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IHG’s free Internet signals ‘sea change’
March 27 2013

IHG’s announcement is the next step toward Internet becoming another utility for which owners must bear the burden of cost.

Highlights
  • IHG consulted its ownership association throughout the research process.
  • IHG’s decision is “somewhat of a sea change moment,” said Michael Hraba of Waterford Hotels & Inns.
  • B.F. Saul is spending approximately $150 to $200 per room to upgrade all of the switches and install new access points across its portfolio.
By Jason Q. Freed
Contributing Editor, Tech Impact Report

REPORT FROM THE U.S.—In a move indicative of the hotel industry’s future, InterContinental Hotels Group announced Tuesday that all of its 4,600 hotels across the globe will be required to offer at least a basic level of Internet access free to guests.

The popularity of free Internet access among travelers—and its importance as an amenity that leads to hotel booking decisions—has been well documented over the recent past. What hasn’t been fully outlined, however, is how hoteliers will recoup the high costs of installing Internet access throughout their properties without charging the guest for at least a portion of it.

IHG consulted its ownership association throughout the research process in advance of making the decision and got full support from them, company executives said.

“We have been working closely with the IHG Owner's Association Leadership team. They have been very supportive of our plans,” said Don Berg, IHG’s VP of loyalty programs and partnerships. “As with any opportunity, we look very closely at the return on investment.”
 
“IHG is working hard to bolster the value of their brands in the eye of the consumer,” added Mark Carrier, a member of the owners’ association and president of B. F. Saul Company Hospitality Group, which owns and operates full- and select-service hotels. “Basic Internet is pretty much a standard expectation. The fact that it’s being granted to Priority Club travelers is a gigantic leap.”

Carrier—like many other hoteliers in the past—compared basic Internet access to hot water and television, saying it’s a “utility” for which hoteliers must bear the burden of cost. His company recently made a conscientious decision to offer that basic level at all its hotels and is implementing a tiered system where heavy users—those expecting more than 1 MB speeds of download and upload—can purchase additional bandwidth.

“The challenge of that connectivity is significant and very taxing on older infrastructure,” he said. “But good, reliable Internet access today is as important as hot water. If you don’t have hot water you don’t have guests.”

“If you’re going to be in the hotel business today, it is absolutely incumbent on you, just like investing in high-definition television,” he continued. “If you’re not investing in what the guest wants, you’re going to be left on the sidelines.”

Michael Hraba, project manager and communications for Waterford Hotels & Inns, a boutique hotel management and consulting company, said IHG’s decision is “somewhat of a sea change moment,” particularly for business and conference hotels that traditionally charge for Internet access.

“Certain value adds or amenities have now just become part of standard operating procedure, just as the luxury of cable television or a smartphone. It's smart of IHG to realize this before it's too late,” Hraba said. “IHG may have signaled the demise of charging for Internet."

Costs involved
The costs of installing basic Internet service through a hotel vary greatly depending on the infrastructure and the size of the property. However, Carrier was able to offer some comparisons and ballpark figures.

It’s more expensive than providing hot water and less expensive than providing high-definition television, he said. The major costs are installing the hardware—a network of devices that provide the access points—and a wired infrastructure to communicate to those devices.

B.F. Saul, which is upgrading all of the switches and installing new access points across its entire portfolio, is spending approximately $150 to $200 per room, Carrier said. Spending between $40,000 and $50,000 in a full size, 300-room hotel is “not an insignificant cost by any stretch,” he said.

As the program rolls out, IHG will mandate that owners establish “basic internet functions” that allows the guest to surf the Web and access email, Berg said. Hotel owners can still operate a tier system and a premium service might be available at certain hotels.

Most of the major brands in the select-service category already have implemented some form of complimentary Internet access. Where decisions such as IHG’s will have the biggest impact on a hotel’s bottom line is in the full-service, urban assets, where Internet access traditionally has been available under a paid model.

“That model has a fair amount of money attached to it. Many big box hotels are still able to charge for high speed,” Carrier said. “The challenge is: Can you pay on that model or not? Will they be able to charge for the long term or won’t they?

“At the most basic level, if you’re not providing high-speed that’s reliable and robust you’re angering your consumer and you can’t survive doing that.”

Standing out
Some IHG hotels already offer Internet access at no additional cost. Now, free Internet is being extended globally to all 71 million members of IHG’s loyalty club, which will simultaneously be renamed IHG Rewards Club.

While IHG claims to be the “first in the industry” to commit to free Internet for all loyalty members worldwide, other global brands already have similar programs in place. Wyndham Hotel Group, for example, offers free wireless to all guests at most of its properties.

“Wyndham Rewards members receive complimentary access to wireless Internet at all Wyndham Hotel Group locations, wherever such access is available,” said Joy Gulledge, manager of public relations.

How other brands across the industry approach Internet access for their loyalty members varies.

All Omni Hotels & Resorts’ loyalty members receive complimentary in-room Wi-Fi, according to Anne Tramer, VP of corporate communications. Omni’s Select Guest program is free to join and members at any level of the program–Gold, Platinum and Black—receive complimentary in-room Wi-Fi.

At Hilton Worldwide, free Wi-Fi is offered to Gold and Diamond Hilton HHonors members across all brands, according to Director of Global Corporate Communications Dasha Ross. Additionally, Wi-Fi is free in all areas of the hotel at Hilton Garden Inn, Hampton Hotels, Homewood Suites by Hilton and Home2 Suites by Hilton brands.


Click to expand infographic.

COMMENTS   Show All
T.D.
4/4/2013 1:18:00 PM
Putting the word "utility" in the top of this article really brings the issue home. For many travelers, an internet fee is much like taking 15 minutes (as is often the case) to register separately with the hotel for television service or electricity, and then getting an additional charge for using them. It's an insult, and guess what? Those things both cost owners money too.
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