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.

Summertime and the Hotel Bonus Points/Offers Continue

If anyone thought things were getting better in the hotel industry, just take a look at the latest salvos the chain hotel loyalty programs are offering for stays this summer.

Starwood started the bonanza by offering 1 free night for every two stays until July 31st - a very rich offer - especially because the awards can be redeemed at some of Starwood's most exclusive hotels. Like all the chains, Starwood segments hotels into specific categories based on average room rate. Starwood starts at Category 1 (e.g. Four Points by Sheraton Saginaw) all the way up to a few uber-luxury hotels in Category 7 such as the W Resort Maldives. The free nights promo allows redemptions (with no blackout dates or capacity controls) as high as Category 6. The nights may be earned at any category of hotel. So, stay a couple of times at a Four Points and then you could redeem for a free night at the St. Regis Rome, the Westin Paris or the St Regis San Francisco. The only catch is that you can only redeem on Fri/Sat/Sun nights and you have to use them by the end of September.

Not to be outdone, Intercontinental Hotels has made a similar offer which offers a free night after two stays as well between now and July 3rd. However, IHG limits guests to earning four free nights (after eight stays) but they do allow redemption until December 26th. IHG allows redemption at all hotels worldwide (except a few in Japan) which makes this a great promotion as well.

Marriott jumped on board this morning with a similar stay and play offer which offers a free night after 3 stays between now and August 31st. The free nights can be used until the end of the year. Alas, Marriott is not allowing redemptions at their most elegant (and expensive!) hotels - only Categories 1-4 (out of a total of 8) are allowed for redemption. So, don't plan on earning your free nights in Cleveland and burning them in Paris.

Hilton has an offer of 1000 bonus HHonors points per night running until the end of June but we expect that they'll have something more exciting soon.

In the current environment, the chains are particularly concerned about losing even a tiny bit of revenue share from the road warriors who participate heavily in these loyalty programs. Hence, the chains are in a "me-too " battle - and the winners are clearly consumers who are still hitting the road.

Marriott Rewards' new offer is great for consumers but shows how hard things have become in the resort market

Marriott's frequent stayer program, Marriott Rewards, just announced a stunning new offer whereby guests redeeming points for free nights at a slug of lavish Marriott resorts can get an additional free night without redeeming additional points. Members can burn the regular amount of points for a two night stay and take home a third night free. And this isn't being offered only on Sunday nights or at the Milwaukee Airport Marriott in January (no offense to Milwaukee) - its being offered all summer long at great hotels in Hawaii, Mexico, Costa Rica, Portugal and the UK among others.

Clearly, Marriott is having a hard time filling these resorts with typical summer leisure travelers. Group and meeting demand has also fallen precipitously at luxury resorts in particular - no company wants to be the next AIG hosting fancy getaways at fancy resorts. As such, Marriott is turning to their most valuable customers and offering them an additional incentive to come and stay at a Marriott.

For Marriott, this promotion enables them to reduce their Marriott Rewards points liability and stimulate some demand into these hotels - even guests staying for free still generally spend money on food and other hotel services (In fact, some studies have shown that guests staying on loyalty point rewards actually spend considerably more than guests who are paying for their rooms)

For travelers, as we've said before, this is yet another great reason to be burning hotel points and airline miles now - because you can! Demand is down and airlines and hotels are opening up frequent flyer/stayer award space. Don't look for seats on the Saturday before Christmas to Aruba but for less peak than peak of peak times, frequent flyer seats and rooms abound.