Up, Up, Up… Hotelier Insurance Rates. How to get off the Ferris Wheel.

No one needed to tell those of us in the hotel insurance industry that insurance rates were increasing steadily. So it comes as no surprise that an August 2009 study by PKF Hospitality Research reports that insurance costs are the fastest growing expense for hoteliers. Over the last ten years, rates have gone up 4.4% annually. From an average $265 per room in 1999 to $558 in 2004 (the latest PKF Hospitality study examined today’s recessionary period with that of the 2001-2003 period). It’s not likely to get better, either. PKF also predicted an estimated 5.3% drop in net operating income and a 1.1% decline in RevPAR for 2010.
Up also goes property insurance rates. Still reeling from some expensive hurricane seasons, insurers are tallying up the collective value of coastal properties and figuring their exposures. AIR Worldwide has estimated that coastal properties stretching from Maine to Texas amount for a $7 trillion exposure for insurance companies.




No doubt about it – 2009 was full of the bizarre news involving hotels. From peeping Tom perps to hotel-based drug operations, hoteliers faced a overabundance of risks well beyond the predictable. With hope of putting the weirdness behind them, hotel owners are looking at 2010 with a slightly jaundiced eye, not sure what risks are still lurking. How has your 2010 been so far?
As hoteliers put to rest a year of upheaval, uncertainty, and financial strain, the predictions are already in for 2010. A PKF Hospitality Research study shows that despite the industry facing an uphill battle, occupancy rates are expected to rise 0.4 percent in 2010. Okay, not great news – occupancy levels fell an average of 8.9 percent in 2009. But the ever-so-slight increase means one thing for anxious hoteliers – the modest increase is the first year-over-year increase in the last eight quarters.
When your insurance carrier and your parent company are at odds, what do you do? That’s the issue facing Best Western Franchise owners to the news that the company is re-evaluating its relationships with franchisees based on their current insurance coverage. At issue is the standard assault, battery, and molestation exclusions that hotel insurance carriers have on their policies. Understandably, the company is requiring the coverage to minimize loss exposure.