Targeted insurance offers hotels some relief in coronavirus fight
Organisers of events called off because of the coronavirus are likely to miss out on insurance payouts because typical policies do not cover epidemic outbreaks. Hotels hit by cancellations may fare better.
That is because a new type of insurance launched by Lloyd’s of London just last year offers hotels compensation when revenue per available room – a key metric for the industry – drops below A certain level because of factors they could not predict or control.
Insurance experts Reuters has interviewed say such policies define an insured event as a case when actual results diverge from forecasts because of unforeseen circumstances and the virus outbreak fits those criteria.
None of the insurers involved would offer details on demand for the product and major hotel groups declined to discuss their insurance coverage.
But the backing of some of Lloyd’s largest insurers suggest it has been offered widely, potentially providing some respite to an industry, insurance experts say.
Data from STR, analytics specialist that runs a benchmarking platform for over 68,000 registered chains, groups and individual properties shows revenue in mainland China fell 21.2% in January from a year earlier and 35.5% in Wuhan, where the outbreak started.
Hong Kong, San Francisco, New York and Thailand also saw declines.
“We have seen a decline in performance across a number of markets because of the coronavirus,” Thomas Emanuel, STR director, told Reuters.
Hyatt Hotels has extended waivers on cancellations and changes in bookings for travelers in several countries. Marriott has said it expects a roughly $25 million hit to its monthly fee revenue, while IHG has also seen cancellations.
3 hotel groups contacted by Reuters declined to comment, while 2 others did not respond.
Insurers and hotels rely on STR data to trigger a payout when the revenue per available room parameter’s drop reaches a certain level as decided in individual policies and because of any unforeseen event.
By Noor Zainab Hussain and Carolyn Cohn
(c) Copyright Thomson Reuters 2020