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updated 4/29/2004 12:47:41 PM ET 2004-04-29T16:47:41

Just a few years ago, high-speed Internet access became a necessity for any hotel looking to lure the business traveler. These days, people are demanding wireless access and it's the medium- and budget-priced hotels that are leading the way.

According to Cambridge, Mass.-based Pyramid Research, the number of U.S. hotels offering Wi-Fi (short for Wireless Fidelity) has exploded from 500 in 2002 to double that in 2003. This year has been even busier for Wi-Fi providers such as Salt Lake City-based STSN and Austin, Tex.-based Wayport, which primarily work with the hotel industry.

Globally, the number of hotels with Wi-Fi has also risen, from about 2,500 in 2003 to an estimated 6,000 in 2004, the majority of which are in the U.S. That number is expected to jump to more than 35,000 by 2008. Overall, the number of Wi-Fi users is also rapidly growing, from 12 million globally in 2003, to an estimated 707 million by 2008.

The hotels aggressively installing Wi-Fi are the mid-priced chains such as Marriott International, InterContinental Hotelsand Wyndham International. "It makes sense that it's the mid-priced hotels doing this because that's where the average business traveler stays," says John Yunker of Pyramid Research. As of April 1, more than 1,200 of Marriott's 2,700 hotels have Wi-Fi, which the company says is the largest deployment of wireless high-speed Internet access in the hotel industry.

"When we first started rolling it out, we were probably ahead of most guests' needs," says Marriott spokesperson Scott Carmen. "But we wanted our guests to feel comfortable when they are working from the hotel."

The advantage to using Wi-Fi is that it gives business travelers more mobility and flexibility. Instead of being confined to your hotel room and tied to a cable modem, guests can work from a sofa in a Wi-Fi "hot spot," which are areas that allow high-speed wireless Internet access. (Think of it as being a reception zone for a cell phone.) Most hotels have also installed Wi-Fi in meeting rooms, which allows several people to have Internet access at once, and means that important documents, E-mails and Web sites can be accessed immediately.

On the downside, there are security concerns because with Wi-Fi information travels over public airwaves. (But the industry is working to address those issues with new security provisions to be built into the Wi-Fi standards later this year.) Some users may also find it difficult tweaking their network settings to get the Wi-Fi to work smoothly.

One reason Marriott was able to quickly provide Wi-Fi is that it's relatively cheap to install, about half the cost of installing high-speed Internet access with cable, since physical cables are not being laid and walls don't have to be torn up. While actual prices vary, Carmen says it costs about $2,000 to install each wireless hot spot--as long as wireless Internet is available in the area. Installing Wi-Fi is also fast; the process only takes an afternoon or, at most, a few days.

Another reason for the growth push is what analysts refer to as the "Intel effect." This year Intel, the world's largest producer of microchips, announced that it expects 90% of all laptops shipped this year will contain its Centrino mobile wireless technology, and Wi-Fi is being seen as another core computing feature, rather than an accessory. When customers demanded wireless access in hotels, the hotels had to comply.

"The hotel industry was more or less forced to jump on the Wi-Fi bandwagon," says Jerry Merkin, of New York City-based Hotel Business magazine. "Customers were demanding it, and if a hotel didn't have it, they went elsewhere."

So, why aren't all hotels rushing to offer Wi-Fi? For the most part, luxury chains such as Four Seasonsand Ritz-Carlton (a division of Marriott International) are not aggressively installing Wi-Fi. The reason, according to Pyramid Research's Yunker, is "the legacy effect." Many of the upscale chains recently completed installations of costly high-speed T1 and T3 lines--which has been the standard connection for high-volume users such as large corporations, universities, hotels, etc.--and are reluctant to incur the costs of installing Wi-Fi as well.

Ritz-Carlton has Wi-Fi in many of its international hotels, but at only three in the U.S.--where it has most of its properties. Derek Flint, the senior corporate director of rooms, says the company is working to have Wi-Fi in the majority (if not all) domestic hotels by end of the third quarter of 2004. Eventually, according to Flint, the company's goal is to have Wi-Fi in 100% of its hotels. "We've had Wi-Fi as a priority for the last six months," says Flint. He explains that one reason for the delay has been structural issues. "It is difficult to add a Wi-Fi component to an existing [high-speed Internet access] and differentiate which service our guests were using," he says. "We didn't want to double charge our clients."

Wiring issues also explain why new chains, such as the budget-priced, Atlanta-based Microtel Inns and Suites, will offer free Wi-Fi in 100% of its guest rooms by the end of the year, since it was installed during initial construction. In the future, the majority of new hotels under construction will include wireless connections. (Some hotels or resorts located in out-of-the-way places, such as a Polynesian island or a river in Wyoming, may take longer to add wireless because they are too far away from a local network.)

But when business travelers are searching for Wi-Fi hotels, they need to read the fine print. The overwhelming majority of hotels which bill themselves as having Wi-Fi have it only in common areas such as lobbies, meeting rooms or the café and not in individual rooms. Some hotels have specialty business suites with Wi-Fi but this is far from being the norm.

Do business travelers prefer working in a café or lobby rather than the privacy of their own room? Suprisingly, yes. Wi-Fi usage is about 15% to 20% in U.S. hotels according to Pyramid Research, and access fees are providing a steady stream of revenue for hotels. Most hotels charge between $9 to $15 a day for access. In comparison, most hotels charge about $10 for high-speed Internet access. Pyramid predicts that Wi-Fi access revenue fees could hit $1.8 billion by 2008. After that, Yunker predicts that Wi-Fi will become an expected free amenity such as cable.

© 2012 Forbes.com

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