Room Service 2.0

The way things are going, Wi-Fi will soon be as ubiquitous in hotel rooms as minibars, SpectraVision and Gideon Bibles. Hotels across the U.S. — big and small, opulent and ordinary — are hopping on the wireless bandwagon, looking to attract business travelers and mobile professionals with the promise of high-speed Internet services.

But so far, few guests appear willing to shell out for Wi-Fi, especially when some hotels charge as much as $10 per day. What set Omni Hotels apart is its February announcement that it will offer 802.11 services in every room throughout its national chain by the end of 2003. What's more is that Omni guests will receive wireless Internet access free of charge — a complimentary perk, like the mints on their pillows.

The price point isn't the only distinction. “Most deals relate only to the hotel lobbies,” said David Giannini, CEO of Core Communications, which Omni tapped for its network buildout. “But Omni will deploy a consistent, brand-standard system through every room in every property. That's unqualified.”

Giannini said that Omni is unique among large hotel chains because it owns all the properties bearing the Omni name. With all hotels operating under the same rules and guidelines, it's much easier to build out a network. Also, the timing was right: Wi-Fi's snowballing growth and the increasing popularity of virtual private networks (VPNs) among enterprise users made the project possible from a logistical and financial standpoint. Giannini said that a Wi-Fi network is as much as 50% cheaper than a conventional wired solution.

“We saw it as a real competitive advantage to be the first luxury brand to offer free Wi-Fi services because no one else out there can tout free wireless technology in every guest room,” said Paul Dietzler, Omni Hotels' senior vice president of finance and technology. “We've added an amenity for our guests, and we're hoping to receive their loyalty in return. You could argue we're giving away $9.95 a day, but we're trying to attract people to stay with us.”

Giannini founded Dulles, Va.-based Core Communications in 1999. Prior to that, he spent five years with accounting titan Ernst & Young, focusing on tax-advantaged restructuring for the telecom and energy industries. The idea for Core was born of the frustrations he regularly faced when using the communications networks and services installed throughout the hotel meeting rooms, conference centers and other large facilities where he often did business.

“Every session had some data connectivity required, and I saw all the costs and mistakes that were being made,” Giannini said. “It was no one's fault. The technology was just fractured between too many parties. I decided what was needed was a focused, Internet-based technology solution for the group-meeting marketplace.”

That solution — which Giannini called a “value-added technology adviser to the hospitality industry” — relies mostly on Ethernet as its standard delivery platform. “We were anti-wireless three years ago,” Giannini admitted. “We did not deploy 802.11 as our primary network solution because we felt it was not robust enough or able to provide the surety we demanded.” He cited the rapid maturity of 802.11 protocols, as well as the growth of VPN technology, as the catalysts behind the change of heart.

“We try to be as user- and application-independent as possible — we'll consider anything that runs over the Internet,” said Rick Sternitzke, Core's vice president and chief operating officer. The company gained its first experience with Wi-Fi in the meeting-space sector, he said. “There was such a low cost of entry, we then decided to take it one step further and bring to our clients the idea of wireless as an amenity. Wi-Fi is the only delivery medium we found economically feasible.” Sternitzke said the installation cost was as little as $60 to $70 per room.

Core's decision to embrace Wi-Fi is not the only turnaround. The Omni partnership heralds the provider's first guest room initiative of note. Until now, its primary directive has been delivering services to hotel meeting rooms, convention centers and the like.

“Our primary business is meeting-room services, but we are building revenue streams on the guest room side, and we expect in the next twelve months to have parity between the two,” Giannini said. “There is a very small minority of hotels that qualify as convention-grade properties, which necessitates that Core must migrate to properties without meeting-room Internet requirements.”

Sternitzke said Core approaches its business operations in two phases: First, the company handles surveying and construction duties, and then it operates as a managed service network provider. Core began installing Omni's Wi-Fi networks last summer, trialing services in cities including Los Angeles, Chicago, Dallas and New York.

“The guest feedback and utilization was fantastic,” Omni's Dietzler said of the trials. “That the services are free is a huge plus, but the flexibility and ease of use was also very positive.” According to Giannini, much of that flexibility and ease is a result of Omni's decision to offer the service gratis. The result is no complex billing interface to stymie users once they log on. “We simply intercept the wireless device, there's a welcome page specific to the property, and boom — off they go.”

Speaking of booms, there are signs to indicate that hotel Wi-Fi is primed to explode despite a slow start. In March, Pyramid Research released a study projecting that the hotel market is primed to overtake cafés as the planet's most Wi-Fi friendly sites. Where just 1000 hotels offered Wi-Fi in 2002, Pyramid anticipates that number will jump to 25,000 by 2007.

“The Omni announcement is huge because it pressures other competitive hotels to follow suit,” said analyst John Yunker, the author of the Pyramid report. “Somebody said the irony is that the more expensive the hotel, the more they try to nickel-and-dime you. Hotels need to do more to retain their customers. One hotel general manager said to me, ‘I can sell Wi-Fi at ten dollars a night to ten users and make 100 dollars. But if I can bring in one extra guest because of free Wi-Fi, it pays for the whole package.’ Hotels have more to lose by NOT offering it.”

For its part, Core intends to grow its Wi-Fi business beyond the hotel industry by building and managing networks in other vertical markets, including the military, health care and education. Needless to say, the buildouts are important to the company's future, but to hear Giannini tell it, the management may be even more so.

“One of the biggest hurdles facing Wi-Fi is what makes it so accessible: It's so inexpensive and easy to install,” he said. “That will be its biggest shortcoming if it's not properly managed. Anyone can install a hot spot — there are no standards of quality, and no policing agents. Who's managing the air inside my property? Who has pre-eminence? That's the role Core wants to play.”