Governance, Risk and Compliance

Top 4 Risks Facing the Hospitality Industry

Posted February 9, 2015 by Resolver

The number of risks that hospitality businesses are dealing with is on the rise. This sector faces a variety of potentially damaging threats that hotels need to contend with, particularly as they deal with an influx of both leisure and business travelers. It is paramount that these companies take advantage of risk management software that can help to discover these threats before they negatively affect business. 

1. Data privacy

Cybersecurity 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 identity theft.

On November 30, 2018, it was reported that Marriott International Inc. faced a breach that exposed the personal information of 500 million customers. The attack is believed to have begun in 2014, two years before Marriott bought Starwood. Marriott’s internal security tool detected the intrusion in September, but the company was unable to analyze the breached information until November 19. Through the attack, the hackers were able to gain access to names, phone numbers, emails, passport numbers, travel details and payment information of customers. 

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.

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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 damaged 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.

Another instance of guest risk occurred when the owner of a Hilton condo dropped several beer bottles over a railing. The bottles caused more than $10,000 worth of damage to the hotel’s pool and hot tub.. Additionally, some glass landed on the roofs of other buildings, causing further damage, Hospitality Risk Solutions adds.

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 in 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. This is especially true if hotels are part of a larger chain.

4. Branding

Hospitality companies rely on their brands to drive customers. Popular brands such as Hilton 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.

Protect Your Hospitality Business with Resolver

If you’d like to learn more about how Resolver’s GRC software can help your hospitality business grow, you can request a demo with one of our representatives. 

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