The inevitability of free Wi-Fi
28 JANUARY 2014 7:00 AM
Loews Hotels’ announcement last week that it will offer free guestroom Wi-Fi might open the door for other chains to follow.
Loews Hotels’ announcement last week that it will offer free basic Wi-Fi in all guestrooms might be a crack in the wall that leads to a chasm. Indeed, 2014 might be the year in which additional brand companies bend to what seems to be the inevitable conclusion that Internet service should be free to guests in all hotels, including full-service properties.
Then again, Loews might just be an outlier, with company leadership hoping to draw attention to a chain that with just 18 hotels needs all the buzz it can generate.
Like most business decisions, the question of whether to charge for Wi-Fi hinges on a number of factors, mostly the balance between lost revenues and the need to address guest demands and expectations. It also largely depends on chain scale.
According to the American Hotel & Lodging Association, while 84% of luxury hotels in the United States and 76% of upper-upscale properties charge guests for Internet service, just 18% of upscale and 26% of upper-midscale hotels charge for the service.
Getting a handle on how much revenue is lost—and whether providing Internet service at a charge is even profitable—is a tough proposition. Loews President and CEO Paul Whetsell told CNBC that the company was making a “couple million” dollars annually on the service at its 18 hotels. Yet, a company representative told me that the chain got buy-in from owners of its properties before making the decision on free Wi-Fi.
Data from PKF Hospitality Research shows hotel telecommunications revenue (which includes phone, fax and Internet) declined steadily from 2000 until later in the decade. As Robert Mandelbaum, director of research information services, wrote in an email, the decline coincided with the sharp rise in cellphone use by travelers. Internet revenues have stabilized since 2009, perhaps because many hoteliers with properties in the upper-tier segments have continued to charge for the service.
Further data comes from STR Analytics, a sister company of Hotel News Now. Between year-end 2011 and year-end 2012, Internet revenues for all hotels in the company’s HOST study fell 40.3% on a per-average-room basis, possibly a function of some hoteliers dropping Wi-Fi charges, along with an increase in the number of mobile hotspots and free public Internet service in coffee shops and city centers.
Loews’ announcement might represent a tipping point in which other upper-upscale and luxury chains follow suit. It might not, though, but time will tell.
More likely, other brands will adopt hybrid approaches in which guests are charged for higher capacities of Internet bandwidth or other schemes. Marriott International last year instituted free Wi-Fi service in the lobbies of its full-service hotels, while InterContinental Hotels Group offers complimentary Internet service to members of its frequent traveler program.
I expect 2014 will be a year in which other upper-tier chains review their Internet policies and make changes that minimize their revenue losses while improving their stature in the eyes of guests.
The opinions expressed in this blog do not necessarily reflect the opinions of Hotel News Now or its parent company, STR, and its affiliated companies. Bloggers published on this site are given the freedom to express views that may be controversial, but our goal is to provoke thought and constructive discussion within our reader community. Please feel free to comment or contact an editor with any questions or concerns.