As the public’s fear from the COVID-19 pandemic receded, pent-up desire for travel and leisure boosted revenue across various sectors.
While pivots in business practices kept the hospitality industry afloat through tough times, lingering challenges such as economic uncertainty, ongoing labor shortages, higher costs of supplies, increasing insurance costs and changing consumer demands remain. Hospitality employers that engage in risk management and focus on recruitment and retention will be poised to thrive in 2023.
Heading into 2023, here are some important things that hospitality business operators should consider when it comes to their profitability, vitality, and resiliency:
An Uncertain Economy
Supply chain shortages, inflation and increasing wages for workers continue to put pressure on hospitality profit margins. The industry will continue to feel inflationary pressure on food, beverage, and labor in 2023. According to the National Restaurant Association, 95% of restaurant owners are raising prices and 65% have made menu changes because of food costs or ingredient availability. Many restaurants have cut back hours and postponed expansion plans.1
A Difficult Insurance Market
Rising insurance costs for food and beverage will compound the industry’s profit burdens. Hospitality companies with liquor liability or live entertainment exposures can expect to pay 5% – 20% more for insurance in 2023. Training workers on how to identify alcohol-related risks and maintaining risk management protocols will be vital to reduce liabilities.
The hospitality property insurance market will also remain challenging in 2023, forcing hospitality businesses to improve building resiliency and prioritize ongoing maintenance. With rates expected to rise at least 5% — 10%, restaurants need to show underwriters they are mitigating risk. Those with a proven risk management strategy that includes a post-disaster plan for recovery will secure better coverage terms and conditions.
This emphasizes the importance of working with an experienced insurance advisor on initiative-taking strategies and risk management measures to appear as a favorable risk to the marketplace.
An Emphasis on Sustainability
Consumer pressure on the hospitality industry to implement more environmentally friendly business practices is growing. In 2022, 87% of Americans said sustainable travel was somewhat or very important to them2. From reducing waste by eliminating single-use items like toiletries or plastic food containers, hospitality businesses that want to appeal to environmentally conscious consumers would be wise to increase their sustainability efforts in 2023. Meanwhile, hospitality businesses should work with insurance specialists to ensure they are adequately covered for any sustainable or “green” upgrades made to their business or property.
The Challenges of a Shrinking Workforce
Like many other industries, hospitality businesses are struggling to find capable employees. With staffing remaining below pre-pandemic levels, the restaurant industry still down 750,000 jobs compared with 2019.3 In order to recruit and retain workers, hospitality businesses should emphasize offering improved benefits, wellness plans and more schedule flexibility.
Offering personalized benefits is an excellent strategy to show workers they are valued. Using data analytics and tools that help identify what matters to workers, hospitality employers can offer benefits tailored to meet employees’ individual needs without increasing costs. Personalized benefits is part of a benefits strategy centered around delivering quality employee experiences (QEX). Delivering quality experiences through benefits increases worker satisfaction, engenders greater loyalty, and creates an attractive workplace where potential employees will want to work.
Work a seasoned insurance advisor to develop a tailored strategy that will protect your bottom line, support your workforce, and build resiliency for 2023. To explore HUB’s full 2023 Hospitality Industry Outlook, please visit their website.
1. National Restaurant Association, “Restaurant Operators Endure Weaker Business Conditions as Economic Pessimism Grows,” August 18, 2022.
2. Hospitality.net, “Greenwashing, Ecotourism and Sustainability Are Now a Major Concern for Travelers,” September 6, 2022
3. CNBC, “Restaurants are short-staffed, and that’s taking a big toll on customers and workers alike,” July 17, 2022.