Why new risks plague the hospitality sector post COVID-19

People can eat in restaurants across Canada without wearing a mask or providing proof of vaccination, a sign the risks initially associated with the spread of COVID-19 have lessened.

But, with public health restrictions largely lifted, restaurant and bar owners now face a new set of risks, including labour shortages, increased supply costs and a rise in break-and-enters.

Even though many restaurants no longer struggle to get customers through the door, they do experience difficulties staffing their businesses at levels needed to match pre-pandemic service levels.

“The demand is there…which is great news,” said Gary Hirst, president and CEO of CHES Special Risk. “On the other hand, though, the hospitality industry is suffering, and will continue to suffer for months to come, because of employment issues.

“While they have a lot of customers, the [hospitality sector’s] service levels are generally below what we all enjoyed two years ago. Because, unfortunately during lockdown, all those people working in the hospitality industry really needed to go find another job.”

Restaurants have also been affected by ongoing supply chain issues, like increased gas prices and inflated costs for food supplies. And now the industry faces the risk of a looming recession.

“Transportation is a focus,” Hirst said. “Increased gas prices drive up the cost of getting the material to the table.” Luckily, many restaurants often prioritize local ingredients.

“A lot of restaurants have previously sourced their ingredients within a certain radius [from their restaurants]. I think restaurants in Canada are very good at that, in that they’re not going hundreds of kilometres away to source things and increase their environmental footprints.”

Hirst acknowledged costs have increased, but “I would hope that transportation and sourcing of ingredients has been relatively easy.”

Insurance companies are still pricing hospitality as they did before the pandemic, he observed. But claims costs — particularly for break-and-enters — are expected to increase rates.

“The level of pricing is still the same, and the risks are still the same,” he said, “[but] the legal system, certainly in Ontario, favours claimants, and that drives up the cost of insurance, unfortunately, because claims are easily submitted.

“We have seen an increase in break-and-entering type claims. But, on the whole, I would suggest premium rates are still at the same level they were pre-COVID.”

Break-and-enter claims might be a lingering symptom of the pandemic, Hirst said. Desperate times may have led to desperate measures, and some may have resorted to crime to obtain food or are selling stolen goods to make ends meet.

“For a lot of the population in Canada, unemployment existed for two years…There must be a horrendous amount of debt being carried by a very large number of people, purely because they were unable to go out and actually earn their livings [during the pandemic],” he said.

Despite these new risks, the outlook for Canadian restaurants is strong, Hirst added. “We just hope for their recovery.”

 

This article is excerpted from on that appeared in the October issue of Canadian Underwriter. Feature image by iStock.com/alvarez