Faster & Cheaper

Exploding demand for guest Internet access is forcing hotel owners and managers to look for sources of faster, cheaper service. On that score, there’s both good news and bad news.

The good news is that telecom bandwidth is cheaper than ever. A rash of new suppliers for Internet access—from cable companies to new types of specialized telecom carriers—is seizing the opportunity. They may already be knocking at your door.

And advanced technologies are better suited to delivering faster Internet access for less. For example, Ethernet, once reserved for in-building computer networks (such as your guests’ computer connections), is now readily available as a dedicated access medium to the Internet. Deploying a 5, 10, or 20 megabits per second Ethernet connection to the Internet usually provides much cheaper connectivity than you could achieve by stringing together standard 1.5 MB T-1 lines. 

Advertisement

The bad news is that in the telecom world it’s not as easy as picking the carrier that offers the most Internet capacity at the lowest rates. Contracting with a new, competitive carrier could create tensions with a franchisor or hospitality branding partner that prefers (and maybe has committed volume to) a major brand name supplier. Moreover, higher bandwidth or newer technology circuits may come with more restrictive conditions, e.g., a two-year (or longer) commitment on each new circuit, ensuring that your contractual commitment never really “ends” if you are growing and keep adding circuits.

And circuits installed on a one-off basis by cable companies or other competitive providers may not benefit from guaranteed levels of availability or speed that are often attainable in a national contract with AT&T or Verizon. What’s more, all Internet access pricing has two parts: the port out to the Internet itself (housed at the provider’s location or “point of presence”), and the “last mile” access from your property to the provider’s location. If your provider doesn’t have fiber (or, in some cases, high-grade copper) into your property, it must buy access from the local telco to get your traffic to its port. Its port price for 10 MB of Internet access may look much better than the big carrier’s, but its access charge may be higher and even offset any perceived savings on the port price.

So where does this leave hotel owners and managers looking to beef up their Internet service without breaking the bank? The solution is a competitive bidding process; the marketplace (read: competition) is the principal driver for Internet rates, which explains why the same carrier will quote a much better rate on a competitive bid than on a single-source procurement. That’s especially true of big brand names like AT&T and Verizon, each of which likes nothing more than to sell services in the other’s “native” territory.

To avoid problems, an effective Internet RFP emphasizes both the best prices and the best terms. A short contract (two years overall), with minimum per-circuit terms (one year max), reasonable billing terms, and an enforceable Service Level Agreement, is advisable and achievable. RFPs including WiFi access in public areas and/or guestrooms require more work. Combined voice and data RFPs are more comprehensive and require more still. 

You need to determine whether you have a certain amount of spend (or circuit terms) committed to other carriers and when those commitments are satisfied, then you can set a target date for the RFP and migration to new services. Also be sure to review the service guarantees and contract terms available on any nationwide contract available under your branding or management agreement; you may have to work harder to match those terms in your own Internet deal. Of course, be sure to consider any brand-wide preferences and synergies before looking to negotiate your own individual contract.

One other caveat: Lock in (or “stabilize”) rates in the contract. With Internet access demands growing by leaps and bounds, and regulatory uncertainty over “net neutrality” pricing structures, the sooner you lock in truly market rates and terms, the better. At the same time, hedge your bets against declining market rates by limiting the term of the deal and circuit commitments and insisting on a meaningful rate review clause that allows you to benchmark your rates against those offered by your providers and its competitors in future years, and to adjust your pricing in accordance with the market.

There’s no great secret to meeting the ever-growing Internet access demands of guests, you just have to give them more. The secret is to have a competitively procured deal so that you can get the “more” cost-effectively.

David Rohde is a consultant with TechCaliber Consulting LLC. Kevin DiLallo is a partner with the law firm Levine, Blaszak, Block & Boothby LLP.