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Hotels unable to hang up on costly phone systems

Travel today, from luggage to laptop, is increasingly high-tech. Yet every hotel room hosts a costly anachronism: a traditional telephone.
/ Source: Reuters

Travel today, from luggage to laptop, is increasingly high-tech. Yet every hotel room hosts a costly anachronism: a traditional telephone.

In-room phones once produced profits for hoteliers. Today they eat into earnings as guests use cellphones instead.

"Phones used to be a revenue center," said Best Western Chief Executive Officer David Kong. "Now they're a cost center."

The dwindling utility of the hotel room phone is part of a wider trend that has landlines vanishing from homes and workers doing business on the BlackBerry.

AT&T and Verizon Communications, the big local phone companies, are losing 10 percent to 12 percent of their lines every year to other providers, said independent telecom analyst Jeff Kagan. That rate will only increase, he said.

But hotels can't hang up on their phone systems. Guest safety and security demand them, said Bjorn Hanson, a professor at New York University's Tisch Center for Hospitality, Tourism and Sports Management.

"We're stuck with them," Kong said.

‘Never used a hotel phone’
Guests use room phones if they need to call for help. In nonemergencies, they pick up the receiver to order room service and wake-up calls.

But guests save money by using their cellphones to take or make most outside calls.

In New York City, it costs about $1.50 to make a local call from a hotel, which also might charge a fee of about $4 to connect to a long-distance carrier.

"I have never used a hotel phone," said Francois Genow, 23, of Paris as he beamed his camera around the lights of Time Square. "Never."

The guest who does decide to use the phone can often do so from the desk, the bed or the bathroom, because installing multiple phones is cheap once the larger system is in place, said hospitality industry consultant Ted Mandigo.

"I get my wake-up call in the bathroom," said Jim Abrahamson, an early riser who heads InterContinental Hotels' operations in the Americas. "I'm already up. That way, I don't have to scurry back to the phone by the bed."

Phones costing hotels money
But hotels pay dearly to install and maintain this glorified system of house phones.

From the mid 1980s through the early 1990s, the telephone generated about 2 percent of profits for hotels, which essentially operated little internal phone companies and charged guests the highest legal rate, Mandigo said.

But now a hotel spends $3 for every $1 generated from in-room telephones as guests swap them for cellphones, he said.

The next source of in-room revenue to vanish will be pay-per-view movies, which guests can forego for cheaper alternatives on their laptops, he added.

Hotel companies have tried to replace the phone and continue to do so, NYU's Hanson said.

One company experimented with a handheld gadget that combined the phone's functions with lighting and climate control, Hanson said. Guests wanted it in addition to, not instead of, a dedicated phone.

Today, many big hotel chains are exploring smartphone applications guests could use to request room service and wake-up calls, Hanson said, but those efforts are very preliminary.

"It's too early to call the death of the phone," Abrahamson said.