By Kevin Eggleston and Mark Lee
There is light at the end of the tunnel for the North American restaurant industry as it claws its way back from the devastation of 2020’s pandemic-driven shutdowns. That doesn’t mean things are back to normal, or even “new normal” (whatever that means). But the industry is rebounding to a desired future state that is vastly improved from last year.
U.S. restaurant sales continue to trend up, too, but still were 3% below pre-pandemic levels this summer.
Hard insurance market challenges recovery
One roadblock to the restaurant industry’s comeback is the difficulty it faces to get or stay insured. At a time when the sector’s resilience has never been more tested, how well operators anticipate, manage and mitigate risk, and especially the unknown, is a critical challenge. The insurance market is the hardest it’s been in 20 years, making risk costly to cover as insurance availability has shrunken.
With some insurance carriers bowing out of the insurance market, the remainder are substantially hiking premiums or specifying large exclusions. COVID-19 and other communicable diseases are standard exclusions in commercial general liability coverage, for example. Excess liability (umbrella) coverage is difficult to find at necessary limits. Even broker strategies like layering (covering exposures in multiple layers among multiple insurers) are difficult to execute.
Property rates have been a continuing issue in light of more and larger claims for natural disaster damages, but they were aggravated by COVID-19-driven business interruption exposures. Cyber insurance is also under pressure as technology’s embrace by hospitality has led to more and more severe cybercrimes (and premium increases of up to 50%). And the executive liability exposures created by COVID are driving directors & officers and errors & omissions coverage up by 50%, too.
Restaurant managers can best deal with insurance challenges with the aid of their brokers and risk consultants, who are best positioned to help them present their cases on successful risk management to underwriters. They are also logical guides on the way forward through the changes impacting the industry.
Investments in the comeback
There’s huge pent-up demand for dining across North America. Tourism continues to pick up with summer.
Much of the investment is customer facing, especially since the guest experience is a big competitive differentiator – especially important now. It’s made another trend also pick up more speed – personalization – which relies on digital systems and tools. In fact, the two top technology priorities by travel and hospitality organizations are digital analytics (to gain better insights) and the front-end customer experience itself.
Improved analytics will give operators the depth of information they need to truly personalize the guest experience – with persona development. Personas reflect distinct customer segments and align services and experiences to their preferences.
The return on investment of well-satisfied guests, though, speaks to the value of personalization.
The restaurant industry has a way to go before it completely emerges from the woods, but it’s position is far more promising than it was this time in 2020 – and even in the early part of 2021. Its ongoing recovery will hinge on the ability to counter the known and unknown challenges along the way.
About the authors:
Kevin Eggleston is Managing Director, Hospitality & Real Estate for Hub International global hospitality insurance brokerage.
Mark Lee is an Assistant Vice President and Risk Consultant with Hub International.