When Spend Management Hits Hotels Where it Hurts: But Should We Be Surprised?

Having grown up in the camp of "We're on vacation! No! You can NOT watch movies in the hotel room!" I have to say that my family never provided a high-margin revenue stream for hotels in terms of long-distance phone calls and in-room pay-per-view movies (incidentally, the old Cisco routers that directed bits and bytes in hotels were affectionately known by those in the systems and network management trade as "p*rn switches," if you're curious about where the bulk of the revenue came from). Flash forward to today and it turns out the people who do chat all night on those ancient landlines while ordering the latest blockbuster films -- or something else -- are doing so less frequently, which has apparently resulted in a hefty loss of hotel revenue from these once (semi) flourishing money streams. Call it smart personal/work travel Spend Management at the expense of the hotel trade.

A recent article in The Chicago Tribune points to this loss, and blames the evils of take-it-with-you technology such as laptops, iPads, and your mobile phone of choice. "Proceeds from phone calls and movie represented only a small share of a hotel's overall cash flow, but the sharp decline in revenue from those sources comes as the recession-wracked hospitality industry tries to rebound from the lowest occupancy numbers and room rates in decades," the article states.

Furthermore, "Annual revenue collected by U.S. hotels from phone calls dropped to an average of $178 per room in 2009 from $1,252 in 1999, a decline of 86%, according to Colliers PKF Hospitality Research. Meanwhile, income from in-room movies and games dropped to $126 per room from $171, a decline of 26 percent, according to the research firm."

Many affected hotels are attempting to regain the revenue with live jazz dinners, spa treatments, or outdoor movie nights. But my question is: at the rate that technology has advanced since 1999, shouldn't have hotels pretty much seen this coming? Any future-thinking business owner will regularly examine all streams of revenue, and risk-manage them as technology improves. Landlines have been dead for years and years, as people simply make long distance and international calls using their cell phones and Skype. As for pay-per-view movies, sites like Hulu and Netflix have been oncoming since original video streaming sites like Youtube were launched seemingly eons ago. A few weeks ago, in fact, I watched my own streaming movies on a flight from Houston to Chicago (Though I did pay for the in-flight wi-fi service. Worth it.).

Therefore, does it come as any surprise that people don't want to pay to time travel back to the mid-nineties while they're staying at a hotel? Not to me. It seems that hotels recognized too late a revenue stream that could have easily been replaced with something better than a live jazz dinner. And before the music stops for good, they better think about an alternative to the $14.99 Internet fees, which thanks to increasingly better 3G and soon-to-be 4G USB and MIFI wireless devices, will also soon be a thing of the past.

Sheena Moore

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