Protecting Hotel Assets Before, After the Storm

Hotel News Now
October 17, 2017

This hurricane season—typically from 1 June to 30 November 30 each year, with peak season being from mid-August through mid-October—has been particularly active.

For the first time in recorded history, the United States and its territories were hit with three back-to-back Category 4 hurricanes—Harvey, Irma and Maria. While it is still too early to tell, estimated damage associated with these storms could cost hundreds of billions of dollars and take many years to repair.

But some hotels in the hard-hit regions might rebound more quickly than others, if they took proper steps to prepare.

Hoteliers should have very thorough plans in place to protect their assets before, during and after a severe weather event hits.

Prior to each hurricane season, hoteliers should keep detailed descriptions of their assets, including digital day/time stamped photos, in an electronically secure site. Life safety procedures and protocols—including emergency planning, preparedness and evacuation plans—should be reviewed, updated and practiced. All service contracts which tie into the operation of the hotel should be examined, particularly to verify the vendors’ procedures and policies for during and after a storm, as well as confirming restoration companies’ availability.

For those hotels that have an emergency back-up generator system, performing required maintenance and testing emergency lighting systems are essential to make sure they will operate during a power outage.

Identifying when to send personnel home, properly securing the property and shutting off all water, gas, electric lines are vital procedures for hotels in evacuation zones. Hotels should also make sure that they have the appropriate insurances in place, such as commercial property, flood, windstorm, business interruption, contingent business interruption and service interruption.

Thorough inspections of hotel assets must be done immediately following the storm, as well as damage assessments to prioritize repairs and address safety hazards.

Some storms have a negative impact on hotels even before they hit land. Being that Hurricane Irma was such a large storm and forecasted to hit as a Category 5, a quarter of Florida’s population was under an evacuation order in the days leading up to the storm. According to an analysis by STR (parent company of Hotel News Now), prior to Irma making landfall, most hotel markets in Florida had a significant drop in occupancy and revenue per available room, while other markets such as Macon, Georgia, Chattanooga, Tennessee, Birmingham, Alabama and Atlanta, Georgia had substantial increases.

Hotel demand can sometimes grow in areas hit by hurricanes as bookings increase for those families displaced by the storm, media members, volunteers and relief workers, first responders, contractors and FEMA and other government employees seeking shelter. An example of this was seen in Houston, Texas. According to STR, after Hurricane Harvey the city registered the largest year-over-year increase in occupancy, ADR and RevPAR.

Many hotels modify and even waive their internal policies before and after storms. Many brands waived hotel room cancelation fees for properties impacted by Hurricanes Harvey, Irma and Maria, while others lowered their rates to assist those people in need. Some not-pet-friendly hotels loosened, and in some cases, even waived their no-pet policy, as well as the fees associated with a pet stay for those evacuating due to the storms.

These emergency efforts can not only help insulate hotels from more substantial losses brought on by storms, they can also cultivate stronger brand loyalty through their goodwill efforts.

Planning is key, but so is flexibility, since even the best thought-out plans cannot account for storms that are completely unpredictable. As such, it is critical to continuously review, update and improve the plans by implementing additional strategies learned from dealing with prior storms so the plans become more efficient and effective.

This article is reprinted with permission from Hotel News Now.

Karyl Argamasilla
Co-Head, CMBS and Real Estate Capital Markets, CMBS Transactional and Workouts Team
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