Purchase or Lease Your High-speed Internet Access, You Know Your Clients Best

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March 01, 2003
CounterPoint
Paul Sullivan

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© 2003 Hospitality Upgrade. No reproduction without written permission.

Your expertise, not your provider’s, will drive the success of your high-speed service. Why should your provider make all the decisions for you?

For a growing number of travelers, high-speed Internet access is no longer a luxury in hotels; it is a valued service they have come to expect. For you and your guests, the success – or failure – of that service depends largely on one key element: a solid business model. To succeed, you need the authority to make critical decisions like how to promote the service, how to price it and where your revenue will go. The purchase/lease model gives you control. Revenue share takes it away.

Who Decides Pricing?
Under the traditional revenue-share model, your vendor dictates what you will charge for your high-speed service – regardless of where your hotel is located, who your clients are or what your competitors are doing.

In contrast, the purchase/lease model gives you the freedom to decide how to offer high speed for the maximum return. You can analyze your competitive set and choose the best options for you and your guests. For example, you may choose to offer it complimentary to some or all guests, or you may decide to create customized billing packages based on time, room type, corporate client and other key criteria.

This flexibility is critical to both the short- and long-term success of your service. Currently, the vast majority of hotels charge for meeting room use, but may offer it complimentary or for a fee in their guestrooms. Under a purchase/lease agreement, you can choose the option that best meets your needs, and even modify your plans in response to the changing market. For example, you may decide to charge for guestroom use initially, recouping your investment more quickly. As high speed in hotels becomes more prevalent in your region, you may move to offering it complimentary – especially if your competitors are doing the same.

Who Decides Revenue?
Revenue distribution is one of the most fundamental areas where the revenue-share model simply does not make sense. In what other situation would you offer guests a service then split your profits with the vendor? Do you really want a vendor making money from your customer transactions? Or telling you how much to charge? The purchase/lease model puts the decision-making power in your hands, not your vendor’s.

It’s also crucial to keep in mind that eventually high-speed Internet access may become such an expected amenity in the overall guest experience that it is no longer something you can (or should) be charging for, at least in certain locations. The revenue-share model doesn’t take this fact into account, nor does it offer ways for your hotel to adapt to changing market demands. What will your hotel do down the track?

Who Decides Promotion? Promotion is another key area where the purchase/lease model is clearly superior. Under revenue share, you do not invest directly in your high-speed solution. Where, then, is your incentive to promote it? If you don’t promote it properly, what is the point of offering the service? According to “The Facts on High-Speed Internet Access” in Hotels, a report Guest-Tek published examining 69 hotels with high-speed Internet access, usage rates for hotels operating under a purchase/lease model were 127 percent higher than those under revenue share. While some vendors offering revenue share may offer to promote high speed for you, you should be very wary. A third party won’t understand your markets as well as you do. Nor will they automatically target the markets you want them to. Particularly in meeting rooms, they may make deals with their own pricing arrangements.

The purchase/lease option eliminates these problems. That’s because when you purchase or lease a high-speed solution, you do have a vested interest in whether that service succeeds. As a result, you and your staff can work together to decide how and where you want to promote it. For example, your banquet and catering department will have a better understanding of the market, and will know how to capture that market through special programs such as including high speed in the room rate to gain major corporate accounts.

Vendors operating under the purchase/lease model know that your expertise, not theirs, should be the determining factor in making these decisions. Rather than replacing your judgment with their own, they may offer services to supplement your expertise. For example, Guest-Tek’s client services department is a valuable resource for hotels to use if they would like tips on promoting their service more effectively, offering customized marketing collateral and other assistance.

The Power to Choose
Purchasing or leasing your high-speed solution gives you the greatest advantage of all: the power of choice. No one knows better than you who your clients are or what they want. Unlike the revenue-share model, purchasing your high-speed solution means you decide how to promote it, how to price it and where your revenue goes. Ultimately, your expertise will drive the success of your service. Why trust these decisions to anyone else?



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