Running a hotel, guest house or Bed & Breakfast establishment is rewarding but challenging due to the number of potential pitfalls.
Unfortunately, too, the hospitality sector is often one of the first areas to suffer in a credit crunch. So it's even more crucial to ensure you don't fork out unnecessary amounts for insurance premiums, or leave your business vulnerable to expensive lawsuits and losses.
Flooding or a fire at the premises, an outbreak of food poisoning or lawsuits from disgruntled staff or guests could spell financial ruin which is why it is so important to protect your business from risks.
Standard buildings and contents insurance isn't enough, as you won't be covered if staff or guests injure themselves on your premises.
Many hotels, b&bs and guest houses have saved considerable sums by reviewing their existing policies and comparing quotes.
The right commercial insurance package for you should give you the peace of mind to let you concentrate on what you do best - running your business.
Hotel insurance protects your business against loss or damage. Depending on your individual needs and your attitude to risk, it will include cover for:
- Business interruption
- Trade contents and stock
- Accidental damage by guests
- Guests' and employees' personal effects
- Liability cover for you & your belongings
- Employee theft
- Loss of money
- Loss of liquor licence
- Goods in transit
- Engineering failure
- Trade Credit Insurance
- Legal Expenses
- Book debts
- Computer breakdown
As well as these, you need to ensure that your legal responsibilities are met if the business causes damage or injury to other people (a third party) or their property.
Employers' Liability insurance is compulsory, as is Public Liability if you have more than 6 guests but other areas of liability that you may need cover for include:
- Product liability
- Motor Vehicle liability
Hotel Proprietors Act 1956
Many insurers will demand that as part of their Public Liabillity cover, hotels must clearly display a Hotel Proprietors Act notice.
On correct display of the notice stipulated by the 1956 Act (not applicable in Northern Ireland) a hotel's liability for loss, damage or theft from a hotel room should be limited to £50 for one item or £100 for multiple items per guest.
The notice must be displayed prominently at or near reception or, if there's no reception, at the main entrance.
If the notice is worded incorrectly or not properly displayed then the proprietor loses the protection of limited liability and becomes fully liable for the whole amount if guests' property is lost or damaged because:
- the proprietor/staff acted negligently
- the property was lost/damaged after being deposited for safe custody
- property was refused for safe custody or a guest was unable to deposit it
There are pitfalls for a hotel attempting to rely on the Hotel Proprietors Act.
Famous French chef Raymond Blanc's flagship restaurant and country house hotel Le Manoir aux Quat'Saisons in Oxfordshire felt the heat when the restaurant's parent company offered two guests just £100 ($185) after cash and valuables worth over $100,000 were stolen from their room.
Police later arrested the burglar but only recovered around $40,000 in valuables. The couple, from Florida in the USA, expected to be reimbursed for the outstanding $60,000.
Instead the company sought protection under the 1956 Hotel Proprietors Act to limit their liability - only to be sued for breach of contract under the very same Act!
The couple's solicitor claimed that Le Manoir had failed to meet its duty to provide for the safety and security of residents, and had failed to comply with the requirements of the Hotel Proprietors Act 1956.
An out of court settlement was reached for the full amount claimed.
The moral of the tale is you must take extreme care in the wording and placement of the notice, and regularly review these.
The Office of Public Sector Information (OPSI) details the Act on its website where you can view the wording of the notice.