Harvard Business Review

What? $300 a Night Plus $15 for WiFi?


Posted on Harvard Business Review: May 13, 2011 9:06 AM

There's an award-winning doctoral dissertation in marketing, hospitality or behavioral economics to be done on why the world's most luxurious hotels insist on charging their guests extra for WiFi. It can't be to build customer loyalty; people loathe it. Surveys suggest patrons paying over $300/night despise paying an additional $10 to $15 a day for internet access (often far more in Europe). You'd think classy chains like the Four Seasons, Ritz-Carlton and Rosewood wouldn't nickel-and-dime their patrons. You'd think wrong.

This market reality becomes paradoxical to the point of perverse when you look downmarket. Budget and mid-tier hotels cost a fraction of what the elite hospitality brands do yet, somehow, their WiFi is free. It's not as if luxury hotel WiFi is faster or technically superior to its discount counterpart.

But what's particularly irksome is not just the added cost but the missed opportunity. The easiest thing these hard-changing elitists could do would be incrementally raise their room rates and bundle in internet access. But they don't. Instead of doing what's easy then, these brands should exercise the wit and ingenuity to do what's best. Don't just tack on new fees, add on new value.

If you're Four Seasons or the Ritz, you attract the most desirable luxury demographics in the world. Have the business decency and determination to make an innovative offer along with that extended palm.

Customers should feel special, not exploited, when they log on. Provide "behind the pay wall" access to, say, the Financial Times or another premium online publication. Offer up QR codes or passwords that create discounted — or free — downloads for Kindles, iPads and mobile phones. And why not digital treats or goodies for children?

Anyone paying a premium to gain internet access in a luxury hotel should know that they'll get a promotional offer for a glass of wine with a meal, a pedicure with a massage, or an engraving with a gift purchase.

The opportunities for making that little nick feel less like a gouge and more like an invitation are immense. The technical requirements for cleverly packaging these offers as guests log on have become easier; the array of potential promotional partners for luxury branded hotels has expanded. In fact, providing this value-added perk is more economically do-able today than even three years ago.

What's more, luxury hotel properties have every rational incentive to observe which guests are most responsive to what promotions. Caesars (formally Harrah's with its world-famous customer loyalty program) has only just begun experimenting with smartphone and mobile web applications. Shall we call them "applipromos"?

For no other reason than greater customer insight, luxury hotels have a vested interested in being more innovative to their guests' online responsiveness. That data is valuable. But the fact that these hotels know that their "'internet tax" is a perennial customer irritant should be even more of an innovation motivator.

Are you also surprised, disappointed and annoyed when your luxury hotel wants to charge for what your budget hotel gives away free? What online promotional offer or goodie do you think a hotel should provide when it asks you for $9.95 or $14.95 to log on?

Copyright © 2012 Harvard Business School Publishing. All rights reserved. Harvard Business Publishing is an affiliate of Harvard Business School.

Michael Schrage is a researcher at MIT Sloan School's Center for Digital Business and a visiting fellow at the Imperial College Business School

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