The Price Is Right

By Nicole Marie Richardson, Contributing Editor | January 01, 2005

Sometimes it seems as though uncertainty and debate are the only constants in the hospitality industry. Still, hotel and restaurant operators seem to agree on only one thing that will remain a healthy revenue generator in the New Year: high-speed Internet access (HSIA) in hospitality hotspots. But that is where the agreement ends. Many issues concerning HSIA--such as whether it should be wired or wireless, free or for a fee--continue to be points of vigorous debate for hotel and restaurant operators.

Wired or wireless
For many operators, like Lori Dunkin, operations manager of Costanoa Lodge & Camp in Pescadero, California, wireless Internet is the way of the future. After installing an HSIA solution provided by Montel Technologies and BelAir Networks (belairnetworks.com), Dunkin was surprised with the speed of the process. Installation took less than a month and her concerns about adding costly access points were a non-issue.

"We have a completely wireless solution because part or completely wired solutions are cost prohibitive and are a short-term answer. As our population becomes more comfortable with wireless and devices rely more on this technology, we will see wired solutions as a hindrance," states Dunkin. "I see HSIA becoming as standard in hotel rooms as a telephone. Wireless has a nearly negligible marginal cost, while wired will always have the cost of additional cabling. Wireless just makes sense."

On the other hand, Steve Johnson, director of information technology for Champps Entertainment, says that wired was the best way to go when installing broadband VPN lines to the chain of 50 sports bars. Set up took about four months to complete, much longer than a wireless install, but was worth it to replace its aging frame relay network. According to Johnson, the solution provided by Netifice Communications (netifice.com) allows for online management of the system and grants access to critical data 24/7.

Even Johnson foresees the benefits of offering wireless hotspots to his guests if not for corporate use. With one Champps already outfitted with wireless HSIA for guests, he plans to convert all 50 locations into hotspots in 2005.

On the fence
Many operators are straddling the fence by implementing both wired and wireless services. James Grosso, general manager of the Walt Disney World Hilton, rolled out wired services in guestrooms and opted for wireless access in public areas. Charging $9.95 per day for access to the Smart City (smartcity.com) solution, usage rates have been close to 6 percent to 10 percent among his mostly business visitors. And with a revenue share model, Smart City benefits from an increase in usage.

Hotel del Coronado also implemented both wired and wireless HSIA from LodgeNet (lodgenet.com) but for another reason. The facility presented a unique challenge in that the original section of The Del--a 116-year old infrastructure--was built with wood, while a newer tower was concrete. "Wireless works fine with wood framing, but not so well with concrete," explains Todd Shallan, VP and managing director.

Telkonet offered a unique solution to Steve Smith, executive vice president, operations of MHI Hotels. By utilizing powerline communications (PLC) technology, Telkonet enables the transmission of data over existing electrical wires making it unnecessary to install dedicated wiring or cabling. "Rewiring the hotels with Cat-5 was too expensive," says Smith. "Being able to provide Internet access over the hotels' existing electrical wiring was both simple and affordable. Security is a major concern to business travelers that use their laptops, and I didn't feel comfortable with a wireless solution."

Free or for a fee
Whether HSIA is wireless or wired, it costs big money to install and support. Some operators say that it's worth incurring monthly costs because the amenity attracts additional patrons. Other operators say that HSIA should be incorporated into room rates and pricing like other services.
Beth Briggs, vice president of IT for New World Restaurant Group, parent company of Einstein Bros Bagels and four other concepts, was determined to choose a service provider that did not force her to use a pay model.

"We wanted to install hotspots in our new concept, Einstein Brother's Café, and we wanted to be able to manage connectivity but we did not want to charge our customers," exclaims Briggs. "Vendors are really pushing that pay model, but if you charge there's a chance customers just won't use the service or they will go somewhere that's free." Briggs choose Netifice and expects 67 locations will open this year.

On the flip side, restaurants like McDonald's and Starbucks have decided to charge for Internet access, charging up to $2.95 for a two-hour wireless Internet connection or $29.95 for monthly access.

Lane Landrith, hotel operations manager for historic Hotel Boulderado, agrees that free is the way to go. Even when the economy started its downturn in early 2001, Boulderado combated empty rooms with adding value--HSIA. "Our objective was simple--build guest loyalty with our unique historic property while exceeding their expectations with high-speed wireless connectivity," insists Landrith. "There is no charge for our wireless connectivity. The profit we make is transparent in that it drives new and repeat guests."

Counterintuitively, many luxury hotels have decided to charge for Internet access. Mandarin Oriental Hotel Group's New York City location (MONY) selected InnerWireless (www.innerwireless.net) to install 100 percent coverage via broad-frequency network, providing complex wide distribution of communication/ data services through its ability to distribute frequencies from 400 Mhz through 2.6 GHz. The system handles two-way radio, pager, cellular/GSM, and 802.11/Wi-Fi and is designed for current and future wireless technologies such as building automation, RFID, security systems (CCTV), and VoIP. The going rate for both wired and wireless services at MONY is $15.

The luxury advantage
At Amelia Island Plantation, a 1,350-acre resort and conference center on a barrier island off the Florida coast, adding wired and wireless HSIA was an essential amenity for its business class guests. Still, as Richard Goldman, VP of marketing notes, the $9.95 price has not generated much concern from guests.

"The sophisticated traveler is now expecting it," Goldman explains. "Our take rates are 500 to 1,200 users a month, which we consider quite good. We are looking at doing more promotion to boost it even further. The next step is make it free, which is an interesting challenge for us."
Amelia Island Plantation searched for the right solution for more than two years before settling on HospitalityONE (comcastone.com) from Comcast. "Installation was a fixed monthly cost, easily covered by our take rates," Goldberg adds. "We liked that there was not going to be any revenue sharing. We wanted to know what the costs were going to be and what the potential revenue would be, and we want to have the costs captured if we decided to go for free Internet."

Costanoa Lodge and Camp also charges the common rate of $10 per day. "We are not looking to use this as a revenue stream. This $10 goes toward the cost the hotel incurs each month for offering technical support." Dunkin adds, "If the hotel is incurring a monthly cost to provide support as well as paying the ISP for Internet access, then the hotel may be inclined to charge."

As users become more adept at utilizing the technology, the need for technical support should go down along with the expenses. metropolitan areas such as Chicago, Hamburg, Germany, and Adelaide, Australia are already installing fiber optic networks with a wireless infrastructure to bridge the "last mile." Known as MANs (Metro-Area Networks), these networks are cutting communication costs for emergency services and offering residents and visitors wireless Internet. Whether it's free or for a fee, wired or wireless, one thing is certain, choosing HSIA takes time, consideration and a healthy debate.

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