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Hotels pinched by tech-savvy guests

As guests show up equipped with iPhones, iPads and other devices, hotels are learning that they want to do anything but pay for in-room technology.

Traveling to Las Vegas for a conference last month, Brian DeLong could have gotten annoyed when he found out his off-Strip hotel charged a fee for Wi-Fi in his room. Instead, he whipped out his iPhone 4, fired up its Personal Hotspot software and accessed the Web "for free" via his iPad and laptop.

"They wanted $10 or $15 a day," said the founder of Ideavise Inc., a marketing and technology solutions company. "The crazy thing is it's like 20 bucks a month for me to get it on my phone — and I'm not even in the room that much."

Travelers are turning to personal devices instead of forking over fees for hotel-based services. Phone calls, movies, Internet access — hotels are learning that guests want to do anything but pay when it comes to in-room technology.

Have device, will travel
"People are more fixated than ever on the devices they have in their hands," said Glenn Haussman, editor in chief of the industry website "Everything they want to do, they want to do through that device."

And given the ongoing proliferation of smartphones and other Wi-Fi-enabled devices, they certainly don't want to pay for it, at least not twice. "You can carry your iPad and access the Internet almost anywhere you are," said hotel consultant Ted Mandigo of TR Mandigo & Co. "Why pay a hotel $7.50 or $9.50 a day when you can get the same convenience through your annual contract?"

While the number of people bypassing hotel-based Wi-Fi is tough to quantify, the trend is playing out in a rapidly changing environment. Even as more hotels offer complimentary Wi-Fi — alas, it's more prevalent at lower-cost hotels than high-priced ones — the proliferation of Web-enabled devices is taxing systems and forcing hotels to constantly rethink their strategy.

"The more robust the network, the more people gravitate toward it," said Kathy Penick, director of telecommunications at the Hilton San Francisco Union Square. "They’re doing things they can't do as fast at home or work like updating their software or downloading the entire 'Star Wars' series."

Phones, fees and fallout
The tussle over Internet access is merely the latest variation on a theme that has already redefined in-room telephony, media and entertainment. In every case, guests have balked at paying for services as soon as less-expensive alternatives became available.

"The first area where hotels started adding a surcharge was the phone," said Robert Mandelbaum, director of research information services for PKF Hospitality Research. "Back in the '90s, people were saying, 'Wait a minute, I can go to a payphone and put in a dime for a local call, but it’s 50 cents from my room?' "

Dimes (and quarters), of course, soon gave way to calling cards and cell phones, and guest room phone use has been declining ever since. According to PKF's data, annual telecommunications revenue at U.S. hotels plunged from $1,274 per available room in 2000 to $178 in 2009 — a drop of 86 percent — and slipped another 4.1 percent last year.

"Frankly," said Penick, "phone revenue has declined so quickly for so long that I've stopped tracking it."

Money and morality
At the same time, laptop- and tablet-toting travelers have learned to just say no to paying for movies and other fee-based entertainment, putting another major dent in hotel revenues. According to PKF, annual revenues for in-room movies dropped 39 percent between 2000 and 2009 — from $288 to $175 per available room — with another 12.6 percent drop last year.

The shift got a lot of extra attention earlier this year when Marriott announced plans to eliminate adult content from its pay-per-view movie offerings, a decision that was based as much on money as it was morality. "Changing technology and how guests access entertainment has reduced the revenue hotels and their owners derive from in-room movies, including adult content," said the company in a statement.

Increasingly, though, the crux of the issue isn't content, but rather the delivery system. "It's not about watching a pay-per-view movie anymore," said Haussman. "It's about me as a traveler bringing my computer with me to stream a movie from Netflix onto that 60-inch screen that they were kind enough to put in there."

All of which underscores the challenges hotels face in keeping up with the changing technology landscape. "The cliché is that they want to make you feel at home," said Mandelbaum, "so the more technology becomes part of everyday life, the more people want to bring it on the road, too."

Big screen is king
It's also why major chains, including Hilton and Marriott, are busy installing in-room media hubs and connectivity panels that allow guests to connect their personal devices to the TV. The Hilton San Francisco Union Square, for example, features 30 rooms equipped with both a connectivity panel and the cables required to connect a multitude of electronic devices.

And even LodgeNet, the nation's leading provider of pay-per-view movies and other media to the hotel industry, is adjusting to the changes. Recently, the company unveiled Envision, a new Internet-based TV system that emphasizes customized apps — flight schedules, tee times, local information — over traditional video-on-demand (VOD) offerings.

"There’s no question that [personal media] has had an impact on the VOD business," said Derek White, the company’s president of interactive and media networks, "but given the option, guests prefer to take advantage of some of these applications through the TV rather than on their smartphone or laptop. The big screen always trumps the small screen."

What that might mean for the larger debate over Internet access is unclear, but most observers suspect that hotels will decide that charging for Wi-Fi simply isn't viable in the long run. As with guest room phones and TVs, Internet access will become a required amenity, with hotel operators having to find other ways to monetize the service.

"There's more and more pressure to make it complimentary," said Mandigo. "Just raise your rates to cover it. Let's not be silly and nickel and dime people."