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The Rights and Wrongs of HSIA

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October 25, 2006
Hotel | HSIA
Dan Phillips - dphillips@its-services.com

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© 2006 Hospitality Upgrade. No reproduction without written permission.

Please explain something to me; why do hotels give HSIA away for free?


A hotel puts in a phone system that costs hundreds of dollars per room and has to incur monthly recurring charges from both the maintenance vendor and the Telcos.  When a guest makes a five-minute long distance call, the cost for the call to the hotel is about $.15 and they charge the guest about $10.  That same hotel puts in a HSIA system that costs hundreds of dollars per room and incurs monthly recurring charges from both the vendor and the ISP.  When a guest wants to access the system, even for days at a time, a majority of the hotels out there give it away for free.  And the really confusing part is that guests would gladly pay for sound service with a good amount of bandwidth.

The hotel industry is notorious for beating up on vendors.  This industry wants everything for free, wants the latest and greatest stuff, wants that stuff to make money, and then they want the lion’s share of the revenue to boot.  This philosophy is quite prevalent with the HSIA providers.  This philosophy is one of the major contributors to what is being done wrong with HSIA deployments.
Fee Structures
The whole industry boils down to two basic fee structures for guest HSIA.  It is either free or on average $9.95 per 24-hour access.  There are several other varieties like $2.95 per hour or $24.95 unlimited per stay, or even the bundled approach of all domestic phone calls and HSIA for $9.95 per day.  Free access means that the service is a loss leader for the hotel.  If that is understood, and the costs are borne by higher ADR and occupancy rates, that may be best for the hotel.

However, demand for HSIA continues to rise.  Demands on bandwidth will become increasingly heavier.  These demands will raise the costs to the hotel.  Sandro Natale, President/CEO of Superclick Inc., may have the best idea. He said, “Maybe have a two- tiered service where there is a basic package with reduced bandwidth with open port such as Web, e-mail and maybe IM.  If a guest wants to use a VoIP application such as Vonage or Skype, there should be an upgrade offering to a premium service for a fee.  It’s like water, if you want free water you drink from the tap, if you want bottled water you need to pay.”
Vendor Relationship/Ownership
HSIA kicked off in the mid to late '90s with companies like CAIS, Darwin and Wayport.  Today, among those three, only Wayport is still here.  Why?  The business model that CAIS and Darwin proposed was one in which they installed and owned all of the equipment and imposed a fee for guest usage, some of which they would share with the hotel.  At that point in time, demand was too low to support this model and those companies folded.

In a revenue share model, whether the hotel purchases the equipment or the vendor maintains ownership, more often than not the goal is to keep the equipment, installation costs and monthly recurring charges as low as possible.  This results in poor guest experiences and higher complaints.  Mike Henderson, vice president marketing for StayOnline, said, “First, the tendency to shop a provider based strictly on price is wrong.  Bottom line:  you get what you pay for.  Second, by installing networks with limited functionality they are ultimately limiting their ability to adapt and embrace new technologies such as VoIP in the future.”
Equipment and Services
HSIA in a hotel is a commercial application.  A hotel that attempts to install a wireless network using consumer grade wireless gear, or, a hotel that attempts to deliver quality wired service over 20-year-old Cat 3 or less cabling, is asking for trouble.

Mike Tourigny, VP marketing at Guest-Tek Interactive Entertainment, said, “The quality of the service depends on the entire system including a call center, NOC, network monitoring tools and systems, in addition to the hardware components.”

No longer can successful hotels install HSIA systems that require guests to reconfigure their laptops.  They can’t install systems with unmanageable switches and gateways.  They can’t rely on a hotel front desk person to answer questions about how to log on.  A successful hotel will probably offer secure wired and wireless access.  They will use bandwidth shaping tools to ensure adequate bandwidth is available for each guest and their specific needs.  They will employ firewalls and pop-up blockers and prevent the spread of worms, viruses and spam generators.  Successful brands will demand brand-wide consistency in performance of the systems as well as the look and feel of the applications.

The Near Future
The crystal ball shows that guest demand for HSIA is going to continue to increase.  Business travelers will be using their laptops at higher rates.  However, what they do on those laptops will be changing.  New applications like VoIP and Slingbox will increase both the number of connections as well as demand for bandwidth.  Hotel companies, both brands and management companies, will be putting demands on HSIA systems to deliver new content streams to the guestrooms.  Dan Lowden, VP of business development and marketing at Wayport, Inc., said, “We have seen that the implementation of loyalty and amenity programs provide an effective model to bundle services and create communications packages for loyalty customers.” 
Vacationers will also place demands on these systems.  They will be searching local content and rely on in-room devices and/or the TV to find what they are looking for. Hotels will be forced to provide secure, strong networks with larger ISP connections and bandwidth shaping internally to compete successfully.

Dan Phillips is COO of ITS, a consulting firm located outside of Atlanta, Ga., specializing in technology in the hospitality industry. For comment or question, he can be reached at dphillips@its-services.com.

Government Regulations

On April 28, 2006, Colorado Representative Diana DeGette proposed an amendment whereby ISPs would be forced to retain data on all of their users and their actions for a period of two years.  On May 26, 2006, Attorney General Alberto Gonzales and FBI Director Robert Mueller, in a meeting with AOL, Comcast, Google, Verizon and Microsoft, stated that ISPs, and perhaps search engines, must retain data on all usage for a period of two years to aid with anti-terrorism efforts.

In 1996, a federal law called the Electronic Communication Transactional Records Act was put into effect.  This law requires ISPs to preserve or retain “any record in their possession” for 90 days upon the request of a governmental entity.

Is a hotel that provides HSIA an Internet service provider?  Telecommunications may provide a good analogy.  In 1984, divestiture happened which allowed hotels to resell phone service to their guests.  In 1996, the law titled “Telephone Operator Consumer Services Improvement Act” was enacted, which controlled the charges that pay phone operators and hotels placed on phone calls made by their customers.  Under this law, hotels were defined as companies providing telephone operator services.  If hotels are providing HSIA, one might assume that they will be defined as Internet service providers.  If the amendment proposed is adopted, will hotels be forced to comply?  If so, think about what kind of storage will be required to keep a database on all guest usage.  If so, think about what changes will need to be made to the systems currently in place to track and record this usage.

How This Legislation May Affect Your Hotel
Assume for a moment that a pedophile is a guest at your hotel. During the stay this guest accesses your HSIA system and starts doing research on fulfilling his desires in your area.  A few weeks later, the FBI uncovers this crime and comes to your hotel. They will ask you for the person conducting this behavior.  If your HSIA solution is unable to monitor guest usage and/or is not storing that information, the only thing that you will be able to give the FBI is your entire guest list during the duration of that one criminal’s stay.  Now, every one of your guests is going to be investigated by the FBI.

Another scenario might be: A guest checks into your hotel with his laptop.  This guest has previously downloaded a pirated copy of a new release movie.  Once in your hotel room, he now has access to a broadband pipe with an IP address that does not belong to him.  He starts selling the movie to any and all takers.  A day or two after he checks out, your hotel receives a letter from an Anti-Piracy Enforcement Agency of the license holder in Hollywood threatening the hotel with a law suit for copyright infringement.

These are only two examples of actual cases that have occurred in the recent past. If you are not thinking of ways to protect your property from online criminal activities perpetrated by guests be assured that someone is taking advantage of the opening in your security.

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