Hotel Reputational Harm Insurance: The Insurer's Answer to Online Reviews

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. June 14, 2012

By Larry Mogelonsky, President & Founder, LMA Communications Inc.

Most of the time, hotel and resort reviews on popular travel websites are honest and reasonably objective. Most of the time, these critiques are written by real, unaffiliated guests with the purpose of informing other potential customers of a product's true worth. But occasionally, the system is abused and the property may suffer lost business as a result.

For example, a guest may denigrate a hotel to well below what is fair, based solely on what would otherwise be perceived as a minor grievance, or even a misperception. Online anonymity makes it easy for someone with a personal grudge to take on the appearance of a paying, and very angry, guest. A false, and perhaps highly scathing, rumor may go viral and reach tens of thousands of individuals before countermeasures can be enacted. These are just three out of many possible scenarios that may ultimately lead to a financial loss. How do hoteliers deal with these headaches? First and foremost will always be guest services. If you eliminate the points of contention and keep your guests happy, then it's hard for people to complain. But, even with all your affairs in order, there is still the possibility that something beyond your control will occur and subsequently damage your reputation.

Thankfully, Lloyd's of London is at the forefront with a new type of protection - Hotel Reputational Harm Insurance. These policies are designed specifically to reimburse properties that have suffered from an Adverse Media Event - that is, publication of a statement which has caused direct loss of RevPAR. Properties that qualify are compensated for their RevPAR deficits during the period of indemnity and for crisis management costs incurred while trying to avoid such RevPAR losses. For property eligibility, coverage details and exclusions, it is important to contact your loss prevention/insurance provider, as this article does not in any way mean that your property can be guaranteed some sort of coverage.

This is not a blanket solution, however. It's still your job as the hotelier to first mitigate any damages through reasonable actions proportional to the level of risk. This includes following the recommendations of approved crisis management professionals such as legal advisors specializing in media strategy, crisis consultants and public relations experts.

Touching on a few of the caveats, this policy does not cover perils that affect a larger portion of the market, such as political lobbying efforts, published surveys or product reclassifications, unless your property is specifically mentioned. Your property must be up to code with the latest regulations for sanitation, cleanliness and water systems. Lastly, adverse media events arising from labor strikes or acts of violence are not covered.

In the end, Hotel Reputational Harm Insurance is a serious step in the right direction. If you feel as though your hotel's online status is at risk, discuss this will your insurer, or introduce the topic to someone who is better placed to make a decision.

Larry Mogelonsky ([email protected]) is the president and founder of LMA Communications Inc. (est. 1991), an award-winning, full service communications agency focused on the hospitality industry. Larry is also the developer of Inn at a Glance hospitality software. As a recognized expert in marketing services, his experience encompasses Four Seasons Hotels & Resorts and Preferred Hotels & Resorts, as well as numerous independent properties throughout North America, Europe and Asia. Larry is a registered professional engineer, and received his MBA from McMaster University. This article may be reproduced with permission of the author.