Midprice Hotels Lead Charge For Free High-Speed Access

Installation of complimentary high-speed Internet access has begun at Best Western International's 2,300 midprice North American hotels, with owners responsible for having the much-in-demand amenity in place by Sept. 1. Similar free-to-guest high-speed rollouts have been announced in the past two months at Marriott International's Residence Inn, TownePlace Suites and SpringHill Suites, Hilton Hotels Corp.'s Hampton and InterContinental Hotels Group's Holiday Inn and Holiday Inn Express.

These rollouts are the latest evidence that midprice hotels have taken the lodging industry lead in incorporating the cost of high-speed Internet access into the room rate, compared with full-service hotels, most of which still charge for the service. Fees typically range from $9.95 to $12.95 per day for unlimited use. Some full-service chains have introduced a bundled approach, combining Internet charges with free local calls and faxes for a single fee.

Executives at midprice chains said their pricing policy was based on a mix of timing and guest expectation. "High-speed has become a business necessity for people today, the way they communicate, similar to the telephone," said Best Western president and CEO Tom Higgins. The rollout at Best Western, an ownership association, hotly was debated since owners, who are responsible for the cost of installation, voted on the initiative.

Many chains went through an evolution in their thinking. "When we first looked at offering high-speed at no charge, we thought it was a feature guests would like to have," said Hoyt Harper, senior vice president of brand management for Four Points by Sheraton, which introduced complimentary service at all its North American hotels at the start of the year. "But it quickly went from a 'nice to have' to a 'we think it could be a strategic advantage.' Then overnight it became a 'must-have.' "

Chad Waetzig, Harper's counterpart at Courtyard by Marriott, agreed that by 2003 high-speed had become a widespread guest expectation, "whether business travelers use it to be productive on their trip or to connect with family in the evening."

While at full-service hotels guests are used to paying for services on an à la carte basis, this is not the case at midprice properties. "In the full-service category, customers have been willing to pay for greater services at a higher price and been able to expense individual line items accordingly," Waetzig said. "A lot of our customers don't have that ability, whether because of budget constraints or other policy criteria their companies place on them. If the charge is built into the rate, it's not a problem. They don't have to break it out."

Courtyard introduced free-to-guest pricing systemwide in September 2003. "This is in keeping with our latest market research. Travelers have said, 'I want you to have it and then, when you do have it, I want it for free.' "

Full-service hotels continue to charge for the service, thanks to a "because they can" mindset, said Adrian Kurre, senior vice president of brand management at Hilton Garden Inn, which last year introduced complimentary pricing. "You'd think the pricing model would be the opposite with full-service brands providing the service for free. But for our typical guest, who is mostly the middle-level road warrior, a $9.95 daily charge makes a difference."

Kurre noted that a few years ago when Hilton Garden Inn charged for high-speed access, the usage rate was 3 percent to 5 percent. Under the complimentary model, general managers at year-end 2003 reported usage rates had jumped to 50 percent to 60 percent. "People are checking in and going right online. Granted, the jump coincides with the spread of the technology, but we believe the change in pricing also was a significant factor," he said.

Given full-service hotels' pricing structure, the charge for high-speed is relatively minor. "When a traveler's paying $225 a night, $9.95 for high-speed is not going to be that painful. It's part of the overall full-service value proposition, the attitude of the product," said Keith Pierce, president of Wingate Inns International, which implemented free high-speed access systemwide in 1999. "At our lodging category, however, we've always had all-inclusive pricing, so not just high-speed, but the use of the business center and fitness center and the breakfast, among other things, were free to the guest. There's no nickel and diming."

As guests begin to expect free high-speed at midprice chains, brands are likely to seek new ways to distinguish themselves from the competition, according to Phil Cordell, senior vice president of Hampton. "Brands might roll out complimentary high-speed, but offer it only in a limited percent of guest rooms or suites," he said. "In our case, it will be available in either a wireless or wired format in the lobby, other public areas and meeting rooms, if the property has one, in addition to 100 percent of guest rooms."

For logistical reasons, the lobby has to be wireless, but the guest room solution can be wired or wireless. "We feel most hotels eventually are going to go the wireless route. In fact, the rollout of wireless is shaping up to be the next big test for the segment," Cordell said.

Wingate Inns, in fact, already has announced it is up to the challenge. One of the first midprice chains to offer a complimentary wired solution, Wingate, which is part of the Cendant Hotels Group, said it was making free-to-guest wireless access in all guest rooms and public spaces a brand standard.

"Many of our competitors now have decided it's time to offer free high-speed, so we're going back and retrofitting every hotel to offer free wireless," Pierce said. "We knew when we began offering free wired high-speed that it was going to be a competitive advantage. Everyone else either was charging or didn't have it at all. We just didn't realize it was going to turn out to be such a strong point of difference."