Small Business

The Cost of Bedbugs


Hotels and rental housing are hit by a resurgence in bedbug infestation—and lawsuits are proving it's not a problem that can be swept under the rug

Rosemary Salinas is a property supervisor for five apartment buildings in San Francisco. The first time she saw a bedbug was in 2004, when one of the tenants in a trendy Marina District building complained about itchy bites from tiny bugs that looked like ticks. Salinas hired a pest control company to treat the unit, the tenant moved out, and that was that—or so she thought.

Only months later did she find out that the primary infestation was actually in the apartment next door and that the bedbugs had spread into the walls, the hallways, and four other apartments in the 28-unit building. Salinas estimates the cleanup cost upwards of $40,000 all told, including a $9,000 payout to one tenant who threatened to sue.

"It was a nightmare," she says. And it's an increasingly common one. Although the bloodsucking parasites all but disappeared from the U.S. in the 1950s, thanks largely to the now-banned pesticide DDT, pest control companies say bedbug infestations have escalated dramatically over the past decade. Pest control professionals say they've found bedbugs in hospital waiting rooms, movie theaters, schools, on public buses, airplanes, and ships. So far, hotels, nursing homes, and apartment buildings have been among the businesses hardest hit by the nationwide bedbug resurgence.

Bedbugs are more of a nuisance than a health risk. While everyone shudders at the thought of bloodsucking parasites feeding on them at night, bedbugs don't carry any known diseases, and some people don't even react to bedbug bites at all. But because the pests are difficult to get rid of, an infestation can exact a real toll.

Not a Sanitation Issue

Salinas now issues regular notices in every building she supervises reminding tenants to call management immediately if they suspect a bedbug infestation. Still, the property owners she has talked to haven't been eager to do the same. "They don't want anybody to suspect that they have them, or to think that they could have them," she says.

Rental property owners aren't the only ones with that attitude. In a statement on its Web site, the American Hotel & Lodging Assn.—an industry group that co-hosted an international bedbug symposium last fall—says the resurgence of bedbugs in the U.S. has "had a minimal impact on the vast majority of hotels, which maintain state-of-the-art sanitation and adhere to strict standards of cleanliness," adding, for good measure: "Bedbugs are brought into hotels by guests; it is not a hotel sanitation issue."

It's true that bedbugs aren't a hygiene or sanitation issue, per se. Unlike roaches or rats, bedbugs thrive even in the cleanest five-star hotels. But the AHLA's definition of "minimal impact" is open to interpretation. A study by the Steritech Group, a commercial and institutional pest management company, found that nearly 25% of the 700 hotels it tracked over a three-and-a-half year period between November, 2002, and April, 2006, required treatment for bedbugs, though of the 76,000 hotel rooms in the study, fewer than 1% were found to be infested. But the public stigma that bedbugs carry makes the line between discretion and transparency a delicate one to tread.

"The hotel industry, property managers, universities—nobody wants to talk about bedbugs," says Michael Potter, a University of Kentucky entomologist and bedbug authority. But some have been taking steps to address the problem quietly.

Mum's the Word

Two years ago, James Bell found that hoteliers weren't interested in Protect-a-Bed's bedbug-proof mattress encasement, until the product was rebranded as "allergy-free (BusinessWeek.com, 8/13/07)". Now, Allerzip's "BugLock" enclosure is mentioned on packaging but doesn't appear anywhere on the label that guests might see. (Allerzip is a Protect-a-Bed brand.) "No one wants to check into a hotel that advertises bedbugs," Bell says.

K-9 Bedbug Detection Services does a brisk business using trained beagles to sniff out bedbugs in around 100 of New York and New Jersey's toniest hotels, nursing homes, and apartment buildings on a quarterly basis, at a cost of $900 to $1,500 per inspection. Although at least one downtown hotel displays its "bedbug alert free" certification in the lobby, Vice-President Jeffrey Kazen says the public's anxiety about bedbugs means that most of K-9's clients don't wish to publicize that they use the company's services. When inspecting hotels, handlers typically tell hotel guests the dogs are checking for mold. At nursing homes, they blend in with the pets present for animal therapy. "You don't want people to know what you're looking for, because then every rash, every itch becomes bedbugs," he says. "You keep it quiet, you take care of the problem, and hopefully that'll be the end of it."

When word of a bedbug infestation does spread, the threat of a lawsuit can make a difficult situation much, much worse. Carl Morello, assistant vice-president for loss control at Sequoia Insurance in Monterey, Calif., says he first started seeing bedbug-related claims from property owners two years ago. He says a likely factor is the increased publicity, such as a widely reported $20 million lawsuit filed against a hotel in the Catskills.

Then there are other costs: the negative publicity, erosion in brand value, and drop in business that can result from a poorly handled infestation. Damage control (BusinessWeek.com, 10/17/07) is tricky since unhappy bedbug victims can easily spread word of infestations online via blogs or user-submitted travel review sites such as TripAdvisor (EXPE). "How many people hear about a hotel that had bedbugs and don't stay there because of it? You just don't know," Morello says. Last year an Australian study estimated that bedbugs cost the Australian tourism industry $75 million annually. (No such estimates are available for the U.S.)

Out-of-Court Settlements

To avoid the hassle of a lawsuit, many property owners prefer to settle bedbug claims out of court. Although settlements are typically maintained under a confidentiality agreement, attorneys say the average bedbug settlement is much less than the ones that make headlines, such as the reported $150,000 that Helmsley Enterprises paid a guest in 2004. But the mental anguish bedbugs inspire can also lead victims to seek claims well above the cost of replacing a suitcase or paying a doctor's bill. "If I'm trying to settle a case, I might be offering $8,000, $10,000, and the person wants millions," says Christian Hardigree, a lawyer and professor of hospitality law at the University of Nevada at Las Vegas. "They feel violated."

Morello says most hotel guests who encounter bedbugs will be satisfied with an apology, a clean room, and maybe a refund. But getting rid of bedbugs is still pricey. Since DDT was banned, pest control professionals don't have many effective chemicals to kill bedbugs, which feed only on blood and aren't attracted to baits or traps. That makes finding and destroying the tiny bugs and their eggs meticulous, time-consuming work that typically requires repeat visits.

To treat infested units in her San Francisco building, Salinas hired a company to empty each apartment and freeze the contents for 48 hours. (Extreme temperatures are one of the few reliable ways to kill bedbugs.) The cost: about $2,000 per unit.

Hardigree says some hotels she has consulted for have spent more than $50,000 to $60,000 to treat full-blown bedbug infestations. Most exterminators use a class of chemicals called pyrethroids in combination with nonchemical methods (heat, cold, vacuuming, steaming). But the costs that pest control companies charge and the practices they use can vary widely. "If a hotel room is infested, in theory, we should be treating all the adjoining rooms," says Douglas Stern, owner of Secaucus (N.J.) pest control company Stern Environmental Group, meaning the rooms above and below and well as on either side. "But a lot of hotels don't want to spend the money." And even without cutting corners, no amount of money can guarantee that a building is truly "bed-bug free."

No Guarantees

Bedbugs can survive for up to a year without a blood meal, entomologists say, so taking a hotel room out of service for a few days or even a few months after it has been treated won't necessarily help. "I can say with 99% certainty that they're gone, but the reality is we don't know until somebody sleeps there," says Stern. Even a clean sweep by a bedbug-sniffing dog is no assurance that a few bedbugs haven't hunkered down somewhere, just waiting for the next warm-blooded host to come along—or that some new bedbugs won't hitchhike their way in tomorrow.

But there are proactive steps property owners can take, such as installing bedbug-proof mattress covers, that can help create an "inhospitable environment" for the critters, making them easier to detect and contain quickly. At a Las Vegas hotel that is Hardigree's client, standard procedure for bedbugs now involves getting permission to dispose of and replace the guests' luggage with new suitcases purchased in bulk through the manufacturer. Before moving to a new room, guests are asked to take a shower and are provided with a track suit and slippers to wear while their clothes are being dry-cleaned.

Hardigree admits that for managers with an eye on the bottom line, such precautionary measures can be a hard sell until an actual bedbug problem arises to force the issue. Training the housekeeping staff to do routine bedbug checks sounds like a good idea, for example, but realistically, "How thorough can they be if they've got 20 minutes to clean an entire room?" she asks.

Still, given the litigious environment hoteliers face, Hardigree says every facility should have some kind of bedbug action plan in place, even if they have to raise their room rates to implement it. In a 2003 case, a Chicago jury awarded $382,000 in punitive and compensatory damages to two plaintiffs bitten by bedbugs in a motel room that they alleged management knew was infested but failed to treat. In 2004 a New York judge awarded a tenant a 45% rent abatement for a six-month period, ruling that the apartment's bedbug infestation constituted an "intolerable condition," notwithstanding the landlord's efforts to exterminate them. Insurance may not cover all the costs of litigation—punitive damages, for example, are typically not insurable—and many insurers won't pay claims if managers were clearly negligent in dealing with infestations on their properties, Sequoia Insurance's Morello says.

Proliferating Lawsuits

Bedbug-related lawsuits have also been filed against rental furniture companies, cruise lines, dry cleaners, laundromats, and universities—and not just over the bugs themselves. In a case pending against Wichita State University, the plaintiffs claim the pesticides sprayed to get rid of the bugs made them sick.

"It's a mess," says Timothy Wenk, an attorney who represents landlords and property owners in civil litigation suits in New York City. Wenk says he expects the number of bedbug-related lawsuits to increase as the infestation spreads, including more landlords suing pest control companies and more bedbug victims suing public municipalities.

Hardigree has fielded phone calls from property owners interested in putting an addendum to lease agreements holding tenants responsible for bedbug infestations. Others are interested in tweaking the language of contracts with pest-control companies so they can sue if the bedbugs return. (Her response to both: "You can put that language in, but I can't tell you it would be upheld by a court.") In any case, bedbugs aren't a problem that can be solved by the wave of a gavel.

For a closer look at the economic impact of bedbugs, flip through this slide show.


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