Generating Revenue with Free Wi-Fi

By Andrew Yorra, VP of Business Development, Eleven Wireless |

Hotels have been giving away goods and services to hotel guests for decades. Recently hotels have found that Wi-Fi is the number one most requested amenity, and one that guests are demanding should be free. Over the next couple weeks we will look at ways for hotels to meet the growing demand for free Wi-Fi while still generating some revenue to help offset the mounting costs of network equipment and ongoing bandwidth required to deliver a world-class experience.

Freebies in Hotels

Food and drink are probably the most common complimentary items hotels give their guests. Many select service hotels provide complimentary breakfast, boutique hotels offer complimentary wine each evening and many full-service brands offer complimentary food and drinks on their concierge floor.

One size does not fit all, of course, as hotels vary their complimentary services based on their segment within the hospitality industry. For example, complimentary free breakfast is a staple of select service hotels, while most full service and luxury hotels charge for breakfast (or hot breakfast, at least). What's interesting is that while one might expect that hotels would have cut back on their complimentary services during this recession, spending on complimentary services per occupied room actually increased during the recession (see PFK Hospitality Research).

With any complimentary good or service, hotels have to balance charging for incremental services (and the risk of being perceived as nickeling & diming) with offering services as part of the room package. The fee approach increases revenue per guest while the latter, theoretically, increases occupancy by providing differentiated services as part of the room charge.

The Emergence of Free Wi-Fi

When hotel Wi-Fi emerged in 2002, hotels almost universally charged for it. Few hotels had high-speed Internet, let alone Wi-Fi, and those that did had either invested heavily in their network or partnered with a provider to capitalize the equipment in exchange for a share of the revenue. Even before Wi-Fi, providers like CAIS, Darwin, Wayport (now part of AT&T) and STNS (now iBahn) spent millions deploying wired networks and charging guests for use. Those long-term contracts assured that Internet would continue to be sold for years to come. By the time Wi-Fi came around, CAIS and Darwin were out of business and Wayport and iBahn couldn't find enough funding to continue capitalizing networks. As a result, hotels were forced to capitalize Wi-Fi networks themselves, but in exchange, they kept greater control of their pricing. Select service brands led the way towards free, as Courtyard by Marriott launched its free Wi-Fi initiative, and Hampton Inn, Holiday Inn Express and the others all followed suit. Even most full service hotels today offer some form of free Wi-Fi, usually limited to their lobby.

As Internet access has become a basic utility in our homes and offices, there's been a growing clamor by guests for hotels to provide free Wi-Fi. The challenge for hotels has been that guests don’t just want free Wi-Fi. They also want it to be fast, reliable and easy-to-use.

This series will explore three key ways for hoteliers to offer some form of free Wi-Fi while still generating revenue from the service to help offset the ongoing costs of delivery. The three revenue opportunities are: (a) selling a premium service; (b) cross selling other services or (c) limiting free Wi-Fi to loyal guests. The next installment will focus on premium Wi-Fi, where hotels can offer free basic service to meet the minimum need, while offering guests the ability to purchase a premium service.