Agents and brokers who are trying to win, or simply renew, clientele in the luxury hotel and resort segment are finding it more challenging than ever–but not because of rates, which remain relatively competitive and affordable for now.
Instead, the challenges come from the changing profile of the high-end hospitality industry and a still-sputtering international economy.
Meeting these challenges requires the broker to be well-prepared, adaptable, and able to work with experts and specialists committed to the segment.
Consider some of the changes that have taken place at resort properties in recent years:
o More kid-friendly destinations:
There has been a steady increase in dual-income professional couples who are more inclined to choose a destination resort and bring their children with them on vacation. Once on site, they are looking for entertaining activities and amenities for all ages, as well as increased care options–including child care centers, in-room babysitting and day camps.
Each of these is likely to prompt detailed supplemental underwriting.
o Surf's up–water sport options grow:
Another change is in the variety of water sports available at resorts near the water. While a little snorkeling or surfing might have been promoted in the past, it is now common to see resorts advertising boogie boarding, kayaking, deep-sea fishing, seasonal whale-watching, canoe rides and stand-up paddle boards.
How familiar are you with the risks of laser sailing, for example? (Editor's Note: The term laser sailboat refers to one of three classes of small, simple sailboats that may be sailed by one or two people, according to various associations devoted to the sport.)
Complicating matters, many of these activities are promoted by the hotel, but not controlled by them.
We are familiar with the case of a third-party vendor who got referrals through a hotel, and casually wore one of their shirts while instructing. When one of his customers, a recent med-school graduate, was seriously injured in a fall from his surfboard, the plaintiff's attorney successfully argued vicarious liability and won a multimillion-dollar award from the hotel.
The vendor, who was underinsured, paid a minor portion of the award.
The broker for resorts must constantly review third-party contracts for appropriate hold-harmless language, indemnification and proof of adequate insurance.
o Botox anyone? Medical exposures increase:
Then there is the trend toward more health care-related amenities on site. The spa has been transformed into the medi-spa. More facilities are equipped to provide wellness programs, recovery programs and procedures once confined to hospitals and clinics.
Does your resort provide medical testing? Botox injections? Dermabrasion?
With these trends, the broker is challenged to help the client make sure medical risk control is in place, and to adequately address professional liability coverage needs.
Finding an insurance company market that is comfortable with combined hospitality and health care risks can be a neat trick.
o A new real estate wrinkle—resort conversions:
Finally, to maximize revenue opportunities, resort properties have become more creative in the use of their land and real estate.
As an agent dealing with large complexes, you need to become a quick study in vacation ownership, condotels, resort conversions, fractional development and private residence clubs. Be prepared to sort through the intricacies of contracts between hotels, individual owners and associations.
SPECIALISTS REQUIRED
Overlaying these changes is the current economic climate. Our observation is that revenues in the hotel industry are down about 20-to-25 percent from a couple of years ago, but occupancy rates are only down 10-to-12 percent. This means the exposures an agent has to insure haven't shrunk as much as the revenues available to pay for them.
There will be pressure from insurance buyers to find lower rates, reduce limits or drop certain coverages at a time when exposures haven't proportionately declined. In fact, as discussed above, they may have increased, creating a real dilemma for the prudent broker trying to do right by the client.
An agent's best defense is to work with the handful of carriers and programs in the United States that specialize in the resort industry. There are many carriers chasing the budget and midscale hotels, but the reliable players drop out quickly when faced with the complexity of high-end resorts and spas. Concentrate on markets that have a proven long-term commitment to the segment–those that have designed products specifically for it and who have structured proven and affordable umbrella and excess limits.
Pay special attention to who will be handling the claims. It isn't enough to have competent claims staff. In this business, the claimants are personal guests of the hotel and their claims and complaints need to be handled with a sensitivity and care that can be missing from large claims operations who randomly assign claims to multiple claims offices.
The rewards of working with the resort hotel industry are plentiful, but agents must be prepared to earn their money and their clients' trust.
After doing the job right, you may need a resort vacation!
Kurt Meister is the vice president of sales, overseeing the hospitality division of National Specialty Underwriters Inc. NSU (www.nsui.com) is a program administrator and specialty wholesaler distributing products to retail brokers nationwide. He can be reached at kmeister@nsui.com.
This article was originally published on Oct. 2, 2009 by American Agent & Broker magazine, a member of Summit Business Media's P&C Magazine Group, which includes National Underwriter. The original publication was a Web exclusive on American Agent & Brokers' Web site, www.agentandbroker.com.
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