Even though hotels were among the businesses deemed essential under California’s shelter-in-place order, the decline in tourism caused by the COVID-19 outbreak made it impractical for many of them to remain open. Several of California’s most historic hotels throughout the state have temporarily closed their doors, including the Hollywood Roosevelt, the Chateau Marmont, and the Hotel del Coronado. In March 2020, it was reported that hotel occupancy rates in San Francisco had dropped from an average of 80% to under 10% at some hotels in the span of just two weeks. Hotels in San Diego saw a similar drop in occupancy.
The COVID-19 pandemic also brought significant impacts to California’s hostels. With countless people cancelling their travel plans, many hostels closed their doors at a time when they typically expect to be full. The ones that remained open typically had very low occupancy, mostly hosting handfuls of stranded travelers and displaced college students instead of big groups of leisure travelers.
COVID-19 Business Losses in the Hospitality Industry
In some cases, hotels may also experience other losses beyond the lost income that comes with cancelled reservations and empty rooms. For example, many hotels offer on-site services that generate additional revenue, such as bars, restaurants, spas, and golf courses. Without guests staying in the hotel, those services also stop generating a profit. If a hotel restaurant had perishable food they were unable to use before closing, that’s another type of loss for the hotel.
Lodging represents just one aspect of the hospitality industry and losses in one area of the industry are often closely connected to losses in others. For example, many hotels in California depend on business from people attending events like concerts, festivals, and conventions. But with so many of those being cancelled, businesses in the event and entertainment industries have also been hit very hard. Event cancellations can also, in turn, impact the food service industry through cancelled catering service contracts and fewer people dining at nearby restaurants.
Business Interruption Insurance in the Hospitality Industry
Running a hotel, or any other business in the hospitality industry, isn’t easy and owners of these types of companies like to plan ahead for events that could significantly affect their business. For some people, that may involve buying insurance that includes business interruption insurance to cover lost revenue and some other types of costs if they are forced to close temporarily. Other types of costs may include things like employee payroll, mortgage/rent payments, and business loan payments.
Some policies may also include civil authority coverage that’s intended to help if they are forced to temporarily close because of a government order. Since many businesses in the hospitality industry are tied to planned events, they may also have event cancellation insurance coverage.
What to Do if Your Insurance Claim is Denied
Amid all the shutdowns and event cancellations caused by the coronavirus pandemic, insurance carriers are broadly denying claims for losses sustained by event organizers, hotels, and other businesses in the hospitality industry. Even large companies and major events haven’t been spared. One very notable example is the South by Southwest Festival, which had to pay millions of dollars after their cancellation because their insurance would not cover pandemics.
Business interruption claims for the hospitality industry can come with some unique challenges, so if you’re getting ready to make a claim, or you’ve already made a claim and been denied, working with a lawyer can give you the best chance of success. At The Wallace Firm, you can get help from a lawyer experienced in dealing with insurance companies and can fight for you to get the compensation you need. If you’re a California business owner dealing with business losses caused by the COVID-19 outbreak, we can help. Contact us today for a free case evaluation.