Hotels and motels suffer from downturn

The niche market provides nearly $2.9 billion in premium

The hospitality industry depends on people and businesses having disposable income and confidence in the economy. Otherwise, the aforementioned will hang on to their money rather than spend it on going to conventions or going away on vacation. The current economic downturn saw the emergence of a neologism dreaded by the hotel/motel industry—the staycation. In fact, the industry is estimated to have seen a decline in revenues of greater than 2% during the 2009-2010 period. A rebound of better than 5% growth is anticipated for 2011-2012.

SIC Breakdown by Number of Enterprises

SIC Breakdown by Premium ($000)

The vast majority of the more than 90,000 hotels and motels that dot the American landscape have managed to keep their doors open during these tough times, and they or their parent companies (there are 73,000 insured enterprises that account for the 90,000 hotels and motels) have managed to pay an average premium of approxi­mately $39,000 to protect them from the risks they face by doing so. The result is an industry that accounts for $2.86 billion in premium, according to data compiled by MarketStance, Middletown, Connecticut.

Motels represent the largest sub­group within this niche, with some 45,000 units accounting for $1.53 billion in premium, followed by non-casino hotels where nearly 31,000 units account for $950 million in premium. These two subgroups represent the vast majority of the businesses covered in this classification. The next largest is bed and breakfast inns with fewer than 25 guestrooms, accounting for some 6,000 units providing $43 million in premium. The nearly 1,100 casino hotels (which represent only 192 accounts) provide more premium than the B&Bs, boasting $197 million in premium and the largest average premium per enterprise at more than $1 million per account.

Forecast Revenue Growth (2011-12)

Hotel / Motel Sector Forecast Growth in Revenues (annual rate)

Ninety-five percent of the businesses in this category represent small com­mercial enterprises and account for $670 million in premium, while middle market accounts represent an addi­tional $911 million in premium. It is a perfect niche for independent agents who are willing to take the time to learn the unique needs of this industry. Or for those who wish to work with one of the many wholesalers that offer specialty coverages for this niche.

For additional information on this or any other niche, contact MarketStance at info@marketstance.com or call (888) 777-2587.