Growing brand loyalty and revenue with HSIA - the positive economics of the amenity model

by Jack Alton
Wayport’s VP of Sales
www.wayport.net

Why offer free high-speed Internet? Increased market share? Competitive demand?

Broadband adoption rates in hotels have far exceeded initial industry expectations of a few years ago. Even though broadband access has been established as a standard offering and not a differentiator, the debate continues over free vs. fee models. 1,290 potential hotel broadband users responded to In-Stat’s 2005 Hospitality Broadband Survey (reported in the September 2005 In-Stat report Battling for Broadband: Broadband in the Hospitality Industry). Nearly two-thirds reported using broadband in hotels where the service was available, and utilizing that service nearly 80% of the nights they spent in hotels.

76% of the respondents indicated that the availability of free broadband influences their choice of hotels; however, when asked about barriers for adoption, only 17% mentioned cost, indicating that price is not a major barrier to usage.

Does the offer of free broadband actually serve to increase market share or provide a competitive response to the market? Probably not.

What does appear to be shaping choice and adoption is the quality of the service and the ease of use.
Most guests will expect a consistent, reliable experience when using broadband services, whether the service is free or for a fee. Plus, the overall guest experience can be negated by a bad experience with faulty high-speed service. Overcrowded DSL lines, dropped connections, and the inability of the guest to log on or connect are risk factors associated with lower cost networks deployed to support a “free” business model.

At the business traveler level, security and quality of service become critical to users who are transmitting confidential data or sending and receiving large amounts of data. Qualified help desk services, VPN support and guaranteed user bandwidth are optional pieces of the broadband solution for the property, and they come with a price. Coming up with a reasonable guest fee structure or amenity plan can offset the installation and support costs associated with premium broadband services and prevent high-speed from becoming a cost.

Loyalty and amenity programs provide an effective model to “bundle” services and create communications packages for
loyalty customers. Growing a
loyalty program with high-speed Internet services is an effective way to increase market share, move
away from third party booking engines and offset the cost of broadband. The average loyalty customer spends 25% more and stays 25% more often.

Using a walled garden and other portal type features offered by full service providers can also help shape a hotel’s online reservation system, increasing revenue opportunities and outpacing third party travel Web sites in order to own and manage bookings for loyalty customers.

For example, one full service hotel portfolio of 100 properties introduced a bundled communications package midway through 2002 that included free high-speed Internet access, free domestic long distance and local calls and free copying and faxing. By the end of the year, the membership in their loyalty program tripled in size. Over the next year, membership increased from 250K to 2.5M. Web site revenue increased by 39% year over year and Web site bookings outpaced 3rd party travel Web sites by 22.5% in revenue.

Additionally, hotels can offer enhanced or extended services to the guest that can be effectively leveraged on both sides of the desk. Such services and applications running over high-speed networks include in-room video, gaming and entertainment, printing, cashless transactions, wireless order taking, “wearable” VoIP technology for staff communications, security systems, and staff training or “e-learning”. Whether designed for direct access by the guests or for increased productivity by the hotel staff, these applications and services can change the economics of providing best in class hotel guest services and can be deployed with varying business models.

The In-Stat study goes on to say that among business users, 55% would pay for an enhanced service that offered faster connection speeds, access to printing capabilities and other enhanced features. “Over half of business traveler respondents, or 55 percent, indicated that they would pay some amount for a premium level of service and, on average, these business users were willing to pay $4.37 per day for this ‘premium’ service,” states the report.

Quality of high-speed service, extended services and cost savings for the hotel can all be packaged into an amenity portfolio that ultimately benefits all parties and creates value for the guests.
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Wayport, Inc. has served the hospitality industry longer than any other broadband provider and offers the highest standards in network performance, convenience, and service. Wayport also provides a distributed enterprise solution for reliable end-to-end connectivity, network management and applications integration. www.wayport.net