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Making the Connection

The demand for high-speed Internet access at hotels has never been greater. Fifty-five percent of hotel guests used the service in 2011, up from just 20 percent five years earlier, according to a recent study by J.D. Power and Associates. While the increased volume strains hotel bandwidth, the study found that only 11 percent of guests using hotel Internet were charged an extra fee to connect. That might be because guests charged a separate Internet fee were noticeably less happy with their experience, the research showed.

As demand grows for fast and reliable Internet access at hotels, increasing the cost of the service, brands are now debating the merits of extra Internet fees and testing pricing strategies that go beyond the one-size-fits-all model. “It’s a period of experimentation,” says Bjorn Hanson, divisional dean of the Preston Robert Tisch Center for Hospitality, Tourism and Sports Management at New York University.

Currently, many upper-tier properties charge extra for a wireless Internet connection, while most midscale and budget hotels offer complimentary access. The typical cost for a single day of high-speed Internet access at a hotel is $9.95, Hanson says. “Guests who are paying more [at upper-tier hotels] are less price sensitive than guests who are paying less.”

Yet the hotel guests surveyed weren’t thrilled with extra Internet charges. They noted how free wireless Internet is accessible at many public places, including coffee shops, airports, and libraries, says Jessica McGregor, senior manager of the global travel and hospitality practice at J.D. Power and Associates. For guests, “expectations are set that it’s free,” she says. According to McGregor, dissatisfaction grows when hotel guests who have paid extra for Internet access encounter a problem with the service. “Satisfaction drops greatly when you have to pay for something and then it doesn’t work.”

But growing guest demand for Internet causes hotels to face bandwidth challenges and slower service. “More people are using the Internet on multiple devices,” McGregor says. “The biggest challenge for everyone right now is figuring out how to deal with bandwidth in the future.” Hotels are forced to find ways to keep Internet service fast and accessible even at peak times. “You wouldn’t tell a guest in the morning, ‘Everyone is showering, so there’s no hot water,’” she says. “So you shouldn’t say after dinner, ‘Everybody is online, so it’s going to be really slow.’”

In an effort to deal with the high volume of Internet capacity of particular guests, Hanson says, some hotels currently providing free Internet are considering charging a fee for users who need more bandwidth. “A guest watching movies takes up so much bandwidth,” he says. “It seems unfair that someone just checking emails should pay the same amount.”

Like many of its mid-market brand competitors, Carlson’s Country Inns & Suites provides guests with high-speed Internet access—free of charge. When it comes to adding a high-bandwidth fee for streaming video and online gaming, Jim Grimshaw, Carlson’s senior director of brand program development and standards, doesn’t see it as part of Country Inns & Suite’s business model. “We don’t anticipate offering a tiered service in the immediate future,” he says. “High-speed Internet is a key guest amenity, and one that all upper-midscale hotel brands provide as a competitive amenity.”

The J.D. Power and Associates study didn’t ask about tiered pricing, McGregor says. But incidence is relatively low in the industry, she adds, as a few properties are experimenting with the model. “It’s definitely going to become more prevalent in the future,” she says, as a way for hotels to account for bandwidth challenges and guests using multiple devices. J.D. Power plans to ask about tiered pricing in a 2014 study.

In another experiment, some brands are waiving Internet charges for frequent guests and loyalty cardholders, Hanson says. Other properties are considering pricing plans that would allow guests to pay a lower rate for several days of Internet use. “If guests have a choice,” Hanson says, “at least they feel some greater sense of fairness and control.”

While hotels aren’t currently rushing to remove Internet fees, Hanson predicts that fewer brands would charge for the service in the future. That might be because the fees are dropped altogether, he says, or because more guests are exempt from the charge thanks to loyalty programs or fewer bandwidth needs. “Airlines get complaints about baggage fees, but aren’t removing them,” Hanson says. “Hotels are getting complaints about high-speed Internet fees, but mostly aren’t removing them.”

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