Hotels and Restaurants - How to Capture Hotel Lost Profits Today Due to the Gulf Oil Spill in Order to be Reimbursed by the Responsible Party

How to Capture Hotel Lost Profits Today Due to the Gulf Oil Spill in Order to be Reimbursed by the Responsible Party

With uncertainty and concern surrounding the impact of the Gulf oil spill to the coastline from Florida to Texas, many companies are asking what needs to be done to quantify and document lost income for future claims. Many businesses are considering filing insurance claims. Others may be looking at the potentially responsible parties for direct reimbursement. Regardless of the source of indemnification, proper documentation of claimed losses is critical.

Quantifying and documenting lost revenue has been a complicated undertaking for the hospitality industry. On one hand, documenting cancellations in connection with booked rooms is relatively straightforward. On the other hand, identifying lost demand prior to a booking can be quite subjective.

Capturing cancellations with appropriate and supportable documentation to withstand future audit can happen only if specific protocols and procedures are put in place now. The process needs to be properly documented and communicated to the relevant employees. Documentation objectives include memorializing discussions and correspondence among hotel sales personnel or reservation agents with guests, potential guests, corporate booking agents and wholesalers, for the purpose of identifying the reason for a cancellation. Loss documentation prepared today should be reviewed by a seasoned financial professional to increase the likelihood it will withstand challenge by an adverse party.

The protocol for associating lost income from cancelled bookings to the oil spill may include refinements to existing sales software or the use of a database/spreadsheet to include the group name, group contact, intended date of stay, number of rooms, F&B revenue, room revenue, ancillary revenue, date of cancellation and reason for cancellation as well re-booking date if any and where the group moved, if known. Additional recommended procedures to be implemented include but are not limited to the following:

The ability to submit and ultimately settle a claim for lost revenue with either an insurance carrier, BP, or another entity will be predicated on the culmination of many hours of dedicated recordkeeping and consistent application of data accumulation protocol. The critical lesson learned is that when an organization is able to execute the above steps, the likelihood of proving a loss and recovery is substantially increased.

Bob Glasser is a managing director at BDO Consulting, a division of BDO Seidman, LLP, in the New York office. Mr. Glasser is a certified public accountant, a certified fraud examiner and a certified insolvency and reorganization accountant, with more than thirty years of diverse financial management and accounting experience at public and private companies.

Mr. Glasser, who is also known as “B.I. Bob,” leads the firm’s New York Insurance Claim Services practice, assisting insured businesses—including hotels, manufacturers, distributors and service organizations throughout the world—to prepare and substantiate business interruption and property damage claims resulting from physical damage due to hurricanes, floods and other perils. Mr. Glasser has also been involved in forensic investigations of employee theft in the hospitality and retail industries.

The professionals of BDO Consulting’s Insurance Claim Services practice have extensive experience working with organizations to determine an accurate assessment of their risk and to define an appropriate amount of coverage to match the organizations’ risk model. Our professionals draw upon their experience working in numerous industries, offering unique insight for our clients’ valuation needs, and they hold a variety of certifications, including CPA, CFE, MAI, ASA and MRICS.

For more information about BDO Consulting’s insurance valuation services, please contact:

As a special benefit to Hospitality Lawyer members, BDO is offering a free consultation to discuss your questions and claim information to help determine if it appears appropriate and supportable to file a claim against the BP oil fund for current and future lost revenues.

Please contact Bob Glasser at rglasser@bdo.com to set-up your free consultation.

ACT is a nationwide disaster response company specializing in the hospitality industry. In order to quickly serve your needs please contact the following:

Jeff Chester at 316-761-4764
Rob Sanderson at 316-734-3334
The ACT 24 hour response number 1-888-747-1515.

For more information on business interruption coverage included in most business property policies, please contact Marshall Gilinsky at (212) 278-1513 or mgilinsky@andersonkill.com.

BMS CAT® is a global restoration company specializing in the restoration of commercial properties. BMS CAT® is a full service company in the areas of structural and content cleaning and can provide all of the restoration services needed. To request assistance please call:

Tim Draney at 908-432-9588
Lindsay Childs at 817-296-0886
The BMS CAT 24-hour 800 number at 800-433-2940.

InStar Services Group is a leading national provider of Emergency/Disaster Response, Restoration, Renovation, and Reconstruction services in the residential and commercial markets operating from 15 offices nationwide. If assistance or help is needed, please contact Angela Pillsbury at (713) 206-3331 or the 24-Hour National Disaster Team hotline at 1.800.555.8006.