7 Critical Risks Facing the Hospitality Industry (2023)

A storm is brewing for the construction industry as a skilled-labor shortage lengthens job times and contributes to higher rates of injury. But there are risk tools that can help contractors get ahead.

7 Critical Risks Facing the Hospitality Industry (1)

A lack of labor in any industry has many implications, from decreases in productivity to increases in workers’ compensation claims. For the construction industry, a labor shortage can contribute to delays in project completion, issues with quality control, increased builder’s risk costs and more.

“Labor is a significant issue in today’s industry,” said David DeSilva, Head of Construction for The Hartford’s Middle & Large Commercial. “Skilled labor shortages hinder the ability of construction companies to uphold the timeliness or contractual requirements with the owner or higher-tiered contractors.”

An Associated Builders and Contractors analysis revealed the construction industry will need more than half a million workers above its current pace of hiring in order to meet demand. That would mean, the report estimated, an additional 650,000 workers.

“When you think about shortages and some of the issues they can cause, there are job delays, reengineering of construction sequences, a shift in the business model. They may be going from self-performed to more subcontracted work,” DeSilva said.

“As an example, if a trade doesn’t have enough workers and laborers to complete the job, they may subcontract part of that or all of that work out to someone else.” And even this practice has its own risk implications to contend with.

It’s no doubt, either, that the pandemic has increased the need for laborers. According to DeSilva, however, this was a growing concern pre-pandemic as well: “More workers were leaving the field than entering it, and firms were beginning to address the issues pre-pandemic.”

Now with the Great Resignation in the mix, an aging workforce and low interest from younger professionals, the construction industry needs to act in order to attract and retain skilled talent and mitigate against risk.

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Here’s a deeper dive into what’s going on in construction, the insurance implications of a labor shortage and how construction professionals can start to course-correct and bring on the skilled talent they need to thrive.

Understanding Your Labor Shortage Exposures

As noted, a lack of labor can lead to several risk exposures. For the industry, specifically, there are a few key things that construction risk professionals should know in order to get a grip on mitigating risk.

A key component of construction is job bidding. Contractors meet with potential clients to give them a proposal for completing their project. Subcontractors use this bidding process to showcase their skills to the contractors to be considered for the job.

But with less labor, contractors aren’t able to take on as many jobs at the same time.

“You’re seeing firms be more selective in their bids and more selective in the work they’re taking on,” DeSilva noted. This means bidding has become more competitive in nature, thus driving up project costs for higher-tiered contractors or the owner, placing a strain financially on the project.

Less workers can also lead to workmanship issues.

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“When you think about less experienced workers coming onto site and completing these jobs, there is a potential for downstream implications on the quality of work,” said DeSilva. Added to that, he said, newer workers could lead to timeliness issues as they take their time to become more familiar with the requirements of the job.

Also, less labor impacts timeliness in that contractors must adhere to safe shifts for workers, and fewer employees means less shifts, which could lead to longer project completion times. Some construction jobs last months — and even years — depending on the type of program and project it is.

Insurance Strains to Note

A skilled-labor shortage has the potential to impact all lines of insurance, no matter the size or scale of the project. DeSilva called attention to a handful that should be at the top of the consideration list for construction risk professionals to review.

Number one is workers’ compensation.

“It’s no secret that older workers take longer to recover from injury, which clearly impacts claim dollars and claim payouts,” he said. “Data has shown that less experienced workers, at the opposite end of the spectrum, tend to get injured more often, and with less workers in the field, there are higher demands on the workers that are left.”

It’s the perfect storm for potential mistakes or oversights, which can lead to more injuries.

It also has workmanship implications, as fewer workers under more pressure could possibly miss key performance and quality checks. That can lead to builder’s risk, yet another insurance line that feels the strain of the lack of labor in construction.

“Then there’s the overall economic inflation, driving loss dollars, medical costs, material costs, safety equipment — everything is increasing at record highs,” DeSilva added.

He said depending on the insurance program structure, these loss dollars could be directly paid by the contractor and indirectly through the insurer.

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Safety as a Way to Bring in Skilled Labor

Safety and training have to be at the forefront of recruitment and retention of workers.

Not only will a strong safety training program bring down the number of injuries and help prevent risk, but it will also create a culture of safety among laborers. That in turn shows these workers their employer cares about their wellbeing and gives them a sense of security in their job.

“Risk managers and safety directors are really beefing up their training and safety programs in an effort to mitigate loss and retain the talent that they already have,” said DeSilva. A key way they’re doing this is by looking to technology for safety solutions.

“When you think about the implementation of onsite imagery, or water sensors, wearables on workers, or telematics in vehicles,” said DeSilva, “these technological devices are going to help drive down loss costs and ultimately benefit both the firms and the workers.”

Partnering with a Team Skilled in Construction’s Demands

Once construction firms understand the labor shortage and its impacts, it can be hard to determine what to do next. Implementing a quality safety program is a good start, but knowing exactly what that entails will require an insurance partner that can guide contractors and construction risk professionals towards the best solutions for them.

At The Hartford, the risk engineering consultants are trained to know what to do to help.

“Our risk engineering team consultants have a wealth of knowledge and experience in the industry, as many of them have come from the contractor side,” said DeSilva.

“They have the training from the contractor seat and have the ability to review safety programs and identify hazards and offer recommendations for improvement. When you’re working through a labor shortage every day, it’s easy to overlook things. A new perspective from people who understand your industry goes a long way.”

The Hartford also has an Accredited Industrial Hygiene Lab dedicated to giving firms the opportunity to monitor and improve occupational health, further reducing workers’ comp claims and bolstering safety efforts to keep workers safe.

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When a claim does roll in, claims professionals at The Hartford are ready to act: “We have medical clinicians who help manage claims, and data experts that are solely dedicated to claims. Our claims team is able to identify trends, highlight exposures and save on medical costs,” DeSilva said.

“The labor shortage is likely going to continue to be a challenge for the foreseeable future. How contractors handle the shortage will be a major factor in their performance and the reputation of their firm,” he added.

“The industry is continually evolving, and organizations that frequently update their safety and training programs are going to minimize and mitigate their exposure to loss.”

To learn more, visit: https://www.thehartford.com/business-insurance/construction.

The information provided in these materials is intended to be general and advisory in nature. It shall not be considered legal advice. The Hartford does not warrant that the implementation of any view or recommendation contained herein will: (i) result in the elimination of any unsafe conditions at your business locations or with respect to your business operations; or (ii) be an appropriate legal or business practice. The Hartford assumes no responsibility for the control or correction of hazards or legal compliance with respect to your business practices, and the views and recommendations contained herein shall not constitute our undertaking, on your behalf or for the benefit of others, to determine or warrant that your business premises, locations or operations are safe or healthful, or are in compliance with any law, rule or regulation. Readers seeking to resolve specific safety, legal or business issues or concerns related to the information provided in these materials should consult their safety consultant, attorney or business advisors. All information and representations contained herein are as of August 2022.

The Hartford Financial Services Group, Inc., (NYSE: HIG) operates through its subsidiaries, including the underwriting company Hartford Fire insurance Company, under the brand name, The Hartford®, and is headquartered in Hartford, CT. For additional details, please read The Hartford’s legal notice at www.thehartford.com.

7 Critical Risks Facing the Hospitality Industry (3)

This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with The Hartford. The editorial staff of Risk & Insurance had no role in its preparation.

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The Hartford is a leader in property and casualty insurance, group benefits and mutual funds. With more than 200 years of expertise, The Hartford is widely recognized for its service excellence, sustainability practices, trust and integrity.

FAQs

What are the risks facing the hospitality industry today? ›

The most apparent and common risk in the hotel industry is fire loss. From grease buildup in the kitchen to electrical hazards throughout the business, a hospitality venue is full of property risks. Many hotels enforce strict guidelines for building and health code regulations.

What are the 7 components of the tourism and hospitality industry? ›

  • Accommodations and.
  • Lodging.
  • Recreation and.
  • Entertainment.
  • Travel Services.
  • Food and Beverage Services.
  • Conventions and Event.
  • Management.

How can we reduce the risk factors in the hospitality industry? ›

Ways to minimise risks include:
  • Developing and implementing safe systems of work;
  • Making sure workers follow these safe ways of working and use appropriate personal protective equipment;

What is risk assessment in the hospitality industry? ›

You must manage the health and safety risks in your workplace. To do this you need to think about what, in your business, might cause harm to people and decide whether you are doing enough to prevent that harm. This is known as a risk assessment.

What are the 4 risks facing the hotel industry? ›

Here are the top five:
  • Identity theft leading to credit card fraud. ...
  • Silent invasions – Cyber-crime attacks are powerful tactics from next generation criminals. ...
  • Longer or no security audit cycles. ...
  • Physical crime will remain an issue for hotels in 2015. ...
  • Loss of competitive advantage after a major security incident.
22 Jan 2015

Why risk is important in hospitality industry? ›

The risk of injury on premises is very high in the hospitality industry. Due to the high number of guests that go through your doors each day, it is essential to minimize this exposure by taking certain precautions.

What are the 7 elements in the hospitality concept framework? ›

A Hotel Concept is designed around 7 components that cover all aspects of running it successfully: The Story, The People, The Space, The Identity, The Services, The Content, and The Channels. Starting from the central story, components are interconnected and work side by side to build a unique, coherent whole.

What are the basic elements of tourism class 7? ›

The five vital components of tourism system are Attraction, Accessibility, Accommodation, Amenities and Activities.

What is hospitality risk management? ›

Hotel risk management entails identifying, evaluating, prioritizing, and controlling risks to enterprises in the hotel industry. Hotel management faces several types of risk: Operational risk to day-to day operations. Project risk, encountered when building or expanding a hotel.

Why is risk management important in hotels? ›

With an increasing number of risks in hotels, risk management is more important than ever. A risk management system helps ensure workplace safety for customers and teams. Beyond accident prevention, it also helps improve operational efficiency.

What is risk assessment Short answer? ›

A risk assessment is a process to identify potential hazards and analyze what could happen if a hazard occurs. A business impact analysis (BIA) is the process for determining the potential impacts resulting from the interruption of time sensitive or critical business processes. There are numerous hazards to consider.

What are the 4 types of risk? ›

The main four types of risk are:
  • strategic risk - eg a competitor coming on to the market.
  • compliance and regulatory risk - eg introduction of new rules or legislation.
  • financial risk - eg interest rate rise on your business loan or a non-paying customer.
  • operational risk - eg the breakdown or theft of key equipment.

What are the 8 common problems of hotel? ›

Here is a list of the most common customer complaints in hotels-
  • Lack of self-serve options. 70% of guests want to use technology to speed up service time. – ...
  • Unclean rooms. ...
  • Bad staff attitude. ...
  • Mechanical issues. ...
  • Lack of communication. ...
  • Poor customer service. ...
  • Poor food or beverage quality. ...
  • Noisy neighbors.
5 May 2022

What are the risks in services? ›

  • CYBER RISKS. For any organization, one paralyzing data breach is all it takes to impact customer privacy and impede a company's ability to function. ...
  • EMPLOYEE INJURIES. ...
  • EMPLOYMENT PRACTICES. ...
  • EQUIPMENT FAILURES. ...
  • ERRORS AND OMISSIONS. ...
  • EVOLVING WORKFORCE DYNAMICS. ...
  • GOING GLOBAL.

What are the major risks which can affect tourism? ›

Examples include:
  • Natural disasters – these include earthquakes, volcanic eruptions, tsunamis and floods, hurricanes and other extreme weather disasters. ...
  • Political issues – political unrest is common in developing countries, and they often have an impact on tourism.
8 Jun 2020

How do you handle risk in your own personal life? ›

7 Ways to Apply Risk Management to Your Personal Life
  1. You should surround yourself with the proper individuals. ...
  2. Educate yourself in whatever it is you are doing. ...
  3. Only listen to the people who have what you want. ...
  4. Understand you can't have the good without the bad. ...
  5. Remember to enjoy the little things in life.

How important is risk management in hospitality management? ›

Risk management helps employees to identify, analyze, assess, and hopefully, avoid or mitigate risks coming from a variety of sources, such as financial upset, legal ramifications, accidents, natural disasters, data or cyber security breaches, and many more.

Why knowing the risk is important? ›

Importance of Risk Management

Risk management is an important process because it empowers a business with the necessary tools so that it can adequately identify and deal with potential risks. Once a risk has been identified, it is then easy to mitigate it.

What is the most important thing in hospitality industry? ›

Service is the key in the Hospitality Industry

Good service is the key to success in any hospitality business. Many customers rely on internet reviews to decide whether to visit a business – and just a couple of dissatisfied customers sharing their experiences online can quickly put you out of business.

How can the hospitality industry be improved? ›

  1. Personalize, personalize, personalize.
  2. Post-booking communication.
  3. Offer freebies and complimentary services.
  4. Implement in-room technology.
  5. Be proactive in your service.
  6. Reward repeat guests.
  7. Offer multiple communication channels.
  8. Create an inclusive experience for all.

What are the 10 basic principles of hospitality managers? ›

10 Ethical Principles for a Hospitality Manager
  • #1 Honesty. People around the world appreciate honesty and to become a successful hospitality manager, you have to be honest and truthful in all your dealings. ...
  • #2 Integrity. ...
  • #3 Trustworthy. ...
  • #4 Loyalty. ...
  • #5 Fairness. ...
  • #6 Respect. ...
  • #7 Commitment. ...
  • #8 Leadership.
1 Aug 2016

What are the current issues in hospitality industry 2022? ›

The 10 trends that are shaping the hospitality industry in 2022
  • Bleisure travelers & hotel work spaces. ...
  • Holistic hospitality, health & well-being. ...
  • Digitalized guest experiences. ...
  • Personalization. ...
  • Experience economy & essentialism. ...
  • Asset management strategy. ...
  • Solo travel. ...
  • Sustainability.

What are the top 10 current issues and trends in hospitality and marketing industry? ›

Read “Contactless Payments Are Becoming More Important Within Hospitality” for more information.
  • Voice Search & Voice Control. ...
  • Virtual Reality Tours. ...
  • Mobile Check-In Service. ...
  • Local Experience. ...
  • Healthy and Organic Food & Drinks. ...
  • Sustainability. ...
  • Personalisation. ...
  • Artificial Intelligence.
12 Sept 2022

What are the top 5 ethical issues in hospitality business? ›

This, of course, leads to an increase in popularity, customer loyalty and profits.
  • Employee Theft. Employee theft is an ethics issue in nearly every industry. ...
  • Dishonest Cleaning Practices. When guests stay at a hotel, they expect to stay in a clean room. ...
  • Providing Inferior Supplies. ...
  • Hotel Espionage.
14 May 2020

What are the 4 components of the hospitality & tourism industry? ›

The hospitality industry is vast and can be broken down into separate sectors. The top four sectors consist of; 'Food and Beverage', 'Accommodation', 'Travel and Tourism' and 'Entertainment and Recreation'. Although the industry is segmented, there is significant overlap to improve customer experience.

How important is the components of tourism supply in the destination management? ›

The tourist supply inspires, conducts, and affects the entire tour. If any one of the above given components does not work well, it impedes the experience of the tourists and the tour does not turn out to the tourists' satisfaction.

› Hotel & Hospitality Tips ›

In this article, you will learn more about the nature of the hospitality industry, the various sectors contained within it, and its connections to the hotel ind...
The tourism sector offers countless fun and financially rewarding career opportunities, some of which include a travel agent, tour guide, hotel manager, theme p...
The hospitality & tourism industry is a vast sector that includes all the economic activities that directly or indirectly contribute to travel and tourism.

What is the biggest challenge facing the hospitality industry? ›

Five Biggest Challenges Facing The Hospitality Industry in 2022
  • Staff Shortages and Retention. ...
  • Cost of Living Crisis. ...
  • Increase in Hospitality Tech. ...
  • Environmental considerations. ...
  • Meeting demand.

What are the issues being faced by hospitality and tourism industry? ›

Labor and skills shortage has been identified as one of the challenges that are facing the tourism and hospitality industry. This has mostly been complicated by the emergence of new technologies and trends that need to be satisfied and attended to.

What are the 8 common problems of hotel? ›

Here is a list of the most common customer complaints in hotels-
  • Lack of self-serve options. 70% of guests want to use technology to speed up service time. – ...
  • Unclean rooms. ...
  • Bad staff attitude. ...
  • Mechanical issues. ...
  • Lack of communication. ...
  • Poor customer service. ...
  • Poor food or beverage quality. ...
  • Noisy neighbors.
5 May 2022

What are the top 10 current issues and trends in hospitality and marketing industry? ›

Read “Contactless Payments Are Becoming More Important Within Hospitality” for more information.
  • Voice Search & Voice Control. ...
  • Virtual Reality Tours. ...
  • Mobile Check-In Service. ...
  • Local Experience. ...
  • Healthy and Organic Food & Drinks. ...
  • Sustainability. ...
  • Personalisation. ...
  • Artificial Intelligence.
12 Sept 2022

What are the five challenges within the hospitality industry? ›

The top five challenges facing hotels in 2019
  • Technology. The hospitality industry should see technology as an opportunity and not a threat. ...
  • Experience. Consumers want more from a hotel – an experience not just a stay. ...
  • Staff. ...
  • Competition. ...
  • Sustainability.

What is problem solving in hospitality industry? ›

Problem-solving is one of the central parts of working in hospitality because you have to be able to identify the problems guests are having, create a plan of action to resolve them and follow through with guests afterward to ensure their satisfaction.

What are the problems faced by hotel industry due to lack of it? ›

The major problems plaguing the hotel industry in India is the lack of skilled professionals and retaining the same. This is because the wages are not at par with international industry standards and more and more employees prefer to shift to aviation or retail management when they are not satisfied with their job.

What are the problems and challenges facing tourism industry? ›

Top challenges confronting tourism are taxation, travel marketing, infrastructure issues, and security and cross border regulations. Too many tourism destinations are not prepared for visitors.

What is the biggest problem that the tourism industry is facing today? ›

'Economic uncertainty' highlighted as biggest challenge facing the travel industry.
...
Key Challenges in percentages:
Economic uncertainty53%
Climate Change44%
Technology skills gaps40%
Brexit25%
Terrorism24%
3 more rows
9 Jan 2020

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