The Truth About Hotel Wi-Fi Pricing

Why it's not free, what to ask and how to negotiate

Site Inspecting for Wi-Fi
Planners should pay particular attention to Wi-Fi and connectivity during site inspections. Following are pointers from James Spellos, CMP, president of Meeting U in New York City.

• Test bandwidth. "Use whatever app you can to at least get a snapshot of bandwidth tendencies," he advises. The test is free and straightforward; speedtest.net is one popular site.

• Invite the venue's IT person. "Make him or her part of the conversation," suggests Spellos. The IT person knows where the router and access points are located, and where signal strength is most robust in each room.

• Talk attendee numbers.
 "Tell them how many people you will have in the meeting room, and ask how many IP requests can be handled," says Spellos. "Make sure they have the right capacity for your event."

"I get my Wi-Fi for free at Starbucks. Why do I have to pay for it here?" It's such a common complaint heard by hoteliers, that it has an unofficial name: The Starbucks Conundrum. It's a touchy topic for meeting professionals, too. A March 2015 survey by M&C (bit.ly/1F2DMSW) found planners overwhelmingly agreeing that Wi-Fi should be free, both in guest rooms (92 percent) and meeting spaces (80 percent).

While the big hotel chains are slowly coming around on the first point, don't expect meeting-room Wi-Fi to be free anytime soon, say sources. "Places like Starbucks have, at most, maybe 20 people in their store trying to gain access," says David Smith, vice president of strategic accounts for Arlington Heights, Ill.-based Encore Event Technologies. "If you had even a small event of 100 people, try bringing them to Starbucks and see how well that would work. There are only so many people who can talk to Wi-Fi access points at one time."

In other words, the bandwidth and access provided by your average Starbucks for free (with a $4 latte) are not comparable to what a hotel needs to install in its meeting rooms. This varies by property, of course, but a hotel requires a much larger pipe (the line into the building that determines bandwidth) plus more advanced, more plentiful and more expensive access points. And that doesn't take into account all of the in-wall wiring, monthly costs and on-site labor.

"Planners need to understand that whether it's undertaken by a third party or a hotel, there is a definite cost to installing, maintaining, running and managing Wi-Fi," says James Spellos, CMP, president of Meeting U in New York City.

"If you look at the cost over a three-year period for a midsize hotel -- say, 500 to 700 rooms -- $1 million wouldn't be out of the question."

Imagine, then, the infrastructure expense for large conference hotels. "Some of these buildings are sitting on 100 acres, with a lot of steel and concrete," points out Michael Dominguez, senior vice president and chief sales officer for Las Vegas-based MGM Resorts International. His company recently invested $14 million to install a proprietary platform with Cisco that serves all of MGM's Strip properties. "That's the initial investment," he notes. "The annual cost to maintain can run $3.5 million to $4 million a year. But it's what we needed to allow us to have the flexibility and bandwidth we require for the size groups we have, groups that are now using multiple devices and need bandwidth that's strong enough for streaming video. That's the present and the future we need to accommodate."


Human capital
Of particular importance to hotel Wi-Fi is the cost of labor. "It's probably the single biggest expense," says Encore's David Smith, whose company provides A/V and Wi-Fi services for all Omni Hotels and other properties. "There is a network operations center, and those folks sit in front of their computer screens and use their software to monitor everything in that network, constantly. If one access point goes down, an alarm goes off that automatically generates an email to the hotel general manager, the hotel IT department and to us, and then we all work together very quickly to eliminate that issue. It might be a simple rebooting of an access point, or it might be necessary to replace that access point.

 

"This happens across the country every day, with multiple access points that are going down," Smith adds. "Most of them are corrected before a guest or meeting attendee will ever even know it happened."

Additional expertise is required on-site for meetings. "Back in the day, we used to have a phone guy for meetings," Dominguez points out. "This was a person who would connect your line at the registration desk. Today I have to have a whole team of technology people who can get you to your server and fix any issues you're having while you're using the network. That's very expensive for us."

It's also a key differentiator between Wi-Fi in guest rooms vs. meeting spaces, says Smith. "Guest-room support is not on-site," he notes. "It's through an 800 number. Meeting rooms have dedicated technicians; those labor costs are hard costs."

Smith adds, "Meeting-room network and revenue for the Internet supports and pays for the ability to give it away for free to the folks upstairs. If it's free in guest rooms, and it's free in the meeting rooms downstairs, the problem will no longer be price; it will be a question of quality. Because there will be no money to replace the network gear, and none of the bells and whistles will be added. If there is no revenue generated from this and it becomes strictly a cost center, everyone will start looking to trim their costs."  

Illustration: @IStockphoto/Alex Belomlinsky

Know Your Needs
As more venues are offering tiered pricing structures for bandwidth, they're asking planners what they require. According to James Spellos, CMP, president of Meeting U in New York City, planners must cull this data from the meeting history, including the following.

How much bandwidth did the group need last year? (Add a percentage on top of that -- say, 20 percent -- based on attendee demographics, to account for the increasing number of devices attendees will bring this year.)

How much bandwidth did they use per day, and in what parts of the venue?

How many IP requests were made? (In other words, how many times did a device reach out to the web?)

"There's data here that nearly every hotel will have," says Spellos, "although some might not know they have it. But this is information that will allow a positive, strong conversation between the parties."

Ask the host hotel from last year's meeting for the data. If they don't have it, or if it's a first-time event, ask the prospective hotel for data from a similar group.


Negotiation frustration
Even if planners understand why Wi-Fi comes at a cost, how high should that cost be? "It can be ridiculously expensive," complains Sherry Sullivan, meeting and event planner for Invest Financial Corp. in Tampa, Fla. "Whether it can be negotiated depends on the property, but a lot of them say it's managed by an outside party so it's a fixed cost." In those cases, Sullivan tries to make up some of the difference by negotiating other, more flexible A/V services.

 

James Spellos
James Spellos

"The question is, what's the profit margin?" James Spellos asks. "That's something that's very elusive right now. It seems to me that the margin is incredibly high, which means this is a negotiable aspect of the contract."

Every hotel is different, acknowledges Spellos, and the pricing varies wildly, depending on factors such as how the hotel markets the service, meeting size, and bandwidth and IP address requirements. One planner who responded to M&C's March survey received quotes that ranged from $3,000 to $29,000 for the same program; based on anecdotal feedback, the high end of that range is not unusual. "Some hoteliers will debate this point," notes Spellos, "but that revenue is going to add up, and in a significant way."

According to a rough spreadsheet Spellos devised, hotels could be making 50 to 70 percent profit on Wi-Fi fees when you look at them over a three- to four-year period.

In far too many cases, notes Spellos, negotiating Wi-Fi is an afterthought, addressed a month or two in advance of the event. "It must be part of the contract conversation," he says. "As with room nights, food and beverage, A/V and other costs, it has to be part of the conversation at the point that you're considering a property. Addressing it at the point of contract gives the planner far more leverage. Some planners are now saying, if you can't provide us what we need at a price that is reasonable, we may or may not choose to use your property.' It's starting to become a deal-breaker."

Another common misstep is that planners who do negotiate don't have any idea whether they're getting what they've asked for. In an educational session Spellos created and has moderated, "The Meeting Planner's Guide to Internet Connectivity," he often takes an informal poll of his audience. Typically, about 70 to 80 percent of planners say they have negotiated Wi-Fi and bandwidth. But about 80 percent say they don't address those details when they do site inspections.

Others are particularly dogged about their connectivity requirements. "I am always doing walk-throughs and testing upload and download speeds throughout our potential venues," notes Ludmila Leito, communication and events coordinator for Silver Spring, Md.-based General Conference Auditing Service. "When there's a problem with the Wi-Fi, it's one of the first things we hear about from frustrated attendees."


Making sense of pricing
One major peeve planners cited in M&C's recent research is the lack of consistency in Wi-Fi pricing. "It's been all over the board in our industry for a long time," says Dominguez. "But we are now in an age of consolidation, where there are only so many companies that can provide the service and infrastructure for us. Because of that, we are now getting into some efficiencies and consistency on pricing models."

It's getting better, agrees Spellos, "but it's still the Wild West out there. It's not at a point where I think it's stable, and I don't think it necessarily will be. We're in an industry that has never had standardization: No two meetings are alike. No two properties are alike."

What's most important now, says Spellos, is for planners to educate themselves about the technology that is required for their meetings, because the quality of the service trumps cost. "The stability of the connectivity is truly more important than the price you're paying," he notes. "If you don't have the connection, then you sabotage your meeting goals."