Nestled deep in one of Canada’s COVID-19 hotspots, the Four Seasons Hotel in Montreal has made the tough decision to close until further notice.
When Quebec Premier François Legault moved the Greater Montreal area, the Capitale Nationale area in Quebec City, and the Chaudières-Appalaches region into red alert on September 28, that plunged the three regions back into a 28-day partial lockdown to prevent further community spread of the coronavirus. The Four Seasons Hotel Montreal was not alone in closing its doors on a temporary basis. Many businesses in the region, and elsewhere across Canada, have had to take similar action due to COVID-related lockdowns.
Major downtown hotels and hotel chains have struggled massively throughout the pandemic. With business travel and leisure travel basically halting, large hotels in downtown cores have experienced huge drops in business. Some have reported occupancy rates of 10% or lower, when in normal times, they would have 80+% of their 300 rooms going at a premium price every night. With less people travelling, hotels are drastically reducing their rates to encourage people to stay, with some high-end hotels charging less than $120 per night in major city centres.
“That presents many challenges,” said Karim Chandani (pictured), vice president of hospitality at HUB International. “There are huge cost pressures on our hotel clients right now. When COVID-19 first struck, the wage subsidy did help to some degree, and, beyond that, the banks supported businesses with six-month loan payment deferrals. But a lot of that support is now coming to an end. At the same time, the summer season is over, everybody’s back to school, and hotels are close to being empty.
“As a result, more and more hotels in city centres like Montreal, Vancouver and Toronto are deciding to close down on a temporary basis. The Four Seasons Hotel Montreal is a perfect example, where they realized they were better off closing down temporarily and preserving whatever cash they have to start over, hopefully, when the economy picks back up again.”
Hotels that have closed or are planning to close need to consider the insurance implications of that choice. When commercial properties are left idle or vacant, they face a different set of exposures to when the business is operating normally. Insurers typically view unoccupied properties as having increased loss exposure, especially when it comes to risks like fire, theft, vandalism, and weather events. While each insurer will determine unique provisions in their policies for vacant properties, the general rule is that if a building is left idle for more than 60 consecutive days before a loss occurs, then insureds may struggle to get certain coverage.
There are many checks and balances that hoteliers, other business owners and property managers can do to keep their properties safe and secure during a temporary shutdown. As Dom Lopes, assistant vice president, first party & risk control services, at RSA Canada told Insurance Business, a lot of the most important preventative measures revolve around property maintenance and risk mitigation actions.
“Before closing a business and vacating a property, it’s critical for business owners to ensure that all maintenance and service elements are taken care of so that the property is prepared for an extended shutdown. For example, they need to set the temperature in the building,” he said. “It’s OK to conserve energy while you leave a property idle, but […] we advise keeping the temperature around 15C as this helps to prevent sprinkler systems and water pipes from freezing and bursting. On that note, it’s also important to test your sprinkler system and your water system to ensure that everything is running normally.”
As well as carrying out regular business maintenance and service checks, hoteliers also need to consider the increased risk of crime if they close their businesses, and how they can mitigate that risk with appropriate security devices, lighting, check-ups and so on. They also need to inspect the immediate surroundings of their properties and “conduct regular checks of their roofs, their downspouts, and any outdoor drains to ensure everything is properly maintained,” explained Lopes. All of this maintenance is particularly important as we approach the winter months.
With hotel clients facing such a hoard of challenges, the advocacy role of the insurance broker goes well beyond selling an insurance product, Chandani stressed. He said: “We have to take a holistic view at these hotel businesses and their finances to see where we can help them. I have these conversations with hoteliers all the time: ‘Let’s look at your finances. Where can we make some changes? Let’s look at snow removal – that’s the next big expense coming up. Can we bring that in-house without creating any extra liability issues? Are you temporarily closing your hotel? Let’s look at how we can work with an insurance company to create a checklist so that you don’t have to have somebody at the property 24-hours-a-day.’
“All of these things that we do can really hoteliers to save some money. At the end of the day, my role as a broker is to do everything I can for my client. I’m not just here to sell them insurance; I’m here to provide a total package of service to them. I have about 250 hotel policies across Canada, and it’s my job to work with each and every one of them to ensure they have access to the latest information and the latest in risk mitigation tactics so that they can protect their businesses and save some money in this difficult time.”