Baby boomers are slowing down. Millennials and Gen Xers are approaching their career primes. And sharing services like Airbnb and VRBO have made it increasingly easier and cheaper to find a home away from home.

In light of these dramatic social and cultural shifts, what do you need to know about your hotel/motel insurance clients?

Pricing Trends

Because this year has been relatively risk-free for underwriters, capacity is abundant in the hotel/motel insurance marketplace—resulting in fairly significant rate decreases in property.

“Property is soft, particularly in catastrophe zones that are subject to wind, like the southeast and the eastern seaboard,” says Steve Coombs, president of Risk Resources, a risk management and insurance consulting firm. “Insurers are trying to hold on to their market shares and the way to do that is they have to meet competition on terms of price.”

A well-capitalized property-casualty industry has translated into a more stable insurance marketplace for higher-end hotel and resort segments, says Dusty Rowland, chairman and executive vice president of sales and marketing at Distinguished Specialty, who cites slip/trip and fall as the leading cause of loss. “These types of claims drive both frequency and at times severity, with the occasional large injury from a fall,” he explains, noting that they comprise more than 50% of all claims.

Meanwhile, liability is largely driven by loss experience, Coombs says. “The liability market is softer than it was a year ago, but not if there are perceptions of significant risk or loss experience that don’t warrant better pricing,” he points out. “They’re going to look at your losses, they’re going to scrutinize them, and pricing will be largely based on that. If your loss experience is poor, don’t expect decreases.”

“General liability, auto and umbrella have been mostly flat for good accounts, with property a bit softer overall,” Rowland summarizes. “There are no new program players and a similar number of direct providers in this space. As you see in many industry segments, inexperienced underwriters looking for market share continue to cause market disruption for the long-term program providers and can result in market volatility in the long run.”

The Hotel Experience

In particular, luxury hotels continue to see larger losses from various exposures like liquor, auto, assault and battery, and severity-type amenities—a claims trend that “has the potential to increase as the lifestyle and experiential models continue to diversify,” Rowland says.

Why are many upscale and luxury hotel/motel segments moving toward these “lifestyle and experiential models”? According to Rowland, recent studies suggest rising affluence, globalization and technology have led modern hotel guests to value experiences and the feeling of “being connected” over traditional hotel luxuries.

Noting that larger hotel companies have launched new brands like Moxy and OE Collection in order to differentiate themselves from more traditional luxury brands, Rowland says these new lifestyle and experiential models emphasize four trends in particular:

WELLNESS. Many hotels are upping their wellness game, going far beyond the conventional fitness center and expanding into offerings like in-room workout equipment, on-loan exercise clothes, running maps and fitness classes in order to create “meaningful social activities and lasting memories,” Rowland says. Similarly, new spa treatments may “incorporate high-tech healing and anti-aging experiences via a hybrid of technology and classic treatments.”

ECO-FRIENDLINESS. For many hotels, expressing a greater commitment to social responsibility is vital in attracting the business of younger clientele. In order to reduce their carbon footprint, many hotels will begin using more sustainable building materials, sourcing heat and lighting from biofuel and solar energy and using innovative designs to improve airflow.

Rowland adds that many hotels are also incentivizing green transportation, “providing charging stations for electric cars and bicycles for the guests to use,” as well as sourcing food from local vendors for their menus.

ACCOMMODATING DESIGNS. As work becomes more mobile and room service less important, the modern guest room has evolved into a more open living space that lacks the traditional desk and chair, Rowland says.

“Showers are the new bathtub and hard surfaces replace carpets because they look cleaner,” Rowland explains. “Modern decorating materials include salvaged wood, stone and metal, vertical living gardens and versatile furnishings in natural themes and organic designs that connect people with nature. Natural light is a priority—not only does it reduce the amount of energy needed, but it also boosts health and reduces anxiety.”

INNOVATIVE TECHNOLOGY. “Technology should be everywhere and nowhere at the same time, perfectly integrated into the guest experience without intruding,” Rowland says. “Hotels will continue to offer guests more control of their environment, allowing them to control room temperature and lighting from their tablets, stream their own content, book travel on a smartphone and use mobile check-in.”

What coverage details do you need to watch in this transforming market? Keep an eye on IAmagazine.com and upcoming editions of the Markets Pulse e-newsletter to find out.

Jacquelyn Connelly is IA senior editor.