Should Internet access be complimentary at hotels?

By David Kong

Tuesday April 5, 2016
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It wasn’t too long ago that the telephone department was a profit center for hotels – local and long distance access charges, surcharges for long distance, charges for fax, etc. However, as cell phones and emails became mainstream and consumers stopped using telephones in guest rooms or fax service, the telephone department quickly became a cost center.

Similarly, consider Internet access. At first, hotels charged for the amenity – to cover their costs. However, in order to meet consumer expectations (even McDonalds offer free Wi-Fi, shouldn’t hotels) hotels were compelled to provide free high speed Internet access (HSIA) – another cost center.

But the analysis does not stop there. The incessant demand for band width is mind boggling. Our guests want to do more and more with their devices, including streaming of audios and videos and making calls via voice over IP. Consider the fact that every major media company allows on demand streaming of their programs and they are buying up one another to offer even more content. It’s no wonder we struggle to keep up with band width expectations. Making the matter even worse, the number of devices in each room has also grown exponentially. Each guest will likely have two to five devices, and often there are multiple occupants in our rooms.

With this backdrop, it is no wonder the JD Power’s 2015 North America Hotel Guest Satisfaction Index Study reports that “Internet remains the highest incidence problem across all hotel segments.” The percentage of guests experiencing internet issues at hotels (31 percent) is almost twice the percentage of the next area of significant complaint which is check-out (16 percent).

Given the strong correlation between access to a reliable and fast internet connection and guest satisfaction, hotels are forced to continuously invest in higher bandwidth and more sophisticated equipment to allocate bandwidth. Many hotels struggle with how they can offset this ever increasing cost.

It is interesting that midscale hotel chains, including Best Western, were the first to offer free HSIA in order to compete. Upper Upscale and Luxury hotel chains begrudgingly acquiesced a few years ago and introduced tiered pricing, which offers basic Wi-Fi to all guests for free with an option to pay a fee for a faster connection or additional devices.   So far, there has not been much backlash from their guests for the optional fee (noting that for these hotels the Wi-Fi fee is only a fraction of the room rate).

As we begin the New Year, it will be interesting to see if midscale hotel chains will follow the lead and implement tiered pricing as well. To do so, we have to answer a few tough questions:

  • Do we want to make investments in the necessary equipment to do the accounting and billing of tiered pricing or should we simply spend the money on increasing the bandwidth to meet guest expectations and accept the harsh reality?
  • Can we deliver a premium Wi-Fi experience throughout a hotel consistently to justify charging extra for it?
  • Or, should we consider the guests perspective – access to the Internet should be free?