Hospitality industry faces intensifying risk this year
By Kim Gore
Headwinds have been buffeting the hospitality industry from every direction during this decade. They’re not about to die down in 2026.
Consumer confidence is declining amidst economic uncertainty and rising costs of goods and services. Continuing labor shortages are aggravated by federal policy on immigration enforcement. And climate challenges – not just weather-related, but societal – are keeping the pressure on, too.
Still, some positive trends are balancing the negative. A burgeoning demand for wellness focused products, services, and experiences continues to promise robust growth for hospitality operators. And the explosion in tech assists creates big efficiencies, but related risks remain a big issue.
Robust risk management will be a priority in this tenuous environment. Knowledgeable broker partners will also be key for devising creative solutions to maneuvering an insurance landscape that’s also challenging. Here’s what to prepare for in 2026.
The Squeeze on Hospitality Profits
U.S hotels in some regions will continue to face lower demand that impacts profitability as travel and tourism trends combine with higher costs and an unsettled economic environment.
The 2026 hotel forecast has demand up in key market areas, but flat for others. In addition to higher costs and services – labor costs for hotel workers alone have jumped by almost 5 percent – the sector is being hit by costly but needed investment in technology and property upgrades. Managing the profitability pressure will be the 2026 challenge: Tech enhancements can lower operating costs and boost ROI, while new guest enticements can attract wider audiences.
Through it all, hospitality will continue to struggle with its persistent labor shortage. It won’t get easier to address the problem in a time of aggressive immigration enforcement: Foreign-born workers account for one-third of the travel-related workforce.
To better manage the impacts – higher absenteeism and growing mental health challenges – hospitality employers will be well served by enhancing the scope of their benefits and emphasizing a positive workplace culture where people feel valued and safe. Personalized benefits, using employee data and analytics, and financial and mental wellness programs will be key for boosting recruitment and retention efforts in 2026.
How the Wellness Drive Can Improve Prospects
The industry is finding a big offset to the pressures on profitability in the heated demand for anything wellness-oriented. The area of the greatest growth for the hotel and lodging industry over the last five years has been in wellness tourism, and that will be turbocharged in 2026. The global market is $1 trillion, and U.S. spending accounts for 39 percent of it.
Capitalizing on the opportunity – by offering and promoting health food options, spa services, or meditation retreats, among other amenities – hospitality organizations will be able to attract new customers as well as long-term talent. But this also will open up a whole new group of liability, safety, and regulatory exposures.
Fitness experiences, for example, open the door to issues should equipment be defective or staff is poorly trained, providing inadequate supervision. Further, employee wellness becomes foundational to the overarching culture and workforce strategy. Organizations that walk the talk will offer comprehensive, layered benefits that support every facet of employee well-being. A sharp focus here will allow organizations to differentiate themselves with guests and current and future workers alike.
Mind the Risks on the Horizon
The risks ahead should keep the industry on high alert; robust risk management strategies and strong broker partnerships will be invaluable for getting through a challenging 2026. That’s no surprise – the pressures have continued to mount on insurers. A rocky environment has led to stricter policy terms and underwriting practices.
Catastrophe and liability coverage, for instance, continue to be pain points.
Weather-related volatility has made property insurance rates more complicated and hampered policy availability, though rates are softening somewhat in lower catastrophe risk areas. Operators should take steps to minimize associated losses, which can offset broader cost pressures. Knowledgeable brokers can guide them to solutions like parametric insurance (which offers a pre-specified payout based on the magnitude of a local weather event).
Another concern is the downside of the technology drive: Hospitality remains a major target of cyber criminals. More stringent safety protocols are not optional, and those include rigorous staff training to stronger contractual vendor management measures.
Operators also should be ready for pressure in other insurance lines. Violent acts liability coverage, for example, is likely to rise as workplace incidents against workers in restaurants and fast food continue to accelerate – now five times higher in hospitality than in healthcare. And both liquor and auto liability rates also are trending up, by 20 percent and 15 percent, respectively.
Kimberly Gore is the National Practice Leader of global insurance brokerage – and Bronze Industry Partner – Hub International’s hospitality specialty practice. She has over 30 years’ experience in the insurance industry with a specialization in hospitality and tourism clients. Kim is responsible for a strategic approach to carrier relationships, specialization and best in class service to benefit each client. Kim is an active member of the insurance community serving as president of IIABHGC and as a board member for IIABSC and was awarded the South Carolina Young Agent of the year in 2010.
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