in recent years. Occupancy and average daily rates have declined in many markets around the country and owners and operators have encrypted to reduce cost. Although there were postponing of large insured property damage - as those experienced by hurricanes Katrina, Rita, IKE and Gustav, which States, and Hurricane Frances, Jeanne, Ivan, Charlie and Wilma hit the Gulf Coast, which beat Florida - the risk of losses from hurricanes, earthquakes, floods, fire and other hazards clearly remains.
Losses from Gulf oil spill are extensive - with a possible time horizon of ten or more - and the heat, not only by BP and other defendants, but also the insurer as also test. Recent losses which further through the Opryland Hotel Nashville flood disaster, owners and operators of the need to be properly prepared and the insured.
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Lost room revenue
Two primary factors rooms are lost revenue percentage occupancy and average daily rate (ADR). There are a number of factors, which in business interruption losses to each of the following areas.
The occupancy and ADR has expected the hotel while the period of compensation of the loss had not occurred?
Are trends in the specific market supports projected occupancy and ADR of occupancy? Authoritative this information sources such as Smith travel research, may be available the tracks and reports for a competitive range of hotels in geographic space occupancy and ADR.
Hotel reservations can document cancelled "on the books" including conferences, events and other reservations? (If bookings from losing higher than bookings a year ago, which indicate, that the trend would continue in the coming year.)
A problem for many policyholders and hotels are no exception, is an often misunderstood wording in an insurance policy, the addresses of "loss of the market." For example taken you, a resort on an island and the island is extinguished by a hurricane. An insurer can claim that the hotel has no insured loss because there was a complete loss of the market (i.e. no tourists coming to the island more)?
Many other factors should be considered in the preparation of a claim and revenue projections to develop. Consider the following examples raise interesting questions.
A hotel is in a deep local recession stuck. The Hotel prepares a rolling forecast which still pessimistic see reflects the economy. Then, put you, the hotel suffers a fire, requires new two year. When the economy recovers during this period, insured is stuck, preparing a business interruption claim based on the original projections?
A hotel is damaged by a hurricane, destroyed the competitors hotel next door. Can business interruption claim projections of uptick reflect in the hotel would have received if the hotel has not become corrupted while competitors hotel was destroyed?
An island hotel from a hurricane is damaged and the airport is also damaged leading to a reduced number of flights on the island. How should the claim of the losses reflect off the airport damage compared to the hotel damage?
A Hotel Casino suffers a fire, injures half of the rooms. The Casino is not damaged. The policy cover for the loss of revenue Casino offers?
A hotel is adjacent to an independent casino that suffers a fire, and the hotel is undamaged. The Casino owner decides the Casino rebuild twice the size of the old, and it takes much longer to rebuild. Has provided the hotel contingent business interruption coverage (which includes a service interruption because of damage or destruction of casino) will be measured as the loss? (On the one hand, the hotel lost sales while the Casino is - including the additional time needed to expand the size - but on the other hand, the hotel can benefit by it when it again opening a large Casino,.)
The risk manager for a large real estate investment trust, the hundreds of hotels that have operated under same brand receives note from the General Manager from a place that bug significant the property infestation. The property is closed for 3 months for cleanup and repairs and other suffering losses due to the negative publicity for the brand. Does the insurance policy these losses? If so, how you measure?
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Owners and operators are well served to these critical issues in advance. A well thought-out out risk management strategy can a respected insurance lawyer and input from the hotel's risk manager, insurance brokers, a forensic accountant specializing in insurance claims containing a significant difference at a time, when the cover is needed most.
Do need specific advice on the issues presented in this article IRMI, contact experienced policyholder advocate.
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