Creative Sources of In-Room Revenue

By Katie Morell, Contributing Editor | September 12, 2011

In 2011, automated concierge systems, creativht_0911_pw_art.jpge pricing, and increased bandwidth are filling in hotel room revenue gaps. In a day where an average guest travels with a tablet in his bag, a cell phone in his pocket, and a laptop in his carryon, properties and technology vendors are increasingly forced to get creative when it comes to capturing dollars.

Guest room revenue has been historically broken down into four categories: phone, television, mini bar, and room service, according to Riyaz Akhtar, executive vice president for Hampshire Hotels and Resorts, founded in 1996 and based in New York City. Quite a bit has changed in the last 15 years.
 
Phones
“Back in 1996, we were running six properties and netting half a million dollars on the phones themselves,” he says. “The phone department stayed profitable through 2000, but by 2003 it was a loss leader.” Today, phones are amenities, says Akhtar, devices in which to receive calls and make in-house requests, but not much else.
 
To compensate for the decrease in revenue, Hampshire uses Alcatel-Lucent’s IP-based switch to record guest information for future use, thus decreasing marketing dollars. “Everything from the room is being routed through the Alcatel switch, so we are able to decipher guest preferences such as temperature settings, music preferences, television channel preferences; by doing this, we can create a steady client base.”
 
Televisions
The widespread utility of laptops and video download sites has decreased video on demand (VOD) usage, but some vendors are still holding on, and one is LodgeNet. Several months ago, the company began testing a creative pricing model for in-room videos: in-theater movies and recent releases were offered at prices as high as $29.99, older movies and non-theater films were offered as low as $4.99 (less than many in-home VOD services). According to the company, the test proved successful and resulted in 20 to 30 percent of new people watching movies. As a result, LodgeNet launched its new pricing model, VOD 2.0, in June.
 
Another way to garner TV revenue is by turning the television into a makeshift concierge. Cory Chambers, director of sales and marketing at the February-opened JW Marriott Indianapolis says the hotel has been successful in implementing an Intelity system into its television monitors. “The system allows our guests to use the TV and remote control to order things like towels, pillows, and room service without using the phone or interacting with anyone; we are collecting revenue from it,” he says.
 
For guests who’d still prefer to download movies to their laptops, Jon Inge, president of Jon Inge & Associates, a hotel systems consultancy based in Edmonds, Wash., recommends tiered Internet pricing. “Video programming is increasing at a phenomenal rate, and it is straining the ability of hotel networks to keep up with it,” he says. “There is strong pressure to increase bandwidth coming in and to provide good enough quality to guests, which is expensive.” Inge says he’s seeing a trend towards tiered pricing for bandwidth.
 
While this seems to be working, it can also cause guest annoyances. “I think we need flexible tiering; more on-demand pricing,” Inge says. “I only want to pay a high bandwidth fee when I need it.”
 
Mini Bar
Mini bars are luxury amenities of the past in many branded properties, including the JW Marriott Indianapolis. “We’ve found that overtime, the mini bar doesn’t enhance the in-room experience,” says Chambers. Specialized lifestyle brands such as Hampshire Hotels & Resorts, however, still invest in the product. Hampshire uses Bartech to auto-record items used, thereby cutting labor costs. The company also offers dry goods outside the mini bar, which has become a key money generator, says Akhtar. “It is a whole different way of looking at things; it makes it easy to pick up and use immediately,” he adds.
 
Room Service
Along with television-based concierge systems, some properties are looking at stand-alone modules to help streamline the guest request experience. At HITEC 2010, HFTP showcased its Guestroom 20X (a futuristic room mockup shown every other year) with a focus on Incentient’s SmartTouch technology. “It is a touch screen in the room that allows guests to order room service, talk to the concierge, get a car ready at valet, and book a spa appointment,” says Katy Walterscheidt, public relations and social media manager at HFTP.
 
The technology may have attracted attention, but pricing has limited application to high-end properties, according to Inge. “I’ve seen more technology that makes it easier and more attractive to order room service on a phone, tablet, and TV,” he says, adding that Intelity ICE software (which is installed on in-room televisions at the JW Marriott Indianapolis, but can be installed on any touch screen or tablet) is another such system.
 
“It’s been growing for a couple years and there are several hotels that are doing it successfully, but most are higher-end properties.” Many of these technologies are IP-based, but still too expensive for the majority of hotels.
 
As for iPads in hotel rooms, Akhtar is hesitant. “The iPad is a recent phenomenon and I think hotels are concerned with the ability of guests to walk away with it; we have to figure out a way to secure it.”
 
According to Inge, increased room service revenue comes back to connectivity. “You have to provide enough in the room for them to want to stay there,” he says. “If you have robust technology and bandwidth, and if you up-sell on your room service, it will help generate revenue.”

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