Internet Access at 4/5 Star Hotels: Getting Closer to Free (Finally)

For a long time, the hospitality industry has managed to convince business travelers that they should pay extra for high speed internet access (or HSIA in industry parlance) in four and five star hotels even though the same companies offer it for free in their lower tier brands.

Four Points, Courtyard, Fairfield, Hyatt Place, Holiday Inn as well as newer brands such as Aloft and Indigo have all offered free HSIA to all guests for some time. However, their higher tier cousins such as Westin, Sheraton, Hyatt, Marriott and Intercontinental have long charged at least $9.95 (per day!) or more for the service.

Why?

Well, because they can. With a majority of their travelers staying on business where someone else is picking up the tab, upper-tier hotels have been able to get away with this. In contrast to the value oriented chains where the target is more leisure and small business clients (who may be paying the fees themselves) the big guys are targeting large corporate and group customers.

But holes are appearing in the "everyone pays for HSIA mantra"

During the peak of the lodging boom 2-3 years ago when hotels commanded pricing power, the upper-tier chains largely refused to negotiate on HSIA access charges for large corporate buyers. It was a sacrosanct rule at many chains to refuse to give it away as part of a negotiation.

Oh how the world has changed. Recent discussions with several of the largest corporate travel buyers have shown that free HSIA is now a very common component of rate negotiations. A quick check of many large corporate rates at several metro 4/5 star hotels yields similar results.

Don't work for a major corporation but have hotel loyalty program status? Free HSIA may be in store for you as well.

Hyatt started the trend last year when they began offering free HSIA to their top-tier (Diamond level) Gold Passport members globally.

Starwood fell into line beginning March 1st for Platinum members, again on a global basis.

And today, Marriott announced a similar program for not just top-tier members, but mid-tier members as well. Marriott, while covering more members, covers significantly fewer hotels however. Marriott's offering does not include hotels outside of the U.S. and Canada or even Marriotts located in Hawaii. (Maybe Marriott is trying to tell us something when we are on vacation?)

So, will HSIA revenues at upper-tier hotels go the way of phone revenues (picked up the phone in your room recently?) Between the growth of wireless cards and relentless competitive pressure, we think this revenue stream is toast. Even when lodging comes back in 2011, we doubt any of the chains will be able to convince customers that they should start paying for HSIA again. And by then, we may not be traveling with laptops anyway.....