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Outsourced security requires extra scrutiny
December 10 2012

As outsourcing loss prevention becomes more mainstream, hoteliers need to take the proper precautions to avoid liability and damage to their reputations.

Highlights
  • “You get more for your money if you go in-house,” said Brad Bonnell of IHG.
  • When outsourcing loss prevention, it’s important to have an indemnification or “hold harmless” clause in any contract, said Stephen Barth of HospitalityLawyer.com.
  • Business travelers and corporations are more and more concerned with the safety of their traveling employees.

REPORT FROM THE U.S.—As outsourcing loss-prevention departments becomes more mainstream, hoteliers need to be more cautious about who they hire to avoid liability that could damage their hotels’ reputations.

After 9/11, there was a greater effort and emphasis on having loss-prevention staff in-house, said Thomas Daly, principal and managing member of Reno, Nevada-based The Hospitality Security Consulting Group LLC. The event was unprecedented in that hotels had to evacuate all their guests, which has only happened to Daly once before in his 25 years in the hotel business.

But as the economy took a dive in 2008, the first thing cut was security, said Brad Bonnell, director of global security at InterContinental Hotels Group. “What appeared was an increase in contract security personnel. Their role was limited to observe, report and document. We were spending less money and getting less.”

With outsourcing loss prevention, which encompasses more than just security measures but keeping guests safe through fire protection and accessibility, hoteliers need to ensure they’re taking the proper steps to hire the right security consultants.

“When (guests) are in a hotel, the expectations are much higher (than other industries), and the legal duty is much greater,” Bonnell said.

Hiring outside consultants “can be a good resource,” but they have to be managed closely, the right contracts have to be in place and the hotel and provider have to have a transparent business relationship, he said.

Legal liability
“If you don’t manage (outsourced) security closely, if you don’t use that contract that transfers risk associated, you lose litigation to them, you will be dragged into court because of their malfeasance and their failure to train,” Bonnell said.

Stephen Barth, founder of HospitalityLawyer.com, said it’s important to have an indemnification or “hold harmless” clause in any contract. This clause is a contractual promise in which one party agrees to protect another party from liability as a result of a third-party claim based on the negligent action of the indemnifying party or its employees, contractors or agents.

Stephen Barth
HospitalityLawyer.com

“Whenever you hire an independent contractor, the more control you exert over them, the more likely you won’t be able to escape responsibility of the contractor’s negligence,” he said. “Typically, liability follows control.”

Once you define the scope of responsibility with the contractor, Barth said, then it has to be in writing. “All of it should be in writing,” he reiterated.

“If we’re going to outsource, then I would want a turnkey program; the vendor/the contractor is taking 100% of the scope of the responsibility, including training, education, the people onsite, etc.,” Barth said.

Outsourcing versus in-house
Often, it’s the big brands that can afford to have an in-house loss-prevention team, but smaller or independent hotels have limited options.

“If you’re an independent hotel, say a big resort some place and you’re not part of a brand, you can’t afford to have a loss-prevention person,” said Joe McInerney, president and CEO of the American Hotel & Lodging Association.

McInerney said the level security provided by third parties should be no different than that provided by someone in-house.

“They’re not less safe at all. You have your security on property, (and) they are trained security officers,” he said. Small organizations or limited-service hotels “can’t afford to have the overhead. They’d rather have a salesperson and contract out loss-prevention to someone else.”

Joe McInerney
American Hotel & Lodging Association

Also, it’s cost effective, he said. It comes down to the physical dollars and how much you can afford. Do you want someone in-house or someone to keep you up-to-date, he asked.

Daly, who was formerly the VP of loss prevention at Hilton Worldwide, said it comes down to a manpower issue for different hotel segments.

“It’s all over the board,” he said. “If you look at large downtown hotels of major (hotel) chains, you’re going to find that staff is in-house and trained by hotels. The smaller suburban hotels that are managed by chains may not have that model.”

However, Bonnell said, in-house security is more familiar and guests are more appreciative of the level of accountability.

“You get more for your money if you go in-house. The role of the security officer can be expanded. You have more flexibility with in-house. You have loyalty factor, and you’re in a better position to confirm the quality,” he said.

But sometimes having both an in-house team and consultants enhances security measures, especially for large events or short-time projects. Even with an in-house staff, “do hire consultants,” Daly said. “If (hoteliers) have a unique problem that (they) haven’t faced before, they hire us for a week, month or a year or whatever it would take; we help them solve that problem.”

Keeping business travelers safe
Outsourcing, if done correctly, is a good alternative for hotels, but overall “the industry needs to devote more resources to safety and security,” Barth said.

Business travelers and corporations, especially, are more concerned with the safety of their traveling employees.

“Key accounts now are challenging hotels security capabilities,” Bonnell said, adding that 1,500 roomnights are at stake with corporate accounts and IHG has to demonstrate security capabilities. “In-house security is capable of doing that instead of a contracted director.”

In fact, Barth said, corporate travel managers are submitting five- and 10-page requests for proposals that they expect a hotel to fill around security programs.

“It’s becoming a sales differentiator—a value add—to be able to show that you focus on and provide safety and security for hotels in the U.S. and around the world,” he said.

However, all hoteliers know that “in an emergency situation, it’s a team effort, not a security effort,” Daly said.

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