Enterprise risk management

Assignment

Hospitality

Submitted by

Mohammed Naseer Khan

(1226114117)

Overview

Vision –The Tourism Industry Plays a vital role in all Economies ,and many economies try to drive Tourism as a core sector for its Growth potential ,Thus we should Enunciate the postulates for an effective Strategy for promoting tourism , hospitality industry is a dominant feature of Tourism , Main Segments being Hotel. Airlines, Misc Transport, Hotel Industry Management should strive to Endeavour providing the optimum services in terms of Room nights, Food and Beverage, Guest entertainment and allied utility Services

Mission-In my report I would focus mainly on the hotels ,the service line concept of providing guests with Accommodations , Food and Beverage , Entertainment, and Other Utility facilitations, as an ultimate satisfaction of the guest ,to which task to Maintain a Business Plan set to realistic Targets quantified and qualified , Our Focus would be to provide an insight and define the Risk Management Process Related to hotel Industry and summaries the critical phases of hotels Risk Management Analysis

Introduction:-

The hotel and hospitality industry faces constant pressure from the evolving marketplace that impacts important issues in risk management and threatens profit margins. As issues that affect bottom line constantly change, so does the industry’s need for proactive solutions for risk prevention and management. A comprehensive plan covering the broadest spectrum of potential issues will provide the most protection. Industry properties often provide a variety of amenities for guests and clients, which in turn can generate different sources of risks. For example, the risk of physical injury can arise from almost any area, including accidents in pool areas, property grounds, sports and activity areas, guest rooms, bathrooms, or spa facilities. There are also risks associated with food preparation in restaurant or food vending facilities. Other potential risks exist, including property loss from transportation services and certain terrifying risks exist from fire or other catastrophic events.

As industry properties expand the number of guest services that are part of an active and robust hotel and hospitality business, there is the need for constant revaluation of the risks associated with these services to maximize profit, as well as to provide protection from injury and property loss. Indeed, to a risk manager, these amenities represent vast potential exposure for injury or insurance-related loss. While injuries and losses cannot be avoided entirely, they can be minimized along with the number of financially damaging insurance-related claims affecting the hotel and hospitality industry. Proper risk management in the hospitality industry starts with an industry specific insurance plan. Businesses must ensure they are working with a broker who understands the risks typically faced in the hospitality industry. Businesses must also understand where their broker or agent buys its insurance, and confirm their broker has other hotel and hospitality clients and experiences in handling industry related claims. Moreover, comprehensive risk management practices must be established and implemented. While proper insurance coverage can help shield a business from liability once a lawsuit arises, hotel and facility operators are also advised to mitigate the factors that can lead to injury or insurance-related loss. Discussed below are some recommended management solutions that were implemented by a successful and multifaceted resort facility, Wood loch Pines Inc., located in Hawley, Pennsylvania? During its peak summer season, Wood loch employs approximately 1,000 employees. The

recommendations discussed below were implemented by Wood loch with good success in response to some common and potentially costly risks.

A risk analysis involves identifying the most probable threats to an organization and analyzing the related vulnerabilities of the organization to these threats. Most businesses depend heavily on technology and automated systems, and their disruption for even a few days could cause severe financial loss and threaten survival. The continued operations of an organization depend on management’s awareness of potential disasters, their ability to develop a plan to minimize disruptions of mission critical functions, and the capability to recover operations expediently and successfully. The risk analysis process provides the foundation for the entire recovery planning effort. Insurance coverage’s, Market survey

Crisis management plan for protecting profit Building an effective relationship with the management company and the owner is essential to maximize the value of the hotel. The first step is to align the objectives of both parties and measure performance. Fortunately, both parties want the hotel to maximize the return on investment. However deciding whether revenue and expense levels are reasonable and achievable can be a difficult task as various factors affect a hotel’s ability to generate revenue and manage expenses. Asset managers should encourage operators to plan beyond the yearly budget and identify opportunities for generating incremental revenues. The following provides suggestions on how to create incremental revenue and how to protect cost, therefore enhancing long-term real estate value.

Crescent hotel risk management approach:-

Crescent understands the importance in maintaining a successful and responsible hotel while reaching your bottom-line goals.  Our approach to Risk Management will create substantial value and provide meaningful savings because we go beyond traditional solutions.  We consistently work in tandem with our broker to serve as a claims advocate to ensure the best possible outcome for every claim, whether property or liability. To ensure you and your hotel are adequately protected, all general liability and property coverage are both loan and franchise compliant.

Due to the portfolio nature of our program, you will gain greater market access, lower your costs, and achieve decreased deductibles. For specialty policies, Crescent Risk Management will work with our broker to tailor asset specific coverage to the exposure and client needs.  At Crescent Hotels & Resorts, we know Risk Management.

PM hotels risk management approach:-

At PM Hospitality Strategies, we are devoted to protecting our guests, our associates, our assets and our financial position. This means we continually identify, assess, and look at ways to reduce risk. We understand that our business is at risk, if we fail to manage it.

Our comprehensive risk management strategy includes:

Commitment to safety standards Safety inspections Loss prevention and control Comprehensive insurance Risk analysis Focus on security (in our employee newsletter) Safety committees Incident reporting and management Training programs

But even Ty Cobb didn't bat 1000. When a procedure falls suspect, we are quick to remedy it and quick to inform our associates. Managing risk means managing change, quickly and efficiently.

Hospitality Risk Analysis:-

Profit Protection Plan:-

The lodging industry is often the first victim of terrorism, war and force of nature. Every market is vulnerable to crisis and every hotel needs to have a plan to protect its profit. During those unpredictable periods the revenue usually declines immediately and the operator needs to act right away to avoid significant losses. A profit protection plan will provide targeted actions to shield profit and goes far beyond the regular cost saving. Each action should be measurable and it should allow the operator taking prompt action to contain losses generated by the regular hotel operation.

Profit Protection Plan can include the following:

-Produce a budget re-forecast -Reduce provision as revenue decreases - Close some floors to save energy - Close selected F&B outlets and reduce provisions - Limit outsourcing and maximize use of hotel staff - Reduction of number of employees - Encourage multitask employees - Reduce lower rated travel agents and tour operators

The better prepared the hotel, the better will it be able to respond and rebound.

Once created, the profit protection plan can be updated every year. In case of actual crisis, the plan will be adapted and modified to fit the situation. As long as there is a plan in place, the management team can focus on generating incremental revenue.

Incremental Revenues:- Now that the marketing plan is in place, every operating department should focus on generating incremental revenue, which will increase the flow-through of the hotel towards profit. The following provides a few suggestions on how to improve hotel revenue: Rooms department - Room service menus and spa menus outside guest directory generate more Revenues - Use the guestroom television as an advertising vehicle. The in-house video can cross-sell and promote your services, amenities, and food & beverage Promotions - Be innovative. Create a children activity menu, in-room promotion, e.g. Pizza night (1 pizza and the movie is free), improve the mini-bar with cards, sun cream, mosquito repellent - Consider front-of-house cross-training, implementing incentive programs - Review amenities packages and operating supplies to reduce costs - For the travel agents and the tour operators, the hotel should provide sales tools such as promotional packages offers, e.g. spa, adventure, discovery, activities for kids, business and MICE

Food & Beverage department:- - Evaluate pricing and menu mix at restaurant - Different promotions every other week to keep the local residents, especially in mixed-use development (office and residential towers) - Identify catering goals for the sales staff, brainstorm off-site catering opportunities - Restaurant’s signage is often overlooked - If you have a child-friendly resort, there are opportunities to improve the revenue in F&B outlets: kid menus, small games, table set to draw on - Cross sale fliers on the table.

Other departments:-- Consider selling parking to non-guests

- Identify whether the fitness centre is good enough to solicit monthly memberships - Study the possibility of leasing hotel space to a third-party retail tenant - Ensure that there are defined revenue goals for each employee in the sales departments - Review employee’s salary versus revenue goals - Consider replacing overtime hours with contracted labour - Appoint employees in each department who specialize in identifying in-house revenue opportunities - Several properties can combine orders to increase the volume of items and the discount - Review all contracts of operation and maintenance, including elevator and trash removal, bid each contract out upon renewal - Consider completing an energy audit to determine opportunities to decrease cost - Consider insurance umbrella when you have more than one hotel asset

Asset Management:- - If the hotel will be renovated during the year, consider renegotiating the contracted fees and terms of the management contract. - Secure the owning company position by ensuring all contract terms are respected. The asset manager should create a management requirement checklist and if the management company doesn’t respect a requirement (e.g. on time reporting, reforecast, presentation of the annual proposed budget), it should be notified in writing.

The first objective of asset management is to assist hotel owners or investors to realize the full value of their hotel assets through a continuous process of value creation and enhancement. The asset manager should encourage the operators to achieve this by optimizing operational, financial and capital efficiencies of the hotel with the ultimate goal of maximizing profits and investment returns for the owner and investor.

Internal audit universe of hospitality industry:-

Major focus area objectives

I Hotel Governance

Ensuring management’s vision , business objectives are incorporated in the governing principles of the companies articles and objectives

iiHospitality Facilitations

Ensuring SOPs are in place and computer package system are customized to Hierarchy of levels of Supervision

iiiOperations Support Audit

Ensuring robust business processes to support effective and efficient operation of units.

ivSupply Chain process –Inventories

To Ensure quality Material is procured at Optimum prices ,Material are stocked , stock sheets are monitored physically as well as thru the inventory Package , Reconciliations are performed and Justified

vFinance & Accounts

Ensuring processes and controls for accurate and effective financial Planning accounting and reporting.

vi

Compliance Management, Human Resources Utilizations

Ensuring processes to help units and HO comply with internal policy and procedures, legal requirements, companies, IT, Act, and other requirements. There is a proper utilization of Human Resources , equitable wage structure ,progressive human resources Management with performance Appraisals and SWOT analysis

Internal Audit methodology for Hotels

• Gaining detailed understanding of your organisation.

• Identification of key business processes supporting GUEST service.

• Importance mapping of business processes.

• Identification of business risks at unit and organisation wide level.

• Organising workshops at unit and HO level to discuss key business processes and risk rating to attain common understanding.

• Identification of operational and FUNCTIONAL processes to be audited (audit wish list).

• Discussion with unit heads and HO to prioritise audits.

Deliverables:-

• Final internal audit plan

• Engagement letters

• Detailed scoping for each audit in discussion with process leaders, unit heads, FCs and HO to identify key focus areas.

• Conducting detailed process walkthroughs, documentation, risk & controls identification and testing.

• Continuous discussion with management at unit and HO.

• Identification of issues, risks, implications, recommendations and discussion with process leaders.

• Audit issue/ process gap impact analysis on clinical and support processes.

• Benchmarking of processes with leading hospital practices.

Audit planning

Audit execution

Deliverables:-

• Engagement scoping document and timelines• Regular audit updates• Audit work papers and audit issues

• Providing detailed audit issues and supporting evidence (including discussions) to process leaders at unit and management for management comments.

• Organising audit closure workshop at unit with process leaders, unit head and medical director to discuss audit issues, rating and recommendations and attain common understanding.

• Submit final audit report to unit, HO and audit committee.

• Formation of recommendations implementation roadmap in consultation with unit and HO.

• Summary reporting to audit committee and presentation.

• Obtain feedback.

Deliverables:-

• Findings and recommendations report for management comments.• Final report for management and audit committee.• Practical recommendations and implementation roadmap.• Audit committee report and presentation.

Quality Assurance:-

• Team of professionals with extensive experience in healthcare audits.

• Continuous project reviews by partners and directors of the firm to ensure quality and client satisfaction.

Reporting

Key Issues noticed in Hotels:-

OPERATIONS MANAGEMENT

• Accommodation control,

• Revenue leaks ,Fraud ,Discounts,

• Room occupancy reporting system

• Profit plan

• Incremental Revenues

• Health club Risks-sauna and steam –process failures may lead to reputation loss –SPA treatments –Allergies from medicines and Discotheque –Break downs , Fitness centre inefficient Machineries may cause business Reputation Loss

• Branding –A

HUMAN RESOURCES-

• should facilitate between guest service standards-Occupancy and Costs

• Training and Change Management-A trainer full time or all department Heads Must have

• Job descriptions, lack of effective man power utilizations

• Frauds in payroll , Service charge has been Immense –biometric Attendance payroll system should be made prevalent,

• Recruitment process , health and safety audits

FINANCE

Balance sheet Reconciliations ,Night Audit, Budget /forecast to Actual variance reporting, Asset management ,Equipment Replacement ,Profit plan protection, Financial Leverages ,Profit and loss(USAH) ,Balance sheet , Break Even ,Cost Board management, property risk entails an Insurance Plan, expedite Claim s ,Cash and Bank Balances , Credit Card Management ,cash flow ,budget to Actual variance Analysis ,Balance sheet Ratio, Liquidity ,funds Transfers

SUPPLY CHAIN-

1. Quality procurement, contracts, setup of material specifications

2. LCs and Guarantee terms of credit, receiving material, quotation comparisons

3. Set up of EOQ, Inventory set up with stock out, FIFO, ABC ANALYSIS, physical stock variances, and Freezer stock stabilizations.

ENGINEERING –

Preventive Maintenance scheduling, Generator, Desalination Plant, Property and landscape protection against Fire, safety compliances, protect gardens against horticulture damages, water Damages and impurity of water, slip trip and fall prevention

IT—

Cyber Liability covered Insurance, hacking Reservation system, sabotage of the various computer packages and Telecommunication system –this aspect very prevalent in many hotel companies which has mitigated service standards and led to loss of Revenue

SECURITY, TRANSPORT-

Decipher Crimes, enabling and strengthening security systems, Transportation loss of fuel, spares, and valet parking discomforts.

CORPORATE ---PRORPERTY RISK –Regular Revaluation of Assets

1. Loss of Revenue Analysis, operating profit, Interaction valuation and Insurance brokers.

2. Fixed Asset Register with all workings of Depreciation analysis, replacement of Machinery and FFE

3. Premises Liability, Safety codes to be defined to ensure guest safety

4. Product Liability –To ensure condition in food processing from poison, enact HACCP procedures

5. Branding –refurbishments –FFE-capital Replacements, are a continuous planning process in corporate budgetary policies, keeping in view of the market Thrust and stifle from competitors

6. Hazards –Rodent menace, cockroach and other menaces which are hazardous in the kitchen, rooms and public areas

7. Pest control contracts

8. Corporate -Operating, sales and marketing planning, financial planning, material planning, human Resources planning, Engineering Plan, project planning, and other utilities planning, risk factors are to be prioritized.

The following factors are highly important in the assessment of Risk Factors:-

Arson, Electrical Installations, Fire Protection, Housekeeping, Security and Alarm systems, Health and Safety, control of contractors, water Damage control, Disaster Recovery. Thus the issue of Monitoring the hotel overview management is the Top Management Role , hotel companies should Realize the above factors and size Up the situation on a smooth phase of control Rather than a fire Fighting one.

Remain Committed to Safety and Risk Prevention:-

Hotel and hospitality managers are encouraged to be visible and establish a personal rapport with their employees. They are also encouraged to participate in the training process of their line employees and asked to develop their own self inspection program with respect to safety in their work area. Managers should be involved in training their staff on loss control, and on incident and accident investigations. They should also be involved in the planning process for special events, functions and projects.

Keep Employees Healthy:-

One way in which hotel and hospitality facilities and their operators can protect their business from work related injuries and losses is by keeping their employees healthy. Health care and workers’ compensation premiums/claims, and lengthy employee absences, often result from work related illness or injuries and are perhaps the most significant cost to any industry. However, these issues can have a significant impact on hotel and hospitality businesses that depend on seasoned, well trained staff to provide quality guest services,

which, in turn, ensures continued growth and vitality of the business. Hotel and hospitality businesses should, therefore, consider implementing wellness incentives and job safety programs. Woodloch increased the number of these programs, with good result both in terms of employee health, decreased sick time and lowered insurance premium expense. For example, Woodloch has implemented a “Wellness Rewards Program,” which provides all employees with three assessments per year (on a voluntary and confidential basis) measuring each employee’s weight, body mass index, blood pressure and waist size. If an employee reaches certain wellness goals, then he or she is rewarded with “Woodloch dollars” that can be used at any Woodloch restaurant, gift shop or vehicle maintenance service centre. Additionally, Woodloch offers challenges to its employees, i.e., “The Biggest Loser,” which encourages groups of employees to compete against each other, to attain weight loss and wellness goals, and become healthier. Woodloch also has certified staff members who offer smoking cessation classes to employees. Woodloch has utilized these wellness programs with great success, resulting in happier and healthier employees, who, in turn, provide quality guest services and ensure continued growth and vitality of the business.

Issues related to hospitality industry risk management:-

Wi-Fi blocking is illegal (FCC fines Hilton Hotels)

FCC takes two enforcement actions on Wi-Fi:-On November 2, 2015, the FCC issued two separate news releases on Wi-Fi blocking. In one action, the FCC announced a $718,000 fine against M.C. Dean, one of the nation’s largest electrical contracting companies, for blocking personal mobile “hotspots” of convention visitors and exhibitors who tried to use their own data plans at the Baltimore Convention Centre to connect to the Internet rather than paying M.C. Dean substantial fees to use the company’s Wi-Fi service.

FCC fines Wi-Fi hotspot provider M.C. Dean:-According to the FCC, as the exclusive provider of Wi-Fi access at the Baltimore Convention Center, M.C. Dean charges exhibitors and visitors as much as $1,095 per event for Wi-Fi access. Last year, the Commission received a complaint from a company that provides equipment that enables users to establish hotspots at conventions and trade shows. The complainant alleged that M.C. Dean blocked hotspots its customers had tried to establish at the Baltimore Convention Center. After receiving the complaint, FCC Enforcement Bureau

field agents visited the venue on multiple occasions and confirmed that Wi-Fi blocking activity was taking place.

The Enforcement Bureau’s investigation found that M.C. Dean engaged in Wi-Fi blocking at the Baltimore Convention Center on dozens of occasions in the last year. During the investigation, M.C. Dean revealed that it used the “Auto Block Mode” on its Wifi system to block consumer-created Wi-Fi hotspots at the venue. The Wi-Fi system’s manual describes this mode as “shoot first, and ask questions later.” M.C. Dean’s Wifi blocking activity also appears to have blocked Wi-Fi hotspots located outside of the venue, including passing vehicles. The Commission charged M.C. Dean with violating Section 333 of the Communications Act by maliciously interfering with or causing interference to lawful Wi-Fi hotspots.

FCC fines and warns Hilton:-In a separate announcement, unrelated except as to the subject matter, the FCC proposed a $25,000 fine against Hilton Worldwide Holdings, Inc. for “apparent obstruction of an investigation into whether Hilton engaged in the blocking of consumers’ Wi-Fi devices”. A consumer complaint alleged that Hilton was blocking visitor’s Wi-Fi in Anaheim, California in order to force them to pay a $500 fee to access Hilton’s Wi-Fi. Other complaints alleged similar Wifi blocking at other Hilton-brand properties.In November 2014, the FCC Enforcement Bureau sent Hilton a letter of inquiry requesting information concerning basic company information, relevant corporate policies, and specifics regarding Wi-Fi management practices at Hilton-brand properties in the United States. After nearly one year, Hilton has failed to provide the requested information for the vast majority of its properties. The proposed fine and announcement to Hilton included a demand to immediately provide the essential information and documents about its Wifi practices, and warned that Hilton may face significantly higher fines for continued obstruction or delay.

Management Update: “How to Future-Proof Your Hotel Company”

Smart hotel executives spend time dealing not only with the challenges of today but also the challenges of tomorrow. I don’t mean tomorrow as in the day after today. I mean tomorrow as in the future, six months from now, five years from now.Our copycat industry is historically bad at this. We often take note of obstacles only after we’ve hit them head on. In a daze, we then rush to adopt the tactics of our nearest competitor.

Why? Maybe we’re not looking far enough ahead. Or maybe we’re not looking for the right signals ahead.

Across all industries, executives’ future-proofing exercises typically revolve around the proverbial Next Big Thing—what’s coming down the pike that’s going to change the world as we know it.

During a keynote at this week’s Marketing Outlook Forum, J. Walker Smith of the Futures Company suggested a different tact: The “Vanishing Point” approach.

It’s hard to spot the “Next Big Thing,” Smith said. When they first materialize, they’re often too small to notice. And they come on quickly, which makes it difficult to react when you finally do notice them.

Vanishing Points are the opposite, Smith said. They are the points at which big, established factors of influence wane out of relevance. That creates a vacuum that must be replaced by something new.

Spot them early, and you can begin to anticipate what will fill the void.

It’s like a big tree falling the in the forest, Smith said. That allows sunlight to penetrate the canopy and foster growth for something new.

An example: Screens are getting smaller. What once was a desktop became a smaller laptop which became a smaller tablet which became a smaller Smartphone. Now wearable are on the rise, and screens are getting even smaller.

“This is the big vanishing point,” Smith said. “The active digital screen is going away. It is being replaced by sensors, or passive digital.”

Shoes will connect to Google Maps and buzz the right or left foot depending on which way you need to turn. Embedded technologies will track your health and fitness.

Instead of inputting data into a screen, sensors will track your behaviour and send you information before you even know you needed it, Smith said.

He called it the “pivot to passive.” In the ecommerce space, Amazon is working to patent anticipatory shopping software that sends you products without you even putting them in your online shopping cart.

Think of that in travel context, Smith imagined. The agonizing booking funnel becomes an intuitive, anticipatory process that actively monitors your behaviour and schedules a hotel stay accordingly. Will it happen tomorrow? I hope not.

(I’m not ready for buzzing shoes.) But it could happen one day. Maybe it will even be the Next Big Thing, Time to get out in front of it.

Hospitality Industry Legal Update: “Critical Control Points in Liquor Liability”

In this article, dram shop and liquor liability expert, Jeff Jannarone discusses critical control points in bar operations, including recourse options for handling intoxicated patrons.Every bar or restaurant that serves alcoholic beverages is at risk of having intoxicated patrons. However, the mere presence of an intoxicated patron within an establishment does not necessarily indicate a breakdown in an establishment’s training or operations, nor does it necessarily indicate a violation of the standard of care within the industry.

The presence of intoxicated people in any environment increases the likelihood of crimes and/or injuries. While bars and restaurants are responsible for limiting alcohol consumption, it is challenging to prevent every patron from becoming intoxicated; consequently, the way that an establishment responds to the presence of an intoxicated person is often the crux of a liquor liability dispute.

Questions that are commonly at issue in liquor liability disputes include:

How effective was staffs at identifying the intoxicated patron? Was the intoxicated patron continued to be served alcohol? What measures did the establishment take in safeguarding their customers and

the public?These issues represent critical control points that test how effectively staffs were prepared to handle potentially dangerous situations.

Many states have a requirement that businesses that are permitted to serve alcohol not serve anyone who is visibly intoxicated; permitted also are responsible for providing proper measures to ensure the safety of any intoxicated person on their licensed premises (or when they leave?). These requirements are reflected in the standards of care for the industry and reinforced by the various professional training programs that promote the responsible service of alcohol (e.g., TIPS, TAM, RAMP, etc.). The modern standard of care goes well beyond simply removing drunken people from an establishment or passively posting the phone number for a taxi service. A well prepared bar or restaurant has a variety of best practice recourse options when they identify an intoxicated person.

Hospitality Industry Security Update: “Developing a Cyber breach Strategy”

Throughout the business world, breaches have become a constant reminder of the critical need to assess and take action on cyber risk. But they can also make addressing the issue seem like an ever more daunting task, leading many to either put off substantive measures or blindly buy the latest insurance or software to “take care” of the problem and move on.

“The biggest mistake companies make in the breach recovery process is just not being aware of the risk in the first place,” said John Mullen, managing partner at Lewis Brisbois Bisgaard & Smith LLP and chair of the firm’s data privacy and network security practice. “You would be amazed—I do up to 100 presentations a year, and at 80% of them, people still look at me like it’s the first time they have heard about it, and I have been doing this for over a decade. The people in the know are in the know, but there is an amazing amount of people who have no clue.”

There are countless ways a cyber breach can unfold, and countless ways response can go wrong, but laying the strongest possible foundation ahead of time ultimately makes the difference between successful response and absolute disaster for a company that gets hacked or otherwise compromised. According to Mullen, a breach coach who reports that his firm sees a new breach case every business day of the year, “If you don’t do all of the prep stuff, you’ll never get response right.”

Measures of risk management in hospitality industry:-

His fact is, if your business serves or sells alcohol, you’re probably responsible for the actions of your patrons. And you’re not alone. The following also run the risk of legal liability:

Servers who serve people past the point of intoxication. Occupiers—people, companies or organizations—who are responsible for

protecting persons on their premises. Employers who allow their employees to consume alcohol at events such

as staff parties. Sponsors who allow alcohol to be consumed at their events.

Security personnel who use excessive force to manage intoxicated patrons.

You can better manage these risks by creating and enforcing meaningful policies and procedures, such as:

Limiting overall alcohol consumption. Ensuring that bartenders do not serve obviously intoxicated persons. Offering food service. Encouraging the use of taxis or public transport. Providing reduced or subsidized taxi and hotel rates. Encouraging car pools and designated driver programs. Reminding guests not to drink and drive. Having trained doormen who monitor guests and encourage or insist on

taxi use when necessary. Displaying posters and/or pamphlets from Mothers Against Drinking and

Driving (MADD) or similar organizations.

Top Risks Facing the Hospitality Industry:-

In 2014, a scant 45 percent of Americans planned to take a summer vacation, and even out of those who were planning a getaway, only 35 percent were taking trips longer than a weekend, according to a Marist Poll. Additionally, 30 percent of companies said they were spending less on expensive business travel as a means to cut back expenses. The global recession affected the hospitality and travel industry just as much – if not more – than any other sector, as both consumers and businesses were hesitant to spend money on travel and lodging.

Fortunately, the global economy is improving, which means consumers and businesses are growing more confident about their financial situations. For those in the hospitality sector, this is a good sign, as it may translate into more money spent on vacations or business trips. That said, increased activity may lead to an increased chance of risks. The hospitality sector faces a variety of potentially damaging threats that hotels need to contend with, particularly as they deal with an influx of new leisure and business travellers.

Top Four Risks

1. Data privacy:

Cyber security has been a big concern for a number of sectors, ranging from power and utility companies to government organizations. While those specific industries are more concerned about cyber terrorism, the hospitality business is more focused on preventing data and identifies theft.

Hotels collect a lot of information about their guests to insure themselves against damages and to fuel their own rewards programs. This makes them popular targets among cyber criminals and hackers, as a single breach could result in hundreds or even thousands of pieces of guests’ personal information (names, addresses, social security numbers, etc.) and payment details being compromised. Because of this, they need to make sure this data is protected against fraudsters.

“Many segments of the hospitality industry have rewards programs that encourage customers to frequent a particular establishment or chain,” Think Risk explains. “These programs necessarily store personal and financial information in order to facilitate reservations, billing and payment and benefit awards. In addition, online reservations and payments as well as transactions processed on-site involve collecting credit card or other personal financial information from customers.”

A security breach has huge ramifications. At the very least, businesses are required to contact other guests (past and present) and inform them that their data may have been compromised – this alone can be costly and may also lead to brand damage. If stolen data is used by fraudsters, the businesses may face liability claims for failure to protect data and maintain reasonable safeguards.

As more hospitality and travel companies use digital systems to automate tasks and manage their data, they need to be aware of the potential risks these solutions bring to the table.

2. Guest behaviour:

Guests represent the fuel for any hospitality company. Without guests and travellers, these businesses wouldn’t make any money. However, guests can also potentially be the biggest threats – both directly and indirectly – to profitability. Lawsuits from people who are injured or damage to guestrooms can represent a big risk to the bottom line.

Take, for example, Plim Plaza. In October 2011, the Maryland Department of Health and Mental Hygiene discovered Legionella bacteria in water collected from various locations. Six people fell sick because of the disease, and one of them died. The California-based hotel chain was later sued for $6 million by those who contracted the disease. Another instance of guest risk occurred when the owner of a Hilton condo dropped several beer bottles over a railing. The bottles caused more than $10,000 worth of damage to the hotel’s pool and hot tub, which had to be closed and drained to clear any glass. Additionally, some glass landed on the roofs of other buildings, causing further damage, Hospitality Risk Solutions adds. Hotels should have internal controls in place to handle guest destruction and ensure travellers’ safety during their stay. Small things, such as closer management of property and resources, can prevent incidents like this from happening in the first place.

3. Staff:

Staffs are another critical risk. During the recession, many employees were rooted by their jobs because it was so difficult to find work elsewhere. As the economy improves, staff will have more options both in and outside the industry. This means hotels are at greater risk of having their key personnel poached by their competitors. Hiring and retraining are options, but they come with additional expenses.

Travel and hospitality companies need to address any demographic, wage level and worker satisfaction issues to ensure their staff remains motivated and content. Creative companies are coming up with new retention plans and innovative strategies to help keep employees engaged. At the same time, hoteliers also need to ensure their employees aren’t actively working against

them. Property theft is a big issue at many hospitality companies, given the number of amenities they deal with on a daily basis. While a stolen towel might not seem like much, theft adds up over the course of the year – especially if hotels are part of a larger chain.

4. Branding:

Hospitality companies rely on their brands to drive customers. Popular brands such as Hilton or Marriott are familiar with customers and have become trusted names in the market. They also tend to be very protective of their brands and aren’t afraid to throw their weight around when another company tries to infringe on their trademarks.

For example, the Hilton Prestige Portfolio led to a copyright infringement lawsuit from Prestige Resorts & Destinations, which alleged that Hilton infringed on its trademark and claimed unfair competition.

The number of risks that hospitality businesses are facing is on the rise. It’s paramount that companies take advantage of a  risk management software that can help to discover these threats before they negatively affect business.If you’d like to learn more about how GRC software can help your hospitality business grow, you can request a demo with one of Resolver’s representatives. 

Conclusion:-The hotel and hospitality industry faces countless opportunities for injury and loss at their properties. The creation of a sound and comprehensive risk management policy that limits risk exposure is an effective way to mitigate the potential for injury and loss. A comprehensive and regularly revisited risk management plan does have its associated initial start up and maintenance costs. However, one single claim can distract management from profitable business operations and likely result in increased payouts for losses and insurance premiums. Although it may be challenging for some businesses to make potentially substantial initial investments in risk management, the benefits are significant and well worth the investment. Indeed, even a small investment in sound risk management procedures can yield significant benefits in terms of loss prevention, claim administration savings, indemnity payouts and continued goodwill among employees and guests alike.

References:-

1.http://www.kbrlaw.com/digiacinto1.pdf http://www.hospitalityrisksolutions.com/tag/risk-management/

2.http://www.hotelinteractive.com/article.aspx?articleID=1099

3.http://marketfinancialgrp.com/hospitality-and-restaurant/

4.http://www.scrivens.ca/family-matters/a-risk-management-plan-vital-for-the-hospitality-industry

5.http://www.resolver.com/blog/top-risks-facing-the-hospitality-industry/

6.http://www.pmhs.com/risk-management.php

7.http://www.chrco.com/Management-Services/Risk-Management.asp