Risk - A dream location?

(From Reinsurance)

Byline: Richard Radevsky.

Picture the archetypal dream holiday location: a palm-fringed beach on a tropical island; the hotel sits at the edge of the beach or on the cliff top above, with huge windows taking full advantage of the fabulous view; much of the expensive furniture has been specially designed and commissioned; and a good proportion of the building materials had to be imported at great expense. The hotel is also normally filled with high spending visitors enjoying their well-earned holidays.

All this makes the hotel profitable, attractive and photogenic for the brochures - and hugely vulnerable to hurricanes, tidal surges and typhoons, which will simply rip through the fabric of the building, destroy fittings and furnishings and send the tourists scurrying elsewhere. Everything will have to be replaced or repaired to a high standard, as no "make do and mend" will suffice. High hygiene requirements judged against international norms mean that great effort and cost will be expended on drying out saturated buildings to avoid such threats as toxic mould growth, as everything must be maintained in tip-top condition to meet guests' expectations. Hotel owners concerned at their exposure to liability claims from wealthy guests insist that they must go to extraordinary lengths to eradicate any suggestion of a health risk.

Hotels, then, are at the front line of the battle when it comes to weather.

But other environmental factors can cause significant damage, and it is normally the reinsurers who pick up the bill. Tourists demand luxury accommodation in more and more remote locations, some of which are exposed to perils that most of us rarely experience. It is no coincidence that many of the world's most beautiful holiday locations lie in volcanic or earthquake zones - it is these natural phenomena that we have to thank for some of the most spectacular and dramatic scenery. But these locations are a real threat.

Then there is the location of the hotel buildings. The closer a hotel is to the beach, the higher price its rooms can command, but building right on the edge of the sea poses its own problems. The shoreline is often far from an ideal location for high specification buildings. Hotel foundations can be destabilised even well back from the beach itself and a building can suffer cracking and subsidence. Having an open expanse of sea in front of them makes them the first solid object that high winds meet when they come roaring ashore.