InterContinental Hotels Group's recent decision to make
basic Internet access across all brands free to loyalty club members is a
game-changer that could hasten development of tiered Internet pricing,
according to several hotel industry analysts.
IHG in March announced that travelers who sign up for its
Priority Club will not have to pay for basic Internet access in rooms or public
spaces—even if they are not currently a guest at the hotel—at any IHG property,
beginning in 2014. As with most multibrand companies, IHG currently charges for
Internet at its upper-tier properties, Crowne Plaza and InterContinental, while
generally providing it for free at the other brands.
While most major multibrand hotel companies require guests
to be at a certain elite tier in loyalty programs to get free Internet access,
other brands have made it free for all program members, including Omni, Kimpton
and Fairmont, according to Henry Harteveldt, travel industry analyst and
strategist at Hudson Crossing. The move by IHG, the world's largest hotel
company by number of rooms, is likely to spur action from similar competitors.
"Giving free Internet is something that's very easily
matched by other brands," Harteveldt said. "Ultimately, this is a
type of reward or incentive for a zero-sum game. I do foresee some response."
Wyndham Hotel Group president and CEO Eric Danziger said the
namesake Wyndham brand—the only one in the company's portfolio currently
charging for Internet access—may drop the charge. For now, it's a legacy issue
affected by existing deals and contracts, but Danziger said his personal
feeling is that it should be free.
"The industry and companies need to evolve," he
said. "I don't go anywhere without my iPhone and iPad, and I want to use
it in my room. It's offensive when I do stay somewhere and have to do the sign
in and pay $24.95 a day. That's nuts, when I can go to Starbucks [for access]
Dubai-based Jumeirah Group also has decided to provide free
Wi-Fi across all rooms, even though the move cost a single hotel in London an
estimated $400,000 in revenue, said Derek Picot, the company's regional vice
president for Europe. Though such a policy currently is rare among luxury
brands, Picot said Internet charges across the industry are on the way out.
"It makes me laugh that people still charge for it,"
he said. "It is an irritant, and our satisfaction scores have increased
considerably. People who think they can still charge for that are living in cloud
Tom Botts, executive vice president and chief customer
officer for Denihan Hospitality Group, said savings on the distribution side
could offset the revenue that IHG will lose by providing complimentary Internet
"It's one more wedge in the fight against the online
travel agencies," Botts said. "The hurdle of joining the loyalty
program is a pretty low one, and they can shift channel share out of the OTAs
and into their own channels by making people more loyal to IHG."
Denihan currently does not charge for Internet in its public
spaces—because "we are in the hotel business, which means we are
hospitable," Botts said—but does so in rooms at some but not all of the
properties in its portfolio.
New York University Tisch Center for Hospitality divisional
dean Bjorn Hanson said announcements from other hotel companies similar to IHG
are in the works, though IHG's announcement "may have slowed some of the
other announcements." However, the key takeaway from IHG's announcement is
the ushering in of tiered pricing, Hanson said. While basic access will be free
through the loyalty program, travelers who need higher-speed access still might
have to pay, he said.
Demand on hotel Internet bandwidth is increasing as guests
are turning to their own devices for entertainment. Witness the recent
bankruptcy of hotel television provider LodgeNet as evidence, Hanson said. As
such, many hotels are making hefty investments to meet that demand.
"It could be tens of thousands of dollars per hotel,
for an older building that has to be retrofitted," he said. "Other
brands are looking to offer a variation of tiered pricing that will be easy to
understand and widely accepted by owners. It's a compromise that really works
for both sides."
The Grand Hyatt New York, for example, currently charges
$12.95 for its 768-kilobits per second "lite" bandwidth option, and
$4 extra for its 2 megabits per second "enhanced" option. Hyatt Gold
Passport members get free basic service as part of the program.
"Let's remember: We have to pay to have Internet access
in our own homes, and the companies that we work for pay for the Internet
access that employees have," Harteveldt said. "A tiered approach
makes sense. For a traveler doing just simple email, the basic is fine, but if
a family wants to download every episode of 'Downton Abbey' to their device,
they should be prepared to pay for that."
Tiered Internet pricing could present some headaches for
travel procurement executives, and Harteveldt said hotels would have to figure
out whether to charge by room or device as they grapple with bandwidth issues,
for example, and determine how to list charges on folios. But it also could
present some opportunities. Most travel buyers try to get Internet access
included as part of negotiated rates, but with tiered pricing, they might have
some value decisions to make. If hotels provide at no charge the basic access
that is sufficient for checking email and other simple tasks, is there any need
to expend negotiating energy on enhanced bandwidth that may not be needed for
work purposes? Would it be any different than reimbursing for a pay-per-view
In the meantime, not all hoteliers are eager to embrace
tiered Internet pricing. Jumeirah's Picot said the policy for the foreseeable
future would be to "provide high-speed everywhere," and Wyndham's
Danziger said it eventually could come down to a brand-by-brand decision.
"If the percentage goes to most people streaming movies
and they are eating up the Wi-Fi bandwidth that stops people from doing email,
we may re-evaluate it, but for today, it's just free," he said. "So
long as we can provide the service, and not a compromised service, we're going
to continue to do that."
Internet Fees By Company
Accor: Last year
announced that it was moving to free basic Internet access across properties in
the Asia/Pacific region, and also indicated it was taking a tiered pricing
Best Western: Internet access is free in the United States,
Canada and the Caribbean, regardless of loyalty program status.
is free for all loyalty program members at Carlson Rezidor hotels worldwide.
is free across all U.S. hotels, with the exception of a few Ascend Collection
properties, and most properties in other regions, regardless of loyalty program
Hilton: For those
with Gold Status, in-room Internet access is complimentary at Waldorf-Astoria,
Conrad, Hilton, DoubleTree, Embassy Suites and Hilton Grand Vacations
Complimentary Internet is available to Platinum members. Hyatt notes that
access "may be wired or wireless and varies by property," and that "upgrades
to premium service may be available for an additional fee."
Internet access is free for Gold members globally as of July and will be
extended to all members as of 2014.
Marriott: At Gold
level, Internet is complimentary at "participating" Marriott brand
and Ritz-Carlton hotels.
Complimentary 3mbps Wi-Fi service is available to those at the Gold Level,
which is the entry level. This also extends to the Global Hotel Alliance
Discovery Program, which includes such brands as Kempinski, Pan Pacific, the
Doyle Collection and Leela Palaces Hotels and Resorts.
Internet access is complimentary at Platinum level.
Wyndham: Free high-speed Internet access is available at the
"welcome level." The Wyndham brand is the only one in the portfolio
that charges for Internet.
originally appeared in the May 2013 issue of Travel Procurement.