From zip-wires and weddings to cookery classes, cat cafes and goat yoga. Is it time to diversify to thrive?

John Cowell, our Senior Class Underwriter looks at the risks and rewards of diversifying safely, compliantly and profitably.

The UK has one of the most dynamic, diverse and creative hospitality sectors in the world. The Great British pub is an institution that unites communities and our thriving music scene is revered globally. Our hotels and restaurants are critically acclaimed internationally and our nightclubs and festivals attract kudos and visitors from all over the world.

But for a sector that exists to bring people together, the last few years have done it’s best to keep us apart. From Covid closures, squeezed profit-margins, soaring supply costs and staff shortages, the fallout has forced many hospitality businesses into finding alternative revenue streams to supplement their income and boost their bottom line.

Diversifying a hospitality business can be exciting and potentially profitable. But having risk management strategies in place that align with any new business venture or added-value pursuits is crucial.

Great expectations

The hospitality industry is no longer just about providing comfy beds and a tasty full-English or being able to mix a memorable Mimosa and prepare pasta that will get you a 5-star Tripadvisor review.

Businesses are branching out in creative ways – think hotels turning into adventure hubs with zip-wires and rock climbing, restaurants popping up in unexpected places like rooftops or canal barges and remote rural inns offering everything from goat yoga to digital detox retreats. The trend for glamping in yurts and converted shepherd huts or double decker buses seems set to grow in popularity as people seek authentic and alternative ‘experiences’.

While these new ventures can add significant appeal to new demographics and attract previously unchartered cohorts, they also bring a mix of emerging liability risks that need careful risk mitigation and revised insurance cover.

Liability risks for diversified hospitality businesses

While hospitality continues to face many challenges, its bounce-back resilience has also highlighted the sectors capacity for survival through innovation.

This adaptability offers a positive blueprint for the future and confidence that many will diversify and emerge stronger than before.

By proactively addressing liability risks, businesses can enjoy sustainable growth while protecting their assets, reputation, and guests.

1. Public Liability

Expanding into new services means new interactions with customers and new procedures for staff, raising the potential for accidents and injuries.

Whether it’s a guest slipping out of a hot tub, a customer suffering an allergic reaction at a wedding event or an injury sustained during an outdoor goat yoga retreat (yes really!), hospitality businesses must review their liability insurance to ensure that they are covered for the new and unexpected.

2. Employee safety

With diversification often comes a need for additional staff, sometimes with specialised skills. Businesses introducing high-risk activities such as zip-lining, kayaking or wellness treatments must ensure proper training and certifications for their employees. Without adequate employer’s liability coverage, businesses risk costly claims from workplace injuries or disputes.

3. Food and beverage liability

Many leisure and hospitality businesses expand into catering, specialty menus or alcohol service. This can introduce risks such as foodborne illnesses, allergic reactions, or intoxication-related incidents. Businesses must ensure they comply with food safety regulations, provide clear allergen information and train staff on responsible alcohol service to mitigate these risks.

4. Cybersecurity and data protection risks

As hospitality businesses diversify, many incorporate online booking systems, guest data collection and loyalty or reward programmes. A data breach exposing guest details or payment information can lead to legal action and reputational damage. Investing in cybersecurity measures, regular compliance checks and cyber liability insurance is essential to protect against digital threats.

5. Property and equipment damage

New business activities often require additional equipment or modifications to existing premises. Whether installing spa facilities, setting up temporary event spaces or investing in high-end kitchen appliances, businesses need to ensure they have appropriate insurance in place.

6. Regulatory and compliance challenges

Diversification may require businesses to comply with additional regulations, such as health and safety standards, environmental laws or alcohol or temporary event notice (TEN) licensing. Failing to meet these requirements can result in fines, lawsuits or forced closures. Regular compliance audits and legal consultations can help diversified hospitality businesses stay on top of their legal, moral and HSE obligations.

7. Know your fire safety and footfall limits

Understanding the maximum occupancy of your new, diversified premises is critical in terms of fire safety and evacuation planning. Businesses can introduce relatively low-cost, yet effective solutions to improve their security preparedness. Having valid electrical inspection certificates and making sure there is adequate provision of first aid and firefighting equipment is a good starting point.

Further measures include regular staff training and completion of a security plan to formalise best practice protocols, such as evacuation plans or lifesaving skills that can be administered whilst waiting for emergency services.

Mitigating liability risks in a diversified hospitality business

To safeguard against liability risks, hospitality businesses should:

• Conduct thorough risk assessments before launching new services.
• Ensure adequate insurance coverage for public liability, employer’s liability, cyber liability and property damage.
• Implement rigorous staff training to reduce the risk of accidents, data breaches and service-related liabilities.
• Regularly review compliance requirements for food safety, employment laws and health and safety standards.
• Have clear contracts and waivers for high-risk activities to protect against legal disputes.

Forewarned is forearmed

For many diversified businesses, the first time they find out if they are non-compliant with health and safety legislation or that they are underinsured is when it’s too late – following an accident, a claim or an enforcement visit.

Before embarking on any new business venture, it is important that business owners seek advice from specialists to ensure that best practice risk management procedures and the right insurance are in place.

Irwell’s liability products include SafeCheck, a health and safety review which is tailored to the unique risk exposures of each business. Following the assessment, businesses will receive a detailed report about what they are doing well – and highlight where there is room for improvement. This useful report also includes practical guidance on how to minimise business risk and achieve H&S compliance.

At Irwell, we believe that prevention is always better than cure.

Diversification can pay dividends

By proactively addressing liability risks, businesses can enjoy sustainable growth while protecting their assets, reputation, staff and guests.

While not every insurer will welcome zip-wires, goats and cats into their policy wording, your broker should be able to find one who will. You certainly shouldn’t open your diversified doors without the right insurance in place.