Free-to-guest TV: It Ain’t Cheap!

Order a reprint of this story
Close (X)

ORDER A REPRINT

To reprint an article or any part of an article from Hospitality Upgrade please email geneva@hospitalityupgrade.com. Fee is $250 per reprint. One-time reprint. Fee may be waived under certain circumstances.

SEND EMAIL

October 01, 2012
Guestroom Service - TV
Dan Phillips - dphillips@dare2i.com

View Magazine Version of This Article

With rare exceptions, it’s probably impossible to sell a hotel room without a working TV in it. And today, that TV needs to be a flat screen and what a guest watches needs to be in high definition. Unless a guest pays for a movie, all of the TV channels and content provided on that guestroom TV is free to the guest (FTG).  However, hoteliers pay for that content, and the price keeps going up.  It is not uncommon for a hotel to pay between $10 and $15 per room, per month for FTG TV content. Simple math: 10,000 rooms for a management company equates to between $1.2 million and $1.8 million a year. And this doesn’t include the upfront, capital cost of all of the head-end equipment needed to make FTG TV work.


The bad news is that FTG content pricing is climbing fast. Home subscriber cable costs have gone up by 6 percent per year for each of the last three years (NPD Group).  The Wall St. Journal stated that subscriber costs have nearly tripled since 2001. Just the cost of the ESPN package, typically the most expensive channel selection in the FTG bundle, has gone up 42 percent since 2006 (SNL Kagan).  As an example, ESPN will pay the NFL $3.2 billion this year for the rights to some of its games, and this has to be spread out among all subscribers. One fear is that as current cable and satellite contracts expire in the next year, costs might skyrocket past the measly 6 percent rate increase we’ve experienced previously.

FTG content purchases are typically broken up into a few different segments. These could include local channels (local ABC, CBS, Fox, NBC and other affiliates), cable channels (TBS, Discovery, USA, CNN), the ESPN package and a movie channel (HBO, Showtime, Starz). An example of average hotel FTG channel selection pricing on a 5-year contract, providing 36 channels, 24 of which are HD, might look like this:
 
                        Per room per month charge
Local channel
           $0.15
Cable channels         $3
ESPN package          $4.50
Movie channels         $3
Total                       $10.65

Obviously, a hotel company must take the time to seriously consider the channel lineup that it provides to guests.  Unfortunately, the way cable and satellite companies are forced to bundle the channel offerings makes it quite difficult for hoteliers to order channels al a carte; meaning, that often times it is less expensive to purchase a lot of channels, many of which are not wanted, than to purchase just the few channels that are really needed. 

Some 2011 statistics from Nielsen might assist in deciding just how important guestroom TVs are, but can also indicate guest behaviors while watching TV and what stress that will put on the hotel’s HSIA network. (See sidebar.)
 
Medium     Male 18-49         Female 18-49       Male 50+       Female 50+
TV  
            139:50             151:18             195:15         217:44
Online           7:02                 4:57                2:44            2:22
Mobile           4:20                 4:20                2:10            3:37

Women watch 16 more hours of traditional TV per month than men. Men watch more streaming video online than women.  Americans ages 65 years and older watch 37 percent more TV than the 35 to 49 years age group. In comparison to watching video content on a mobile device or online, TV viewing is still the vast majority of time spent in front of a screen (in hours: minutes, average per month): (See link above)

Perhaps an unaccounted for trend is the amount of multitasking that goes on with other digital devices while watching traditional TV.  For a hotel, this would mean multiple devices depleting bandwidth resources in hotel guestrooms simultaneously.

  • 44 percent of all Americans 12 and over own a smartphone.
  • 61 percent own a portable digital media device.
  • 40 percent own an Apple device.
  • 38 percent of ages 45 and over now engage in social networking.
  • Over 15.5 percent of the 25-54 age group watch video content online.
  • There are 61.2 million mobile video viewers, which is equal to 25.2 percent of the mobile phone users and 19.3 percent of the country’s population.
  • In 2011, there were 49.4M mobile Facebook users; this number is expected to increase to 93.9M in 2014, which would equate to 98 percent of all smartphone owners.

It is extremely important for a hotel to determine an accurate mix of the guest demographics. Traditional TV is still the most used form of technology for viewing video content. Effort must be made to ensure that this vehicle meets or exceeds guests’ expectations. In addition to a strong TV solution, an equally, or even more powerful, Wi-Fi solution must be in place to support it.

Another trend in the development of consumer digital technology is upward age adoption. Whereas in the past, technological developments often left the older generations behind, today’s digital devices provide such an intuitive interface that older demographics, those who can more easily afford such amenities, are adopting these devices and purchasing them almost in the same quantities as younger generations. Hotels do not have the luxury of waiting for Generation Y or Millennials to come of age to travel and make up a significant percentage of the traveling public. The digital devices are saturating the traveling public today.

Also a strong, traditional TV platform must be in place, with time shifting and DVR capabilities included. Superior Wi-Fi coverage in the guestrooms must be installed. Anticipate guests watching more video while simultaneously being engaged on their own digital devices.

Hoteliers may need to look at ways to deliver other forms of content to their guestroom TVs than traditional cable or satellite FTG offerings. This is called over-the-top TV content, or OTT. Many in-room entertainment providers offer systems that enable guests to view content from Netflix or Hulu, or even foreign TV channels.  There are other companies that can provide recorded TV shows, either older shows from days gone by, or newly recorded shows about specific interest areas, such as golf or exercise. The financial models on these various types of OTT content range from being a part of the monthly cost to own the system or being free to the hotel and supported by advertisers. At any rate, hoteliers may need to start looking at ways to benefit from the expense of providing great new TVs without having to pay huge monthly sums to FTG content providers.

Dan Phillips is a partner at Dare to Imagine and can be reached at dphillips@dare2i.com.

©2012 Hospitality Upgrade
This work may not be reprinted, redistributed or repurposed without written consent.
For permission requests, call 678.802.5302 or email
info@hospitalityupgrade.com .

 

Top All-day Programming Networks 2011:
1
- TBS
2 - Discovery
3 - USA
4 - TNT
4 - Weather Channel
6 - Nickelodeon
7 - Food Network
8 - ESPN
8 - C-Span
8 - CNN
 
 
 

85% of all video viewing is done in real time. 

Presently, only 8 percent of video viewing is done via DVR.

The average TV screen viewing time per week during the new TV season in 2011 was:

  • Age 18-34, 32 hours: 52 minutes, 79.1% of which was live TV, 8.4% was DVR
  • Age 35-54, 37:19, 86.1% of which was live TV, 9.0% was DVR
  • Age 55+, 46:19, 92.6% of which was live TV, 5.4% was DVR
  • Age group 50-64 makes up the largest segment of traditional TV viewers at 25% of all TV viewers
  • Age group 35-49 makes up the largest segment of Internet online video viewers at 27%
  • Age group 25-34 makes up the largest segment of mobile video viewers at 30%
 
 

While watching TV, 40 percent of all tablet owners and 42 percent of all smartphone owners are multitasking every day:

  • 60% check email
  • 46% surf the Internet
  • 42% are social networking
  • 30% are checking sports scores
  • 29% are looking up content relevant to the show they are watching
  • 19% are looking up content related to advertisers on the show
  • 13% are looking up coupons

Articles By The Same Author



want to read more articles like this?

want to read more articles like this?

Sign up to receive our twice-a-month Watercooler and Siegel Sez Newsletters and never miss another article or news story.