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.....

Chase Feels the Hyatt Touch: GoldPassport Gets a Co-Branded Credit Card

Hyatt and Chase today announced a new co-branded credit card which will allow members of Hyatt's Gold Passport loyalty program to earn points with every dollar spent. Hyatt has been the key holdout among the large chains in issuing a co-branded credit card - Starwood, Marriott, Hilon and IHG have issued similar cards for many years.

Many feel that Hyatt has held out on this potentially lucrative revenue stream (banks buy the points that they offer consumers based on spend) because of the relatively small size of the Hyatt chain (which limited points burning options) and a desire not to dilute the earnings of members who have earned their points by staying in hotels - Hyatt's main business.

However, with the continued growth of Hyatt into new segments and the recent IPO, that thinking has clearly evolved. Also of note is that the card is a Visa - Hyatt has long partnered with Mastercard on Gold Passport earnings promotions.

Hotels.com Updates Loyalty Program welcomerewards

Hotels.com today announced a re-tooling of their loyalty program, welcomerewards. Welcome Rewards was announced in October 2008 and was (or is) the first robust frequency program offered by an online travel agency. Maybe it was a little too robust.

welcomerewards offered a simple proposition: Stay 10 nights, get one free. Each stay had to be $40 or higher and you could use your free night for up to a $400 hotel stay. In other words, a really good deal.

Today, some enhancements were announced such as extending the expiration of credits and a removal of the $40 minimum rate requirement. (Handy for those $18 rooms in Vegas)
However, the big change was on the redemption side - no longer will members be able to claim a room valued at up to $400.

Instead, Hotels.com will average the room the room rates over the ten stays and offer that amount as a credit towards a future booking. For example, if a customer buys five room nights at $75, two at $200 and three at $100, they would now be eligible for a free night valued at up to $107.50 rather than the previous $400.

We are not totally surprised by this change - the program seemed almost too good to be true when launched - Welcomerewards was a better offering than anything the chain hotels offered through their loyalty programs and certainly the broadest redemption possibilities. Compared to Starwood Preferred Guest, for example, the same spending levels in the example above (for a non-elite member) would have earned 2150 StarPoints - yes, enough for a free weekend night at the lowest of the low redemption categories - but certainly not a $400 value. I doubt that any of the Starwood SPG Category One hotels ever see an ADR of $400!