Top 3 Hospitality Risks the Industry Faces

The global recession that occurred in 2015 significantly affected the hospitality and tourism industry as people had to forgo vacations and businesses ditched expensive travel to reduce costs. Fast forward to present day, the global economy picked up its revenue, but it is now facing another setback. With the COVID-19 pandemic, the hospitality industry suffered losses yet again. Not only that, there are various hospitality risks that you should manage effectively.

The global community is working together to flatten the curve of COVID infection, however, the tourism and hospitality industry is opening its doors to local and international travel. While people are still hesitant to travel, the hospitality industry is gaining traction slowly, but with infection prevention measures in place. 

These risks are a threat to your hotel. So, you should face them head-on and create a risk management plan. The first thing to do is learning about these risks and how they affect your hotel.

  1. Breach of Data Privacy

Hospitality is one of those industries that embraced digital transformation. Nowadays, inquiry, room reservations, and confirmation are now completed electronically. Whether it’s a dedicated website or mobile app, the hospitality industry is a big user of technology in serving its customers.

The process often includes gathering personal information such as name, contact number, email addresses, and even IDs. These details are prone to cyberhacking. Thus, if your hotel’s network system isn’t secure, you are at risk of cybercrime.

In case you experience a cybersecurity breach, you have to perform necessary actions to control further damage and liability. First, you have to inform your customers about the breach.

Breach of data security and privacy hurts your brand. So, be prepared for customers bombarding you with calls, emails, or messages about the breach. You should also expect some lawsuits against you to brace for these potential hospitality risks.

2. Guest-Related Risks

Guests and travelers are your sources of profit, so you have the responsibility to secure their safety during their stay. Despite them being your biggest source of income, they also pose significant hospitality risks.

You can get sued if your guests sustain any form of harm during their stay in your hotel. Whether the cause is lack of diligence or accident, your guests can sue you for damages. These lawsuits can drain you financially. Moreover, lawsuits are stressful. The most significant impact of these lawsuits reflects on your brand image.

Another risk is when guests misbehave during their stay. These behaviors can cause damage to your hotel’s property, but you can charge the customer for these damages.

You can identify whether property damage is deliberate or not. Use internal controls to handle guest misbehavior. Implement safety measures by providing clear warnings and instructions during emergencies.

3. Negative Impact on Branding

The hospitality industry is big on branding strategies, and hotels go to great lengths in developing a brand that guests remember.

Often, these branded and luxury hotels have a clear understanding of what their customers want. They build their services and products based on these desires. 

However, mistakes happen, such as not living up to customer’s expectations, and lawsuits can negatively impact your brand. You may lose potential and regular clients. A reduced number of guests may mean lower income.

One unhappy guest can’t lead to brand damage overnight. But, if the guest is an influential person and becomes dissatisfied, you’re risking your brand name. They can quickly post their experience in your hotel. Thus, make sure your employees are courteous at all times.

Your Solutions to These Risks

First, make sure your employees are well trained to face any compromising situation. Let them know about the OSHA guidelines for the hospitality industry, and ask for their feedback on ways to improve the hotel. They’re the backbone of your hotel’s success, and listening to their opinion will not only validate them as your employees, but help to resolve issues a hotel owner might not notice. Hotel owners can always look for ways to improve.

Second, get an LA Hospitality Insurance to protect you and your business from these risks. You can claim benefits for these covered situations, provided they’re part of your coverage.

Finally, adopt an effective risk management plan. We are not only talking about insurance. We refer to the overall risk management strategy to minimize losses.


The hospitality industry has a unique way of doing its business. It faces various risks that require business owners to insure their valuable assets. Running a hotel is difficult, but it can be much less stressful if you have insurance to cover losses and costs of liabilities.

About Arroyo Insurance Services

Arroyo Insurance Services was officially established in 1986, but we have roots dating back to before 1950. One of California’s leading client-oriented and independently owned agencies, we have over 140 employees with a combined experience of over 450 years, spread across 11 locations. We are committed to providing the best insurance and risk management services at the most competitive premiums, and backing it with hands-on service tailored to our customers’ needs. For more information on how we can mitigate your risks, contact us today at (877) 220-4769.