Despite the many devices hotel guests bring with them, the television remains the centerpiece of every guestroom. It’s the one thing capable of delivering a widescreen view of all the news, sports, movies, and broadcast shows guests are looking for. And even though there are some aspects, such as ordering room service, accessing directories, and checking out, in which the TV has become even more useful to guests, the average hotel television falls well short of matching what most of them experience in their own living rooms.
Look no further than the bankruptcy announcement by LodgeNet for evidence of hospitality TV’s shortcomings. A major player in its industry from the time it established itself in 1991 until it acquired the last of its competitors in 2007 and served nearly 2 million hotel rooms, the company didn’t have an answer when guests turned to the Internet for their entertainment. After failing to change with the times and not posting an annual profit since 2006, LodgeNet is now a shell of what it once was. While the company secured $60 million in new financing through an affiliate of investment firm Colony Capital and promises to “transform its business,” it will be doing so in a much more crowded field. That may explain why LodgeNet has recently been trying to expand into the health care industry (the company wouldn’t comment for this article).
“The reason LodgeNet is disappearing from hotels is that it didn’t adapt,” says Bob Wagener, executive vice president of sales and marketing for Roomlinx, which delivers a competing service to hotels. “The company was reluctant to do anything that interfered with its primary revenue source of selling movies.” He points to the 2011 introduction of Envision, LodgeNet’s interactive product, which added some apps such as a local flight information screen to the traditional video-on-demand offerings. But, since it was an RF (Radio Frequency) system like its legacy product and not IPTV (Internet Protocol TV) it didn’t allow for the Web-based streaming of movies or music. “Hotel guests are now looking to select from an increasingly vast menu of entertainment options during their stay. Netflix changed the business model so consumers are now used to paying for streaming content.”
Meanwhile, others moved on. Case in point: at the Hotel 1000 in Seattle, an independent property that prides itself on its technology, guests often prefer to plug their devices into the TVs and bypass the hotel’s 60 high-definition channels, says spokesperson Kirsten Andresen. “This way they can bring their own content yet utilize the large, flat-screen high-definition TV with superior pictures and sound quality,” she says.
“The business model is rapidly changing and new technologies will need to be introduced in order to accommodate the new normal,” Andresen adds. “Guests are bringing their own devices with their own content and they expect a certain ease of use when it comes to pushing their content to the hotel’s hardware. Also, hotels must be aware of the need for large, stable bandwidth in order to accommodate the huge influx of streaming content from user devices.”
Bjorn Hanson, divisional dean of the hospitality school at New York University, says the shift in how guests watch TV is largely driven by age. “Younger travelers have a high propensity not to watch TV, but to watch some kind of Internet content.” That demographic might resist paying for a movie on TV but they might pay more for online access.
“Older travelers do like in-room entertainment systems,” Hanson continues. “It’s a traditional way of passing the time in hotel homes. For families, the TV is important as opposed to each kid bringing his or her own computer.”
Hotel operators will have to navigate this transition away from the pay-per-view model to some kind of Internet-based model, with their choices depending on their technology budgets and the expectations of their particular guests.
The race to take LodgeNet’s place
“If you think that because of the LodgeNet situation in-room television is dead, you’re missing the big picture,” Wagener says. “Blockbuster did not adapt either, but companies like Netflix and Redbox are doing well.” Robert Crellin, president of the Americas for iBAHN, which also installs Internet-based media systems for hotels, agrees. “LodgeNet had a great business model; they gave the hotel a TV set and then shared pay-per-view movie revenue with the hotel,” he says. “But the world has moved on to streaming movies and TV shows so the business model had to change.”
Roomlinx and iBAHN are among the cluster of competitors that have emerged to supplant LodgeNet’s entertainment platforms in hotels. Many use the same approach of building their own networks within properties that LodgeNet uses, since this allows guests to access their content via WiFi or through a television. “Now it’s more important for people to have a good Internet connection than good television content,” Roomlinx’s Wagener says. “That’s why we install full Internet capability into the television, which is operated by a keyboard, so guests can use the TV the way they would their own computer.”
The iBAHN approach is to install a television system that can deliver content via the Internet rather than broadcast, cable, or satellite. The onscreen menu makes it easy for guests to connect to services like Hulu, Pandora, or Netflix. While iBHAN still offers films from platforms like Starz, Crellin says they have the lowest use.
“On the occasion guests have two hours of downtime they might watch a movie, but it’s not the way most are behaving, especially younger people,” Crellin says. “I have a 26-year-old son who is on his laptop, speaking on the phone, and watching TV at the same time. A hotel needs to have a stable network that can allow the guest to pull down what he wants. That’s our mantle.”
The biggest issues, Crellin adds, come from balancing the quality of the network against guests’ insatiable demand for access. “It’s like the brunch buffet. How much food do you want to put out so that guests are satisfied, but you’re not wasting money on unnecessary food? At the end of the day, guest satisfaction is more important than a couple of bucks for a movie rental.” Guests are willing to pay for a value statement, says Wagener. “They don’t want to get nickel and dimed but will pay for what they consider a product above and beyond expectations. The goal is to monetize guest habits.”
When it comes to habits, the dirty little secret is that adult movies always constituted a high percentage of in-room movie rentals—so much so that the proliferation of that option online added to the demise of LodgeNet. Ironically, Omni, which made a splash by eliminating adult movies at all its hotels a number of years ago, is feeling the loss of declining revenue less as a result, according to Ed Netzhammer, senior vice president for Omni Hotels and Resorts.
There will be differences in what hotels in different price categories will be able to offer. Systems like those offered by Roomlinx and iBAHN are expensive to install. Keith Pierce, executive vice president of brand operations for the Wyndham Hotel Group, says each of the company’s 15 brands has its own standards in terms of the content that must be available. Pay-per-view remains a standard for the business travel-oriented brand Wingate. “The use of the TV really does depend on the category,” Pierce says. “At a Wingate you will find a fair amount of pay-per-view rentals; guests at a midscale hotel without food and beverage will tend to rent movies. At a Super 8 you might have a premium cable channel like HBO or Showtime.
“My guess is that many guests with iPads will not take the trouble to connect to the television,” Pierce adds. “It all depends on the level of sophistication of the guestroom equipment and on the level of sophistication of the guest. If we have a guest in our extended Hawthorn brand who is staying two weeks and is technologically oriented they might connect their device to the TV because they will be there for two weeks.”
There are those in the industry who think content can still drive revenue—a worthy goal in the face of declining TV income. While revenue from pay-per-view movies is slipping rapidly, televisions—and more to the point Internet bandwidth—are expensive propositions. “The cost is second to electricity at some hotels,” according to Netzhammer. “You can offset that somewhat by movie sales, but it is a capital intense setup.”
There are installation fees for networks that support Internet access on TVs, and service fees as well. These are hopefully retrievable through charging for access; continuing revenue for paid content; increasing rate because of the quality of the service; and possible ancillary income from selling sponsorships of in-room dining or local websites with links to restaurants, with commensurate payment for clicking through.
A possible contributor to making the TV more valuable to guests—and to operators—is their use for meetings. Part of a meetings package might be the ability to stream sessions into guestrooms or send customized messages to event attendees. New technology even allows hotels to turn on the TV with a message or alert, displaying for example, that a conference session is starting in 10 minutes.
And, if the resources are available, it’s still possible to wow guests with the hardware. All 1,001 rooms at the Omni Dallas have TVs built into the bathroom mirrors. “We wanted to be competitive in the convention business and this was a way to give guests more than they expect,” says Larry Magor, the managing director of the hotel.
The TVs also offer an interactive tour of the local artwork that is displayed throughout the hotel, including four original pieces in every guestroom. Guests can click on specific pieces to learn more details. “We also have room service available on the TV, as well as using the set as a way to communicate to guests,” Magor says. “We might tell them that a wine tasting is being held, and we can do that even if the TV is turned off.”
Henry Harteveldt, a travel industry analyst with Hudson Crossing, says guests are less concerned with what’s being shown on in-room TVs now that they can connect their own devices. “The challenge is to have unique content that’s difficult to get otherwise or is non-traditional—content that appeals to key niche markets,” Harteveldt says. “Perhaps a hotel has a large number of non-English speaking guests from a specific country, and there might be content customized for that market.”
While hotels enjoy promising an experience “like at home or better” for a variety of services, including TV, that is difficult in most cases. “The kind of interactive menus that people have at home from their cable provider have been difficult to get in hotels,” says Omni’s Netzhammer. “Until the technology changes, you’re probably not going to see the 500 channels you get in homes. But you will find the channels that most people watch.”
A simplified future?
NYU’s Hanson says many brands are trying to find ways to generate revenue but he hasn’t heard of any companies who have solved the problem. “The interim solution is that hotels will buy or lease a TV with the understanding that most travelers expect an experience at least equal to what they get at home. The idea of branded entertainment is being discussed. If a traveler likes classical music or art, that special interest might command a premium. But branded entertainment would have to have broad enough appeal.”
“The future is a bit murky right now,” Andresen says. “However I believe it will hold new technology which will allow more flexibility for the guests and will allow for revenue streams to be created for the hotels.”
“I wonder that with some systems like Verizon’s FiOS, the time would come where you don’t need a content provider at all,” Netzhammer says. “You would just need some basic head-in equipment that would deliver content to hotels without having to put in large equipment, but so far there is not a solution like that out there.”
“Brands don’t really hold out hope for getting revenue from TV,” Hanson says. “What will happen is tiered pricing. If people are just using the Internet to check email that would be part of the rate. It comes down to what makes for a satisfied guest at Brand A rather than Brand B. If a hotel actually has some exclusive content that is cost effective, it could affect the choice. But right now what appears to be the situation is not a race for leadership but an effort not to create dissatisfaction among guests.”
Monday, June 10, 2013 by social bookmarks
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Friday, June 07, 2013 by social bookmarking service
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