Inside the Liability Risks of Turning Hotels Into Dorms

Over the last several months, hotels have been coming up with innovative ways to generate revenue and stay afloat with tourism virtually nil and business meetings going virtual amid the pandemic. Some hotels are offering on-site offices while others have extended their pool hours to attract more guests. But some hotels have pivoted to provide college students with long-term housing as an alternative to living in a dorm room in an effort to help co-eds and universities meet social-distancing requirements and fill hotel vacancies.

In fact, according to a recent article on CNN’s website, campus housing offices have struck deals with local hotels and booked blocks of rooms or even full floors, allowing students to live in hotel rooms for the same cost as a traditional dormitory room. For example, Suffolk University in Boston booked 473 rooms at Hyatt, Doubletree, and Wyndham. The University of Pittsburgh and Xavier University of Louisiana are also working with Wyndham and Hilton, respectively, to house hundreds of students.

Although most hotels say they don’t have plans to shift their business model to that of a dormitory or to mirror the college experience, in providing students with long-term stays these operations now have an entirely different exposure than that of a traditional hotel. And, therein lies the rub, with the potential for obtaining Liability insurance in jeopardy for a hotel changing its operation.

Insurance Coverage Issues: When a Hotel Is No Longer Just a Hotel

There are many additional exposures for hotels offering dorm-like stays. Most undergraduates are away from home for the first time, experiencing the freedom that comes with no longer living under one’s parents’ roof. This means having parties (despite the pandemic, kids are gathering and doing what all college students typically do, as evidenced by the number of students either being infected by the virus or getting suspended for shunning school safety rules), drinking, and perhaps doing foolish things that put the hotel at greater risk. Hotels with balconies have to worry about students roughhousing or not adhering to the occupant load on a balcony. In addition, there is heightened exposure to assault and abuse/molestation incidents, especially when there is access to (and excess) alcohol involved. Students will inevitably bring in hot plates and other cooking equipment, which are not permitted. Most hotels are simply not equipped or able to interfere and prevent this type of stuff, no matter how diligent they are in their safety protocols.  Under normal circumstances, in fact, a hotel doesn’t rent rooms to individuals under 18 because of the liability.

It’s important for insurance brokers to discuss these issues with hotel insureds and advise them that Liability insurance under their existing policy or upon renewal may not be available if they are also housing long-term students due to a material change in their operational exposure. It’s important for hoteliers to discuss their plans with you prior to making any arrangements with universities or undertaking a sales and marketing campaign directly to students to offer dorm-like facilities.

Other Potential Liability Issues

Beyond the additional insurance exposures, hotels should evaluate how having an influx of students living at their facility will impact their other clientele in terms of noise and other issues. Also, they need to look at how certain university regulations regarding social distancing and face coverings will square with that of the hotel’s policies.  Which policy will the students abide by? In these unusual times, everyone is looking for a source of income, particularly in the hospitality industry, which has seen its revenue slashed. It’s important, however, to carefully evaluate any material changes in exposure to determine what insurance would apply.