Hospitality
Shifting focus to improving risk management, facility maintenance and worker wellbeing will serve up results.
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What to Expect in 2024
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What to Expect in 2024
The country’s insatiable appetite for leisure travel has buoyed the hospitality industry following the gloom of the COVID-19 pandemic. However, lower levels of business travel, elevated inflation and rising property insurance rates will threaten profitability, and labour shortages will persist. Hospitality companies focused on risk mitigation — and those willing to consider alternative insurance strategies — will be best positioned to succeed in 2024.
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profits and drive organizational vitality and resilience...
Business is rebounding but the financial environment will remain challenging.
Many hospitality businesses are continuing their positive momentum into 2024. Sales at restaurants and bars are expected to hit a record $110 billion this year and today’s pent-up demand for leisure travel continues to grow, with business travel expected to reach pre-pandemic levels by 2025.
However, inflation could dampen demand for leisure travel in 2024. Higher commodity prices will increase the cost of doing business, pressuring profitability. And recent strikes by hotel workers in British Columbia could lead to additional losses.
Profit margins are thinner than ever. The number of restaurant bankruptcies in the country in the first half of 2023 was up nearly 90% compared with the first six months of 2022.
More than two-thirds of Canadian hospitality executives that responded to the HUB International 2024 Outlook Executive Survey cited increased expenditures as a threat to profitability in the coming year. In addition, the escalating frequency and severity of weather events nationwide are driving up property insurance rates, adding an additional financial burden.
The difficult fiscal environment is expected to continue throughout 2024. Regulatory changes — such as minimum wage increases for several provinces in 2024 — as well as the debilitating burden of repaying pandemic-related debts will tax hotels, resorts and restaurants throughout the country and require a new approach to payment structures and gratuities.
In addition, hospitality companies that own their properties will struggle to find adequate property insurance, particularly those with exposure to hurricanes, floods, convective storms and wildfires. In some cases, these properties may only be able to secure a fraction of the coverage they need. For example, a hotel in the Maritimes that has historically been able to purchase $15 million in wind coverage may only be able to secure $5 million in 2024.
Companies that lease can expect to see these increases reflected in their rents.
Hospitality companies with a strong focus on risk management will be more successful in securing adequate coverage at the best price.
Vitality
Resiliency
Facilities Maintenance
Facilities Maintenance
Resiliency
Profitability
Addressing worker wellness will improve the ongoing labour shortage.
The labour shortage in hospitality persists. The food service industry had more than 170,000 job vacancies in 2022, and more than 43% of restaurateurs are managing with a smaller staff. In the hotel industry, two out of three places of accommodation report that labour shortages are significantly impeding their business.
In fact, 57% of Canadian hospitality industry respondents to HUB’s survey say job market dynamics have affected their organizations’ vitality, and nearly half say they were strongly focused on employee recruiting.
Given the competition for talent, leveraging analytics to deliver personalized benefits that ultimately create quality employee experiences (QEX) can differentiate hospitality businesses in the eyes of potential employees.
Providing benefits that speak to individuals requires an in-depth picture of individual needs and wants. For instance, younger employees may not want or need expensive health insurance but would like access to mental health counselling and telehealth. Older workers, meanwhile, may prioritize prescription drug benefits and retirement programs.
And yet others may need financial wellness and wealth-building education.
More hospitality companies are prioritizing wellness benefits, particularly mental health. With more than 10,000 restaurant closures since 2020 and the added strain of staffing shortages, nearly 85% of hospitality workers in 2022 said they have experienced mental health issues. In response, many hotel and restaurant employers are improving employee assistance programs and providing access to mental health therapists. Some are partnering with mental health organizations to offer online counselling, and one Calgary-based organization is offering free peer support.
Facilities Maintenance
Vitality
Profitability
Risk preparedness is paramount for continued success.
Hotels, resorts, restaurants and bars that survived the worst of the COVID-19 pandemic are more resilient as a result: These companies learned the importance of risk management and how to make their operations better equipped to handle risk.
However, not every business is prepared to survive the next disaster. This is reflected in insurance rates for the hospitality industry, with property insurance rates increasing up to 10%, and rates for catastrophic (CAT) perils in high-risk zones going even higher.
Hotels and restaurants located in areas prone to wildfires can expect challenges at renewal, and insurers are re-evaluating property insurance terms and conditions for properties in the Maritimes with hurricane exposure.
However, rates are stabilizing in many other lines of coverage. Excess liability insurance rates will increase slightly, although large resorts, hotels and restaurant chains may not be able to find sufficient limits from a single insurer.
Resorts, hotels or restaurant chains with positive loss history — particularly those located in CAT-prone areas — may benefit from joining a captive. Captives give access to insurance capacity that would be otherwise difficult to obtain. In addition, companies participating in a captive are entitled to share in any underwriting profits.
Resiliency
Vitality
Profitability
Property protection will be more problematic in a changing environment.
Underwriters are scrutinizing properties like never before. From analyzing historical wind and extreme heat patterns to evaluating brush exposure, restaurants, hotels and resorts will need strong risk management programs if they hope to get a favourable renewal in 2024.
As a result, hospitality companies will need to ensure facilities are maintained and exceed safety standards. These actions include upgrading windows and roofs, and adding weather and disaster modeling, which will make facilities less vulnerable to wildfires and storms and may reap rewards at renewal.
Among hospitality respondents to HUB’s survey, nearly 50% are using technology to a “significant” extent to help mitigate risks, and a similar number are using modelling and forecasting to evaluate the impact of anticipated risks.
While some mitigation techniques — such as using geospatial intelligence to predict earthquake, wildfire or flood vulnerability — may seem prohibitively expensive, even adding simple measures like water
monitors, which insurers often distribute for free, will make properties a more attractive risk.
In some cases, investing in upgrades and consulting with predictive modelling services can reap significant savings.
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HUB hospitality insurance, risk management and employee benefits specialists will work with you to develop a tailored strategy that will protect the bottom line, support your workforce and build resiliency for 2024. Here are some initial considerations:
Thoughtfully lean into risk.
High interest rates and increasing catastrophes are making insurance more expensive for hospitality companies. Consider alternative insurance vehicles, such as captives. Ask your HUB broker about what kind of insurance strategy meets your risk profile and budget.
Invest in your facilities.
Increase workforce engagement through benefits.
Be transparent with your broker.
Increase workforce engagement through benefits.
Be transparent with your broker.
Thoughtfully lean into risk.
With rising property insurance rates, resorts, hotels and restaurants need to take steps to mitigate their risk. Whether it’s investing in windows and roofing that can withstand hurricane winds or adding water sensors throughout buildings, underwriters will offer the best terms and pricing to those managing their exposures.
Invest in your facilities.
Hospitality companies have difficulty attracting and retaining employees, but those with a benefits strategy based on personalization and fostering a quality employee experience (QEX) will boost engagement, have an advantage in recruiting and retention and lower risk as well.
Increase workforce engagement through benefits.
Thoughtfully lean into risk.
Invest in your facilities.
Be transparent with your broker.
Let your broker know what changes you’ve made to the business, so there are no surprises at renewal. Review exposures and insurance needs at least 90 days prior to policy renewal, so your broker can identify the best options.
Be transparent with your broker.
Thoughtfully lean into risk.
Invest in your facilities.
Increase workforce engagement through benefits.
Hospitality
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Download our 2024 Hospitality Outlook and Insurance Market Rate Report to see what to expect in the coming year.
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Meet the Experts
Practice Leader & Chief Sales Officer, U.S.
Hospitality Practice
Kim Gore
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Karim Chandani
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Cross Border Practice Leader
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Placito Miceli
Hospitality Practice
Risk Advisor
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Jean-Francois Beaulieu
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Paul DiBenedetto
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HUB Hospitality
When you partner with HUB, you’re at the centre of a vast network of experts who will help you improve your profitability, enhance the vitality of your workforce and remain resilient into the future. For more information on how to manage your insurance costs, reduce your risk and take care of your employees, talk to a HUB hospitality advisor. We’re here to help.
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1. Global News, “Half of restaurants losing money or just breaking even, finds new report,” October 24, 2023.
8. TVO Today, “Three big challenges facing Canada’s restaurant industry in 2023,” January 18, 2023.
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Profitability
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Resiliency
Facilities Maintenance
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Explore insurance alternatives
Create a strategy for protecting personal property
Conduct due diligence
Take steps to make yourself a better risk
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2. Toronto Star, “Leisure travel by Canadians is back to pre-pandemic levels – but not business trips. Here’s why,” August 11, 2023.
3. CBC, “Striking hotel workers demand wages meet the cost of living in Metro Vancouver,” August 5, 2023.
4. Pivot Magazine, “Are you being served? Restaurants face a turning point,” September 25, 2023.
5. HUB’s 2024 Outlook Executive Survey polled 900 C-Suite and VP-level executives on the issues facing them on profitability, employee vitality and organizational resilience.
6. CTV News, "Canada extending small business emergency loan repayment deadline," September 15, 2023.
7. Government of Canada, Canada Emergency Business Account, accessed October 27, 2023.
9. Cision, “Hospitality Businesses Are Turning to Technology to do Better with Less Amidst Labour Shortages and Economic Uncertainty,” January 31, 2023.
10. Hotel News Resource, “It’s Possible to Do More with Less During a Labor Shortage: Here’s How,” August 14, 2023.
11. Menu, “Mental Health Awareness in the Hospitality Industry: Kris Hall and The Burnt Chef Project,” April 8, 2023.
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Regardless of the approach, nearly all employers have increased their focus on employee wellbeing. This not only leads to increased employee recruitment and retention, but it can decrease recruiting costs, reduce sick days taken and promote employee satisfaction.
With more than 10,000 restaurant closures since 2020 and the added strain of staffing shortages, nearly 85% of hospitality workers in 2022 said they have experienced mental health issues.
Regardless of how they meet their insurance needs, hospitality businesses should consult a broker before renewals. It will demonstrate to underwriters a commitment to risk reduction and that the company has plans for mitigating potential exposures, giving it the best opportunity to secure coverage at the best terms and prices.
Resorts, hotels or restaurant chains with positive loss history — particularly those located in CAT-prone areas — may benefit from joining a captive.
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12. Global News, “New mental health initiative created in Calgary focuses on healing hospitality industry,” June 13, 2022.
13. Canadian HR Reporter, “How happy is your workplace?” August 28, 2023.
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Karim Chandani
Hospitality Practice
Cross Border Practice Leader
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Placito Miceli
Hospitality Practice
Risk Advisor
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Regardless of the approach, nearly all employers have increased their focus on employee wellbeing. This not only leads to increased employee recruitment and retention, but it can decrease recruiting costs, reduce sick days taken and promote employee satisfaction.
Regardless of how they meet their insurance needs, hospitality businesses should consult a broker before renewals. It will demonstrate to underwriters a commitment to risk reduction and that the company has plans for mitigating potential exposures, giving it the best opportunity to secure coverage at the best terms and prices.
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© 2024 HUB International Limited. 150 N Riverside Plaza, 17th Floor, Chicago, IL 60606. All rights reserved.
Privacy Statement
Terms & Conditions
Sitemap
Industries
Agribusiness
Construction
Cannabis
Education
Entertainment & Sports
Private Equity
Healthcare
Hospitality
Real Estate
Transportation
Nonprofit
Employee Benefits & Retirement
Private Client
North American Outlook
Learn more about us.
Visit hubinternational.com
Contact Us
CA | FR
US | EN
Cannabis
Construction
Education
Entertainment & Sports
Private Equity
Healthcare
Hospitality
Nonprofit
Real Estate
Transportation
Agribusiness
Employee Benefits & Retirement
Private Client
Industries
Contact Us
CA | FR
US | EN
Contact Us
Employee Benefits & Retirement
Private Client
Industries
When a private oceanfront golf course, a HUB client, began construction of a new facility, it invested in sophisticated flood mapping and made modifications to create a building strong enough to withstand hurricanes. The effort also resulted in a financial payoff: An annual $25,000 discount on property insurance for their efforts.