12 Ways to Save Money on Hotel Insurance in 2022
The hospitality industry, and specifically the hotel industry has been hit hard the past few years, that’s no secret. As the market adjusts to the new reality, one part of the equation is the insurance policy – and it doesn’t seem to be improving. As we approach the end of 2021, it is a good time to review the current state of the market and see what can be done. To address these concerns, we’ve created 12 ways to save money on insurance in 2022.
What’s Going On And Why Is This Happening?
This is the most common question I get, followed by the question of when it will improve. Well, to get to the answer let’s figure out where it began.
Carriers have made significant adjustments to their hotel insurance plans heading into 2022. They’ve locked rates, increased rates, and some have exited the hotel insurance market altogether. A big part of the reasoning for this is simply the unknown. We don’t know when things will change in our new reality. But that is just the tip of the iceberg – there’s so much more affecting things and so much more we can do to address this.
What Factors Are Affecting The Hotel Industry?
Aside from the obvious reasoning from the last few years, let’s look at some less obvious reasons.
- Property Rates Have Increased – Claims have pushed rates up regionally. Depending on what region you live in, it’s been a tough year for claims across the board. In the Midwest where our agency is, for example, we’ve seen plenty of wind and water claims. When that happens, rates increase not only for the hotel affected, but when enough of them happen it affects rates across the board.
- Reinsurance Rates Have Increased – For the first time in several years, reinsurance carriers have raised their rates. For a more detailed explanation of this, I would encourage you to watch our video but I’ll give a simplified example of how it works here:
- Your building is worth $1.5 million, and you have it insured at full replacement cost with your insurance company.
- Your chosen insurance company has the proper amount listed on your policy. Behind the scenes, they are fully insuring, say, the first $500,000 of the building and the rest is insured by a reinsurance carrier.
- It’s all covered properly and in the event of a total loss you’d be fully compensated, but by re-insuring part of the risk it keeps rates down for everyone. So when the reinsurance carriers raise their rates, your standard insurance carriers have no choice but to increase their rates as well.
- Google Reviews Are Carrying Significant Weight – We’ll get into this further into the article, but Google Reviews are carrying more weight now than at any time in the past. It is most definitely a part of the discussion when rates are determined by carriers.
The 12 Ways to Save Money on Hotel Insurance in 2022
Now that we have some context, let’s look at the things that can be controlled and the 12 ways to save money on your hotel insurance in 2022.
1. Schedule inspections to improve the condition of the building, parking lot, and property.
It’s worth mentioning that an insurance policy is not for maintenance. You are responsible for the upkeep of the property, and when conditions are not as good as they can be then it makes the likelihood of damage much higher. Proper upkeep of the property can not only save you on your insurance costs but will save you much more in the long run by avoiding building damage.
At minimum, schedule annual inspections to catch the little things that can quickly become big things. Maybe semi-annual inspections would work better for you. Repair the roof, take care of the potholes, address the room damage.
2. Improve your Google Reviews
This has been critical since the beginning of 2021, but has become even more important as time has gone on. Your online reviews are so important that if you do not have a strategy with them, you had better develop one as soon as possible. Some questions for you as you develop your strategy:
- How are you asking for Google Reviews right now?
- Are you responding to both the positive AND the negative reviews?
- Are you addressing the problems noted in the negative reviews?
- Are you able to automated the process of asking for reviews? (This has been huge for our agency and our clients. We’re able to generate more reviews, catch the bad ones before they ever go public to address then one on one with our clients, and effectively improve online reputations significantly)
- Can you think of any other ways to ask or incentivize customers to leave reviews?
This is an absolutely critical step. Do not overlook this! If you need help or ideas in implementation, please schedule an appointment with me.
3. Increase your annual occupancy percentage
This one is tricky since there’s only so much you can do, but carriers at minimum are looking for hotels with occupancy rates of 40% or higher, preferably above 60%. To make matters even more complicated, some are requesting or requiring room rates of at least $125 or higher. Nonetheless, the purpose of this is to share exactly what we’re seeing from our insurance carriers and this is something that affects your rates.
4. Franchised hotels get better rates
Franchises have requirements for a reason – it’s to keep them save first and foremost of course, but it’s also to keep you safe. With that known added accountability, many more carriers are more comfortable with giving better rates since they know property and liability issues will be addressed in more ways than one.
5. Upgrade your security
Now would be a good time to make sure your security system is adequate. If you have a sprinkler system, keep up with inspections. Install cameras where needed. Review your central alarm systems and agreements.
6. Make sure you have adequate lighting outside of the building
This goes hand in hand with #1, but good lighting prevents a number of issues that could quickly become a liability for the hotel. Make sure the bulbs are replaced when they go out, and consider adding additional light poles if there are areas that do not have adequate light.
7. Interior doors vs. Exterior doors
Yes, I realize this is not something you can control. That said, if you are looking to acquire additional hotels, your rates will historically be better if it’s a hotel with interior doors due to the additional security and accountability that comes with it. If you do have a hotel with exterior rooms, there are plenty of options available, but you should expect a higher insurance premium than ones with interior doors. That will make the other steps all the more important.
8. Install self-closing doors
By now you should be noticing a pattern – security is a huge concern for carriers right now, so the more you can show them that you are doing all you can to protect your hotel and its guests, the more opportunities you will have from carriers to reduce your pricing.
9. Upgrade your keys
This is a simple one. Electric keys are much more secure than regular keys, so upgrade your locks.
10. Install dead bolt locks
Chances are you’ve already done this, but it’s worth looking into if any of your rooms need to be upgraded. And yes, it can and does play into your rates.
11. Post exit plans in case of an emergency
If you are part of a franchise, this is likely a requirement already but even if it’s not, this matters. If there’s an emergency and your guests need to evacuate, this can make all the difference and several carriers have asked for these in order to quote.
12. Reduce your percentage of long-term and extra short-term customers
Insurance carriers very much prefer nightly rates rather than hourly or monthly rates for a number of liability reasons. Nightly rates will give you the best insurance pricing.
Where do I start?
You may read through this list and see an overwhelming amount of work, and that’s ok. If that is the case, then a Service Timeline Schedule may be the way to go. By working on this with your agent and presenting it to the carriers they represent, you may find more carriers willing to work with you when they know that you are making these things a top priority and showing them exactly how it will work.
We don’t know what’s going to happen next. We don’t know when and if the economy will improve. But the things listed in this article will be relevant regardless of what happens.