Should Internet access be complimentary at hotels?
 
Should Internet access be complimentary at hotels?
21 MARCH 2016 7:02 AM

With free Internet and Wi-Fi access so ubiquitous in public spaces, should hoteliers finally accept that guests expect the same free Internet once they check in?

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 cellphones and emails became mainstream and consumers stopped using telephones in guestrooms or fax service, the telephone department quickly became a cost center.

Similarly, consider Internet access. At first, hoteliers charged for the amenity to cover their costs. However, in order to meet consumer expectations—even McDonald’s restaurants offer free Wi-Fi—hoteliers were compelled to provide free high-speed Internet access, which has become another cost center.

But the analysis does not stop there. The incessant demand for bandwidth is mind-boggling. Our guests want to do more and more with their devices, including streaming audio and videos and making voice calls over IP. Consider that the major media companies allow 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 bandwidth 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 that 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%) is almost twice the percentage of the next area of significant complaint, which is the check-out process (16%).

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

It is interesting that midscale hotel chains were the first to offer free high-speed Internet access 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 guests for the optional fee (but for these hotels the Wi-Fi fee is only a fraction of the room rate).

As we move through this 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?
  • Should we consider guests’ perspective that access to the Internet should be free?

David Kong is president & CEO of Best Western International and has served as the global hotel brand's top executive since 2004. Kong has also held leadership positions with KPMG Consulting, Hyatt Hotels, Omni International and the American Hotel & Lodging Association, and served for three years on the United States Department of Commerce Travel and Tourism Advisory Board. More insight from Kong is available through his LinkedIn channel and the new Best Western Executive Blog “It’s Personal."

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4 Comments

  • Bob Rauch March 22, 2016 2:36 PM Reply

    David, good job explaining the challenge. The solution, in my opinion, lies in raising our rates high enough so that we can afford to provide high-quality, free wi-fi to all guests. HNN's article on average rate growth in 1996 vs. 2015 tells the story - time to drive much more rate. Bob Rauch

  • James Schultze April 13, 2016 1:15 PM Reply

    If every hotel raised its nightly rate by $10, all could offer free internet and have more profit than 2014!

  • Pavel Pohl - Nettify June 12, 2016 10:23 PM Reply

    First and foremost. Guests got used to fee internet and no longer see it as a bonus point for a hotel chain. There is a fundamental shift towards quality internet service that is FAST and STABLE. And this will be the biggest challenge now. Not only for mid-scale hotels, but mainly for them, as their free internet strategy was low cost oriented.

    Another dimension of this problematics is security. Low cost Wi-Fi networks often lack even the most basic configuration that would protect their users, many with no login authentication, in place. So the internet service hotels provide must also be SECURE.

    Once hotels invest in an equipment that can allow for these three basic preconditions of a decent internet service, implementation of tiered access is a breeze. Giving your guests the luxury of choice between very good free internet and a great premium one will always be well accepted, as with other services hotels provide in a similar manner.

  • Pavel Pohl - Nettify June 13, 2016 11:00 PM Reply

    First and foremost. Guests got used to fee internet and no longer see it as a bonus point for a hotel chain. There is a fundamental shift towards quality internet service that is FAST and STABLE. And this will be the biggest challenge now. Not only for mid-scale hotels, but mainly for them, as their free internet strategy was low cost oriented.

    Another dimension of this problematics is security. Low cost Wi-Fi networks often lack even the most basic configuration that would protect their users, many with no login authentication, in place. So the internet service hotels provide must also be SECURE.

    Once hotels invest in an equipment that can allow for these three basic preconditions of a decent internet service, implementation of tiered access is a breeze. Giving your guests the luxury of choice between very good free internet and a great premium one will always be well accepted, as with other services hotels provide in a similar manner.

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