In-Room Investments

Demands for increasingly advanced systems are high. New models help hotels meet guest needs and the bottom line.

By Joan Marsan, Technology Editor -- HOTELS Magazine, 8/1/2000

In their daily lives, people expect technology

to offer them access to more choices, be they entertainment or media

options. They have grown accustomed to taking greater control over

the means by which they access these resources. The patterns of guest

use of in-room entertainment systems reflect these changes. Real Time

Hotel Reports, Ithaca, New York, reports that from 1996 to 1998 the

percentage of hotels offering movie, VCR and video game rentals increased,

while hotels offering cable and pay-per-view television declined.

Entertainment options available in the hotel room have been growing

more closely aligned with what guests would have in their homes. And

hotels have been responding to guests’ demands

for greater autonomy when it comes to determining the

types of services they want at their disposal and the hours at which

these services are available.

Given these trends, more hotels are expressing an interest in installing

in-room Internet systems. Not only do these systems allow properties

to mirror the types of technology guests have in their homes, but they

also allow guests access to even more hotel-generated entertainment

and business services, such as those accessed through hotel-specific

portals. But questions remain about the type of service guests are most

likely to use and the sort of pricing structure that will guarantee

profitability for hotels without alienating guests with charges they

deem unacceptable.

If You Build It, Will They Come?

Reports of low usage of high-speed Internet access have many hoteliers

questioning the wisdom of installing such systems. At peak demand, 5%

of guests at three Hyatt hotels near major technology centers use high-speed

access, said Scott Miller, president, Hyatt Hotels Corp., Chicago, at

the New York University Hospitality Industry Investment Conference.

Guests use only 1% to 2% of high-speed lines at Host Marriott hotels.

Despite low usage rates, however, guests continue

to demand in-room Internet access, and they repeatedly cite an interest

in achieving this access at higher speeds. The failure to offer high-tech

services guests desire will eventually erode occupancy. This is especially

true in an environment where a hotel’s competitors offer these

improved services. And more hotels are offering in-room high-speed

access. Four Seasons, Hilton, Inter-Continental, Marriott, Ritz-Carlton,

Sheraton, Westin and Wyndham all offer the service in at least some

of their properties. Of these companies, some Four Seasons, Hilton,

Sheraton, Westin and Wyndham properties also offer wireless high-speed

access.

Guests know they can go to a nearby hotel for

enhanced amenities. David Michal, general manager of the 150-room

La Quinta Inn, Oakbrook Terrace, Illinois, watched as his desk clerk

recited a list of in-room amenities for a potential guest. When the

guest asked if two-line phones were available, the clerk responded, “They have dataports but are single-line.” The

guest left without another word. Michal sharply felt

the pressure to upgrade services.

Clearly, unimpeded Internet access, the higher

the speed the better, attracts guests. Why, then, aren’t they using it in hotels that

offer the service? While many guests are familiar with phone modems,

fewer laptops are equipped with the Ethernet adapters required for a

high-speed line, and most guests are reluctant to install unfamiliar

hotel-provided hardware. They are equally reluctant to install chain-

or hotel-specific software necessary for connecting to the Internet

through a hotel’s portal for fear they might damage their system

by overtaxing memory or introducing viruses. Additionally, most travelers,

while they may enjoy the luxury of Internet access, only need to access

e-mail. Given the hardware and software requirements of high-speed access,

they are content with the known and simple dial-up access. And for many

business travelers, dial-up access is the only option, as corporate

firewalls prevent access to their network through a hotel’s Internet

connection.

These impediments suggest that temporary technological

obstacles, not a lack of interest, prevent guests from accessing this

amenity. The solution, then, for Choice Hotels International, has

been to install in-room computers, which during tests they discovered

had a usage rate of more than 50%. But these usage rates were achieved

when guests had access free of charge. Hotels, meanwhile, would pay

a rate of US$3 per room, per day to Stay Connect, the Choice-founded

company that brings this in-room technology to the hotels. And hotels

typically pass that cost along to guests by charging them a daily

service fee—a move

likely to decrease usage and send guests back to dial-up

access.

Investment Sense

Given the potentially high cost of installation

and ownership of such in-room systems and guests’ reluctance to pay for their use, hoteliers

are wise to consider their options. For some, this has meant taking

a wait-and-see attitude, looking to what the competition installs and

introducing systems only after guest use of other hotels’ systems

becomes apparent. But at this point, with so many hotels

moving to install solutions and so many guests basing decisions to stay

on in-room technology, doing nothing no longer appears to be an option.

Enhancing entertainment and business services by providing provisions

for Internet access, due to the amenities creep, is fast becoming a

mandate.

Recognizing guests’ reluctance to make use

of the seemingly more complicated high-speed systems and their tendency

to return to the phone for Internet access, hoteliers have continued

to appreciate the flexibility of television-based systems. These systems

have the advantage of familiarity, and they limit the investment in

additional equipment. And like providing PCs in rooms, which, as Choice

discovered, is clearly an attractive option, television-based access

circumvents fears about installing software and the lack of Ethernet

connectors, while giving e-mail access to those without corporate

firewalls. Additionally, the clear, growing convergence of technologies

suggests that television and telecommunications, and thus the Internet,

may become inseperable and accessible through a single television-like

device.

Hotels have a number of options for acquiring

systems, and the increasing abudance of application service provider

(ASP) models in all areas of technology, with the hotel paying a fee-per-use,

may work in hoteliers’ favor

as they navigate the shifting arena of in-room solutions. Many providers

of in-room systems offer revenue-sharing options. They take on the installation

costs and collect the majority of the profits, which are split with

the hotel. Both models decrease hoteliers’ risk, while the current

limitations of in-room systems disolve and technology

evolves.

Even these low-risk options have shortcomings in the current environment

of rapid change. With so many in-room technology companies

entering and leaving the marketplace, it is difficult to maintain certainty

that the chosen system provider will remain solvent. The advent of wireless

systems increases the likelihood that wire- and cable-bound

investments will be outdated within a few years, further threatening

the financial stability of companies that have poured funds into wiring

and cabling projects. As with any investment or installation, partnering

with a company with a solid, sensible business plan that addresses the

mercurial nature of the technology marketplace is the only sensible

decision when adding or upgrading in-room systems.

Tech Briefs

E-Procurement Partners

A focus on supply-chain management led Starwood

Hotels & Resorts

Worldwide, White Plains, New York, to form an e-procurement

partnership with Zoho Corp., Sunnyvale, California, says James Hyman,

senior vice president, group services, Starwood. The venture was announced

weeks after Hyatt Hotels Corp. and Marriott International sealed a

deal with GoCo-op to form an e-procurement venture.

Starwood will invest US$30 million in the system,

which will allow the company autonomy in a quickly consolidating arena. “A company

this big needs to be independent,” Hyman says.

“We are focused on the total cost of ownership, not just purchase

price,” he adds, emphasizing the “supply-chain management

thinking” that guided Starwood’s decision to go solo. The

venture must provide benefits to buyers and suppliers

alike, Hyman says.

Additionally, Starwood sought an e-procurement arrangement with an

experienced supply-chain managment team, a pure hospitality focus and

a global platform that was already up and running. Freedom to add Starwood

preferred vendors, and to remove those vendors with whom Starwood does

not have purchasing agreements, was also key.

The decision to forge into e-procurement without

other hotel partners also shields hoteliers from the watchful eyes

of U.S. federal anti-trust regulators, who are investigating automakers’ plans

for a joint supply-buying site and the Orbitz site designed by the

airlines for ticketing distribution.

Supplyline

• Four Seasons Hotels & Resorts, Toronto,

  signed on with TRUST International, Orlando, Florida, for a multi-lingual

  voice reservation system for properties worldwide. Four Seasons

  also signed an agreement with Austin, Texas-based Wayport, providers

  of wired and wireless Internet access...

• Orient Express Hotels, London, elected to join the

  hotelBANK Internet reservation services developed

  by Micros, Columbia, Maryland...

• Accor, Paris, announced the launch of its online

  reservations channel at accorhotel.com, serving 3,400 hotels in

  90 countries. Accor also acquired a stake in WorldRes,

  San Mateo, California-based operators of an online-distribution

  network that will complement Accor’s

  accorhotel.com offering...

• Mandarin Oriental Hotel Group, Hong Kong,

  partnered with STSN, Salt Lake City, Utah-based providers

  of high-speed in-room Internet access...

• Darwin Networks, Louisville,

  Kentucky, will outfit 129 Lodgian-operated hotels

  with in-room, high-speed Internet access and videoconferencing capabilities...

• Hilton Hotels Corp., Beverley Hills, California, announced

  its intent to establish a proprietary procurement

  network with PurchasePro.com, Las Vegas...

• Eltrax, Atlanta, contracted to offer training

  and installation services to Atlanta-based hsupply.com,

  an e-services and e-procurement provider...

• Choice Hotels Int’l,

  Silver Spring, Maryland, partnered with Montreal-based

  electronic lock manufacturers Ilco Unican...

• And Pegasus Solutions,

  Dallas, and IDeaS, Minneapolis, will jointly develop

  a data extraction enhancement for yield management

  purposes.

Netline

Hospitalitycareernet.com (www.hospitalitycareernet.com)

features an online job exchange service, industry news,

stock quotes, career advice, compensation surveys, and research on companies

in the hospitality industry. Many sites offer job search capabilities,

but few offer lengthy lists of both prospective employers and employees.

And few are comprehensive enough to keep users checking

in on a regular basis. Hospitalitycareernet.com may well alter the reality

of online hospitality career sites.

Keith Kefgen, President of HVS Executive Search,

Mineloa, New York, says three factors keep Hospitalitycareernet.com

attractive to its audience. Strategic partnerships within the hospitality

industry promise to drive quality traffic. Timely news content will

keep the audience informed and give them reasons to return. And, “The site has tremendous ‘push-pull’ technology,” Kefgen

says.

By push-pull technology, Kefgen means the site

drives information back out to its visitors. It is not a passive site,

dependent solely upon receiving hits. Rather, Hospitalitycareernet.com

alerts users when newly listed job postings match their criteria.

And it pulls users back for more. Linked with the site is a 20 20

Skills assessment, which helps recruiters identify interviewees who

may be a particularly good match for the company. A variety of data

mining options aid employers as they screen interviewees and staff

members in terms of efficiency and customization. It also functions

as an ongoing training tool to improve the performance and retention

of the hotels’ employees and to set goals in employees’ personal

development. HOTELS is among several trade publications

providing content to the site.

OTconcierge, a new

service offered through OpenTable.com (www.opentable.com),

allows hotel concierges to book tables at leading restaurants 24 hours

a day, seven days a week, without picking up the phone. "The fact that I no longer have to call all over

town in search of availability gives me more time to focus on my guests,

which is what this job is really all about,” says Kathy Cady,

concierge at San Francisco's Galleria Park Hotel. While

OpenTable currently serves only the Chicago, New York and San Francisco

markets, rave reviews suggest it is likely to expand.