Hospitality Industry - Life after Lockdown
As the UK and other countries are slowly emerging from lockdown under their respective governments’ guidance, it is no surprise that the hospitality sector is going to present a challenge to get back to work and is likely to be the last industry sector to open its doors. The diverse nature of this industry sector removes the option of one size fits all guidance to safely return to normal working conditions. The comparison between the advice as to how bars and restaurants can start operating again is likely to be very different to, say, tourist destinations such as The Tower of London or Disneyland Paris.
The hospitality sector is reeling from two major impacts of the coronavirus pandemic. The first and most obvious is, without actually having the doors open there is an extremely reduced capacity for this sector to conduct any kind of business. Fast food outlets have the edge on high-end restaurants in that they can more easily provide or continue to provide a take-away service. However a surprising number of restaurants have managed to offer this service in some capacity or another, which will keep them in the minds of the regular diners but may not be especially profitable. Tourist attractions will have to stringently police the visitors to ensure that they do not gather together in large groups and contravene the social distancing rules. Hotels may be able to offer a limited service but their hygiene and safety protocols will have to be exemplary. How bars, pubs and nightclubs can manage their patrons and social distancing is yet to be clearly defined. There will no doubt be a number of imaginative solutions evolved to persuade the public that they will be in a safe environment once the possibility of socialising opens up again.
The second body blow to this sector is the rejection by many insurance companies for business interruption claims. All insurance claims are dependent on the terms of the policy but a considerable number of hospitality businesses in the UK believe that their policies are within the terms of business interruption, particularly as the British Government made coronavirus a notifiable disease on 5 March 2020, and governments in many countries ordered a lockdown to prevent the spread of the pandemic which brought the industry to a standstill. Giambrone’s insurance and re-assurance team recognises that there are no easy answers and that negotiation may be the best option for all parties.
In order to clarify the insurance position for the UK hospitality industry the Financial Conduct Authority (FCA) is in the process of taking a sample of representative policy wordings to court in July to get what it calls an “authoritative declaratory judgment” on whether insurers are responsible for paying compensation. The court’s finding will be legally binding on insurers. If the decision goes against the insurance sector, the pay-out could potentially bankrupt many insurers, notwithstanding the extensive reserves that are held. The insurance industry underpins commerce and the economic outlook is extremely risky; ideally survival and recovery will require countries and industry sectors to work together.
For more information on making a business interruption insurance claim please click here