Some resorts are reporting a business interruption and lost revenue due to room cancellations as a result of the BP oil spill in the Gulf. Other resorts along the Louisiana, Mississippi, Alabama, and Florida coast lines are not yet seeing a loss of business income because their rooms are still occupied–by people who are trying to clean up or stop the Gulf oil spill. For example, I recently read a quote from a resort manager who said that their rooms are not full of vacationers, but the slack from this group is being made up by the people helping with the cleanup, reporters, and government officials. But just because rooms are occupied at the same or higher rates, resorts should not assume that there isn’t a loss of revenue.
While other revenue streams such as restaurants, bars, night clubs, beach rentals, and water sports may correlate to occupancy under normal circumstances, resort managers should not assume that the same relationship exists when there is a major shift in the nature of the occupancy of the property. Resorts are designed to entertain people–and those high margin services, which are often purchased and paid for separately from rooms, will not be utilized at the same levels by people who are there to work on the oil spill problem.
People who are working all day, and not on vacation, are probably not drinking at the pool bar or they may be eating lunch and dinner offsite. They’re most likely not booking rounds of golf (at least every day) and they’re probably not riding jet skis. All of these operations should be projected based on historical relationships to occupancy levels and compared to actual results, given the current mix of guests occupying the resort. In other words, just because the rooms are occupied, it would be an error to assume that there are no losses in the room type, services, and amenities that resorts offer to vacationing guests.
Resort managers would be wise to not prematurely assume that their properties are not experiencing a loss.
Need a forensic accountant?
We’re not your typical bean counters. We know how to calculate, present, and defend business interruption insurance claims with off-the-charts winning results for our clients.
We’d love to help you. Please get in touch.
