After years of delaying capital expenditures, hotel companies are now taking the opportunity to renovate their properties. In fact in 2012, we saw more hotels renovating lobbies, restaurants, bars and fitness centers, and this trend will continue into 2013. Also, with the volume and scope of renovations increasing, large and small contractors that provide products and services to hotels are boosting their hiring. Recent employment data shows some improvement among non-residential specialty trade contractors, a category that includes businesses that provide site supervision, remodeling and repair for office buildings, hotels and other structures that are not houses.
This is all good news for the hotel industry. But, as your hotel clients look to renovate and expand, be sure they have the proper project management in place to help mitigate claim disputes and losses. This includes: choosing an experienced project manager, creating a detailed scope of work, assessing cost estimates and timelines, documenting the budget, and hiring the appropriate contractors.
In addition, be sure company-approved contract forms are established to maintain control over contractual risks being documented. Very often, the underlying cause of construction claims and disputes is because companies do not have approved contract forms. Various project managers are using and negotiating different company forms or responding to forms produced by third parties, and therefore don’t have effective control over the contract documents used by the company and the contractual risks being documented.
Other processes that should be in place include:
- establishing procedures for oversight of completed contracts;
- ensuring early contract negotiation and execution so that important provisions with architects and contractors don’t have to be worked out at the last minute resulting in extra costs and delays;
- having provisions in the construction contract that address the coordination/conduct issues for hotels to be occupied during the renovation, such as constraints on working hours, worker conduct, construction access issues, storage and staging of materials, and coordination with on-site hotel management; and
- prohibiting verbal change orders without documentation in contracts to avoid disputes, among other critical steps.
What’s more, review all insurance policies to ensure appropriate coverage is in place for both the hotel and the general contractor and his subcontractors, including Liability, Property, Builder’s Risk, Excess Liability/Umbrella, Wrap-Ups, Professional Liability, EPLI, Workers Compensation, and other key coverages.
Insurance Programs Of America delivers markets and products for the hospitality industry in three distinct areas: Standard Markets, Surplus Lines, and Programs. Give us a call at to find out more about our programs at 877-653-IPOA (4762).