By Resolver and WAKEUP CALL
The global economy is improving, which means consumers and businesses are growing more confident about their financial situations. For those in the hospitality sector, this is a good sign, as it may translate into more money spent on vacations or business trips. That said, increased activity may lead to an increased chance of risks. The hospitality sector faces a variety of potentially damaging threats that hotels need to contend with, particularly as they deal with an influx of new leisure and business travelers.
Top Four Risks
1. Data privacy: Cyber security has been a big concern for a number of sectors, ranging from power and utility companies to government organizations. While those specific industries are more concerned about cyber terrorism, the hospitality business is more focused on preventing data and identify theft.
Hotels collect a lot of information about their guests to insure themselves against damages and to fuel their own rewards programs. This makes them popular targets among cyber criminals and hackers, as a single breach could result in hundreds or even thousands of pieces of guests’ personal information (names, addresses, social security numbers, etc.) and payment details being compromised. Because of this, they need to make sure this data is protected against fraudsters.
A security breach has huge ramifications. At the very least, businesses are required to contact other guests (past and present) and inform them that their data may have been compromised – this alone can be costly and may also lead to brand damage. If stolen data is used by fraudsters, the businesses may face liability claims for failure to protect data and maintain reasonable safeguards.
As more hospitality and travel companies use digital systems to automate tasks and manage their data, they need to be aware of the potential risks these solutions bring to the table.
2. Guest behavior: Guests represent the fuel for any hospitality company. Without guests and travelers, these businesses wouldn’t make any money. However, guests can also potentially be the biggest threats – both directly and indirectly – to profitability. Lawsuits from people who are injured or damage to guestrooms can represent a big risk to the bottom line.
Take, for example, Plim Plaza. In October 2011, the Maryland Department of Health and Mental Hygiene discovered Legionella bacteria in water collected from various locations. Six people fell sick because of the disease, and one of them died. The California-based hotel chain was later sued for $6 million by those who contracted the disease.
Hotels should have internal controls in place to handle guest destruction and ensure travelers’ safety during their stay. Small things, such as closer management of property and resources, can prevent incidents like this from happening in the first place.
3. Staff: Staff is another critical risk. During the recession, many employees were rooted by their jobs because it was so difficult to find work elsewhere. As the economy improves, staff will have more options both in and outside the industry. This means hotels are at greater risk of having their key personnel poached by their competitors. Hiring and retraining are options, but they come with additional expenses.
Travel and hospitality companies need to address any demographic, wage level and worker satisfaction issues to ensure their staff remains motivated and content. Creative companies are coming up with new retention plans and innovative strategies to help keep employees engaged.
At the same time, hoteliers also need to ensure their employees aren’t actively working against them. Property theft is a big issue at many hospitality companies, given the number of amenities they deal with on a daily basis. While a stolen towel might not seem like much, theft adds up over the course of the year – especially if hotels are part of a larger chain.
4. Branding: Hospitality companies rely on their brands to drive customers. Popular brands such as Hilton or Marriott are familiar with customers and have become trusted names in the market. They also tend to be very protective of their brands and aren’t afraid to throw their weight around when another company tries to infringe on their trademarks.
For example, the Hilton Prestige Portfolio led to a copyright infringement lawsuit from Prestige Resorts & Destinations, which alleged that Hilton infringed on its trademark and claimed unfair competition.
The number of risks that hospitality businesses are facing is on the rise. It’s paramount that companies take advantage of a risk management software that can help to discover these threats before they negatively affect business.