How risk, resilience, and insurance strategy shape the modern hotel business

Risk has become one of the most defining forces shaping the modern hotel business. What was once a backoffice consideration is now a boardlevel priority, reshaped by climate extremes, volatile markets, rising construction and operating costs, cyber disruption and a tightening regulatory landscape. For hotel leaders, the ability to anticipate and manage these pressures is now inseparable from financial performance and guest experience.

Uncertainty is no longer an occasional challenge but a constant operational reality. Weather events, tax changes and sudden market shifts can disrupt revenue and continuity overnight, making risk management not just a safeguard but a strategic lever that touches every part of the hotel enterprise.

At the same time, resilience has evolved dramatically. Today, it spans valuation accuracy, leak detection technology, cyber maturity, business continuity planning and climate adaptation – all at a time when margins are compressed and expectations are rising. Hotels are being asked to protect more assets, mitigate more exposures and demonstrate greater accountability, without compromising service.

Below, Max Palmer-Jeffery, Client Relationship Manager at Howden, explores what this new risk landscape means in practice: the structural shifts reshaping the sector, the data behind emerging exposures and the strategies enabling leading hotel groups to secure stronger terms, improve insurability and stay ahead of fast-moving risks.

How has the risk profile of hotels evolved in recent years, and which emerging risks should hoteliers be prioritising at board level today?

The risk landscape facing hotels today is more complex, interconnected, and fast moving than at any point in recent memory. Several shifts – extreme weather, increasing digitalisation, supply chain fragility, evolving guest expectations, and heightened regulation have combined to reshape the exposures that hotel owners and operators must navigate.

One area that continues to present significant challenge is underinsurance. Hotels are, by nature, intricate and high-value assets, and their reinstatement costs have been rising steadily. Data showing that more than half of buildings surveyed were underinsured prior to professional appraisal reflects a widespread gap that leaves properties vulnerable to significant financial shortfall following a loss. Conversely, a portion of hotels were found to be overinsured, leading to unnecessary premium expenditure. This imbalance creates inefficiencies and drains value from an already margin-pressured sector.

Parallel issues appear in business interruption (BI) exposures. Recovery timelines – once assumed to fall comfortably within 12 month indemnity periods – have been steadily lengthening. Factors such as property ownership structures, building heritage status, complex reinstatement requirements, and brand sensitivity can all contribute to extended downtime. In hotels that rely on celebrity endorsements, influencer partnerships, or strong online engagement, even brief closures can result in reputational harm that outlasts the physical impairment. Many BI indemnity periods still fall short of what modern recovery demands, highlighting the need for reassessment at board level.

Operational risks such as escape of water have also intensified. With dense plumbing networks, extensive guest bathrooms, and continuous refurbishment activity, water damage has become one of the most frequent and costly claims in the sector. Incidents have the potential to reach sevenfigure sums, reflecting not only physical repairs but also lost trading days, guest relocations, and damage to interiors. Hotels investing early in leak detection and shutoff technologies are already seeing substantial reductions in downtime and improved risk profiles when approaching the insurance market.

Climate-related exposure is another growing priority. With extremes of weather becoming increasingly common and millions of UK properties projected to face flood risk by midcentury, insurers now expect hotels to demonstrate clear climateresilience strategies. These may include upgraded drainage, flood defences, landscaping adjustments, or enhanced emergency procedures – each contributing to improved insurability and reduced exposure.

Cyber risk continues to accelerate at a pace unmatched by almost any other threat category. High-profile system breaches affecting both hotel management platforms and guest data highlight the industry’s dependence on digital infrastructure. The wide adoption of IoT technology increases convenience but introduces new vulnerabilities, particularly in environments where system maturity has not kept pace with technological expansion. With a significant proportion of hotels having experienced IoT-related security incidents, cyber resilience must now be treated as a cornerstone of operational safety rather than an IT concern.

Together, these developments emphasise a crucial message: hotel risk is shifting, and leadership teams must shift with it.

How can hoteliers ensure they are securing the right cover without compromising protection or value?

Hotels that consistently secure favourable insurance terms typically demonstrate clear control over the factors within their influence. At the centre of this is ensuring that property valuations are accurate, current, and professionally supported. In a climate where construction costs, materials pricing, and labour availability fluctuate rapidly, accurate reinstatement values form the foundation of insurability. The same applies to business interruption cover, where indemnity periods must realistically reflect today’s lengthening recovery trajectories.

Insurers increasingly reward transparency and robust risk management. Programmes that perform best are those supported with clear evidence of preventative measures across key exposures — such as fire protection, waterdamage mitigation, cyber security, flood resilience, and strong governance. Demonstrating these controls not only influences premiums but also broadens the scope of available cover and provides reassurance that the hotel fully understands its operational vulnerabilities.

Yet the most significant differentiator lies in the quality of the submission narrative. A generic, templatestyle proposal no longer satisfies underwriter requirements. Today’s insurers look for detailed, sitespecific insights, including comprehensive documentation, maintenance and testing schedules, justifications for BI assumptions, and evidence of investment in resilience-enhancing initiatives. A strong, data-driven story can transform the underwriting conversation, shifting the hotel from a perceived exposure to a strategically managed risk.

Hotels that focus on creating clear, credible, and compelling submissions not only secure more competitive pricing, but also build trust-based relationships with underwriters – relationships that lead to longterm stability and mutually aligned objectives.

What role does risk management beyond insurance play in protecting profitability and asset value in the hospitality sector?

Risk management extends far beyond the confines of insurance placement. It is the strategic framework that keeps hotels operational, protects revenue streams, safeguards guests and staff, and preserves asset value. The most resilient hotel operators adopt a forward looking, preventative approach rather than relying on reactive measures.

Central to this is the accuracy of valuations and business interruption modelling. Failure to update these areas can leave hotels dangerously exposed to underinsurance penalties, particularly as reinstatement timelines and costs continue to increase. A misalignment between expected recovery duration and actual repair time can have severe financial consequences, turning an insurable event into a long-term commercial setback.

Preventative investment has become an essential element of asset protection. Whether modernising cyber infrastructure, installing leak detection systems, strengthening flood resilience, or enhancing building integrity checks, the cost of preparation is almost always lower than the cost of recovery. Hotels that delay planned upgrades or defer essential maintenance often face extended closures, higher claim severity, and reputational damage that can take years to unwind.

The regulatory environment further amplifies the need for strategic risk oversight. Martyn’s Law represents one of the most significant recent changes to public safety legislation, placing new responsibilities on hospitality venues of all sizes. These include formal risk assessments, documented procedures, staff awareness, and proportionate protective measures depending on venue capacity. Noncompliance carries consequences that extend across regulatory, legal, financial, and reputational domains.

Ultimately, hotels that treat risk management as a core strategic function – embedded across leadership, operations, and culture – are the ones best positioned to remain profitable, insurable, and resilient amid growing complexity.

How should hotel owners and operators think about resilience and business interruption in an era of extreme weather events and operational volatility?

Resilience today requires both realism and readiness. Disruptions rarely follow predictable patterns, and modern recovery timelines often exceed historical benchmarks. Many complex hotel operations struggle to return to preloss trading conditions within a traditional 12 month BI period, reinforcing the need for longer, more realistic indemnity durations aligned to contemporary risks.

Flood resilience has emerged as a priority area. With extreme weather becoming increasingly common, hotels must understand their exposure and implement protective measures, whether structural, operational, or procedural. Demonstrating tangible resilience investments not only reduces daytoday vulnerability but also strengthens the hotel's position in insurance negotiations.

Operational volatility also demands robust scenario testing. Strikes, supply shortages, equipment failures, or sudden outages can all disrupt operations in ways that standard procedures may not anticipate. By conducting structured simulations, hotels can identify hidden vulnerabilities, streamline internal processes, and improve response capability long before an incident occurs.

Cyber threats, too, must be woven into resilience planning. As digital dependency grows, continuity plans must include offline contingencies, well-tested recovery protocols, and clear role assignments. The fastest-recovering hotels are those that treat cyber continuity with the same importance as physical safety measures.

A mature Business Continuity Plan (BCP) remains the backbone of resilience. A welldeveloped BCP supports decision making during crises, reduces fragmentation, sustains guest confidence, and accelerates the path back to full trading. Hotels that invest early in continuity structures demonstrate organisational maturity that directly influences the availability and affordability of insurance cover.

What advice would you give to hotel groups navigating growth, refurbishment, or brand transition from an insurance and risk management perspective?

Periods of transformation – whether driven by expansion, refurbishment, rebranding, or repositioning – bring a distinct set of risks that must be managed proactively. Changes to building layout, contractor presence, temporary safety system adjustments, and modified occupancy patterns all influence the risk profile.

Refurbishment projects frequently introduce issues when insurers are not informed early enough. Contractor activity, hot works, and temporary fire protection arrangements mean exposure levels shift significantly during construction phases.

Failure to notify insurers can jeopardise cover precisely when it’s most needed.

Business interruption risk also evolves during redevelopment. Phased openings, partial trading, and temporary closures each affect revenue flow and guest behaviour. If these structural changes are not reflected in the BI modelling, hotels may unknowingly leave themselves exposed to gaps that emerge only during a loss.

Hotels that involve risk engineers and insurance advisors early in the planning cycle consistently achieve better outcomes. This early engagement supports safer architectural choices, clearer documentation, improved site controls during construction, and smoother insurer approval. Proactive planning transforms risk management into an enabler of successful project delivery rather than a late-stage compliance hurdle.

Get in touch with Max

max.palmer-jeffery@howdeninsurance.co.uk

07974 253 097

Or request your free insurance review here