January 25, 2013

Trend: More hotels charge for internet connectivity

A tiered pricing structure based on connectivity speed is the current trend in hotel internet charges. While this practice will most likely not restore the profit-producing days of the old telephone department, it will most likely curtail the slide in telecommunications revenue until the next wave in communication technology comes along.

The way travelers communicate on the road has changed dramatically over the years, and these changes become evident when analyzing the revenue earned by U.S. hotels from their guests for use of telecommunication devices and services. In lodging industry parlance, "telecommunications revenue" includes monies received from the guest use of hotel room phones, fax machines, and internet connections.

According to PKF Hospitality Research, LLC (PKF-HR), telecommunications revenue at the average U.S. hotel in its annual Trends® in the Hotel Industry survey sample has declined from a peak of $1,274 per available room (PAR) in 2000 to $269 PAR in 2011. The represents a 79 percent decline. During the 1990s, telecommunications revenues used to account for three percent of total hotel sales. In 2011, that number declined to just 0.6 percent of sales.

Not only has telecommunications become a minor revenue source, it now "costs" most hotels to provide telephone service to its guests. In 2011, for every dollar of telecommunications revenue earned, the average hotel in the Trends® sample spent $1.46 to pay for the cost of the calls, switchboard operators, and other telecommunications department expenses.

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