Fair Wi-fi: Are hotels really fleecing guests?

You may think you know the answer already...

The reputation of the hotel industry is taking a beating as pressure grows to ditch 'rip-off' prices for wireless internet access. silicon.com is leading the charge for fair wi-fi but are the hotels getting a raw deal? Is some level of charging essential? Will Sturgeon gets the facts...

At first glance, making sense of the charges hotels make for wi-fi access is like trying to second guess the British weather. Some hotels charge a £50 flat rate, others £5 per hour. Some charge an incredible £20 per hour while others offer it for free.

As such, looking for method in this madness isn't easy, and trying to determine whether hotels are ripping off their customers or not - or to what degree - is equally tough.

The first factor to take into consideration when judging hotels is the likely set-up costs they will have incurred for any wi-fi offering. Graeme Powell, MD of iBahn, has worked with a large number of hotels in installing guest wireless and fixed-line internet access. He told silicon.com there are considerable overheads for the hotels.

The cost of setting up wireless internet access in an average-sized hotel of say 200 to 300 rooms could be around £30,000. However, Powell added that hotels differ vastly and therefore so can the costs involved with setting up wireless networks.

Powell said: "Wireless coverage depends on a number of different things such as how thick the walls are, and the age of a building will have an impact."

Certainly lower overheads is one reason the US currently leads Europe in the provision of free wireless. The Four Seasons is one hotel group that confirmed it is able to offer free wi-fi access in its US hotels but still charges in the UK. However, the company declined to comment on why this is the case.

Powell said one major reason could be the build of hotels, especially where buildings predate the arrival of wi-fi: "If you want to provide sufficient wi-fi coverage in a hotel in the US you can probably work on an access point every 10 rooms because the walls are paper thin.

"In Europe it's probably an access point every seven rooms. In London it is probably an access point every five rooms. If you look at Marriott County Hall in London that has six foot of marble between one floor and the one above."

Despite this obstacle, in the world of rip-off access prices the Marriott County Hall actually compares favourably against other hotels, charging £15 for 24 hours access, wired or wireless in all areas of the hotel.

At the other end of the difficulty of implementation scale, hundreds of hotel rooms can be covered by as few as three or four access points – especially if access points can be put outside on facing walls, said Powell.

Quality of service is also key and while hotels could roll out cheap services Powell said they do not want to expose their clientele to failing or unsafe connections.

While all these factors contribute towards relatively high set-up costs, they only begin to explain the charges hotel guests must pay. Many high-profile users recognise the point at which reasonable charges become unreasonable.

Arun Aggarwal, head of the EMEA consulting practice at Tata Consultancy Services, said: "I'm not against paying for a good service but I know how much broadband costs and I know when I'm being fleeced. Internet charging does impact companies' decisions about where their employees stay. Hotels that catch on faster will generate more profits than their greedy counterparts."

Ric Francis, COO of the Post Office, told silicon.com: "I can understand the argument from both sides. On the one hand it is an infrastructure cost that would need to be recouped by the provider but on the other it is a service which should be provided to the hotel customer-base, as commonplace as the TV in the room."

But do more than a handful of customers really need wi-fi access? Is this a case of the few expecting to be subsidised by the many?

Wi-fi usage in four star business-traveller class hotels is typically around 10 per cent and Luke Mellors, former CIO of The Dorchester, now CIO of bookings agency Expotel, makes a strong case for saying the minority shouldn't expect to be subsidised by the vast majority.

Mellors said: "Consumers need to know that not all hotel guests require these services. Yet the costs involved in the supply, maintenance and service of wi-fi within a large hotel can be fairly large."

So is the bottom line that it costs to provide a wi-fi service and therefore those who want to use it must be prepared to pay?

Perhaps not. Other critics have pointed out that many hotels include the use of a gym, pool or spa in their room charge and yet those facilities are often similarly underutilised and likely to be far more expensive to set up. Furthermore, internet access is now a far more in-demand service than gyms, or even parking, according to Tony Walsh, development manager at hotel bookings company LateRooms.com. This would suggest hotels would do well to start regarding wi-fi access as a service they must provide - and provide on the customer's terms - or face losing bookings.

Walsh added that while providing wi-fi access does require a large initial investment the forward-thinking hotelier should be able to think in terms of long-term benefits, such as repeat bookings from business travellers eager for hassle-free wi-fi.

Walsh cites one hotelier who claims the cost of providing good quality wi-fi for a 300-room hotel works out at around £9 per day on an ongoing basis. Even if only 30 guests use the wi-fi at an average of £10 per hour, that's still £291 per day the hotel is pocketing.

In fact the hotel is still breaking even if only one guest goes online for an hour.

Or is it? In truth this simple equation is further complicated by the involvement of third parties the hotels work with to install and often manage a network.

The degree to which both parties then set their sights on profits determines the extent of the rip-off. If the hotel and third party share the revenue from the use of the network on an ongoing basis, customers are effectively paying twice.

If the hotel simply uses the partner to install the network and then manages pricing and revenue itself, it's likely to offer better deals for customers, according to a spokeswoman for RIEO Communications which works with a number of large hotel chains - both those which charge and those which swallow the costs and offer the service free to customers.

So if some hotels can offer good wi-fi services for free - and the truth is they can - why don't all, given they must realise disenfranchising paying guests is rarely featured in any marketing best-practice guide?

One reason for this beyond the obvious desire to make money (or at least to get away with it for as long as possible) may be the need to 'future-proof' additional revenue streams.

The mobile phone and the trend towards customers choosing to avoid costly in-room services means in-room telephone revenues have fallen for the hotels. The advent of guests using VoIP to make calls on a laptop or PDA is likely to hit the hotel even harder. Therefore how likely is it the hotels will gladly provide free internet access?

And then there is the in-room pornography on pay-per-view TV channels. How many guests will still pay for that (assuming anybody does) if internet access is free?

The complex economics of wi-fi don't just take into account the costs the hotels need to recoup, it also includes the profits the hotels want to make, the profits they need to share with their technology partners and an insurance policy, of sorts, to protect or replace other in-room revenue streams.

But what becomes clear in all this is that the costs the hotels actually need to cover are a tiny fraction of what the guests actually pay - and many hotels are indeed running wi-fi services at a grossly inflated premium.

The more common knowledge this becomes, the greater the pressure will be on hotels to redress matters.

This is why silicon.com is running its Fair Wi-fi campaign and we need your support. If you believe too many hotels are still overcharging for wireless internet access, then please sign our petition.