Perspective: The hoteliers economics of Wi-Fi


By Steven Glapa, senior director of field marketing at Ruckus Wireless

Hotel guests have long based their accommodation choices on the availability of favored amenities, in addition to the usual location and price metrics. Traditionally, these amenities could include features such as a restaurant, a bar or a gymnasium, but increasingly Wi-Fi is becoming a primary expectation in the mind of the average hotel goer.

Whilst many hotels still provide wired networks, the rapid rise of smartphone and tablet technologies has rendered wired connections all but useless. To maintain functionality and connectivity, hotel guests are now fundamentally dependent on Wi-Fi.

Wireless expectations

Hoteliers are, therefore, faced with a set of technical and infrastructural challenges in meeting the wireless expectations of their clientele. One option available to them is to sign a long term contract with a fixed line or wireless provider; however, this kind of contract can be troublesome, often tying hotels down for extended periods of time while typically not offering the tailored solution and specific hospitality experience required.

Another option is for the hotel to purchase and operate an inhouse wireless network themselves, but this requires a considerable financial outlay and operational expertise not found inhouse. Inhouse solutions can, therefore, often lead to spiraling costs and non-optimal Wi-Fi performance.

In light of these poor alternatives, many in the hospitality industry are choosing to solve their Wi-Fi connectivity issues by partnering with a managed service provider (MSP.) An MSP will furnish individual hotels or larger chain groups with all of the necessary Wi-Fi technology. After the initial installation, the MSP will then manage and maintain the hotel's wireless network as a third party. This allows hotel staff and IT departments to focus on core responsibilities, always assured that the Wi-Fi is in 'safe hands'.

Hands free

The most obvious benefit of the MSP model is a financial one, with the removal of installation and maintenance costs providing significant savings to the hotel. Equally, the establishment is not as frequently tied down to a long term contract, which gives the MSP a clear incentive to retain business through the provision of ongoing maintenance, support and an all round quality service.

Often, MSPs will come to a revenue share agreement with their customers and partners in the hospitality industry, which divides the income generated by Wi-Fi charges. Naturally, for the MSP, commercial benefits are dependent upon several variables, including the extent of their project control, the nature of the revenue share model and the ratio of access points to actual Wi-Fi usage; but generally speaking, both MSPs and their partners in the hospitality industry experience a sliding scale of profitability.

At the higher end, where guests are more inclined to spend money on premium services, there is the potential for very lucrative returns. Conversely, with mid level two and three star accommodations, most guests expect free Wi-Fi access and are therefore furnished with more basic wireless technology. However, economies of scale apply in this scenario, and due to the relatively large number of mid-level hotels, a respectable net income is still collectively generated.

Succinctly, MSPs tend to experience blended profitability throughout their commercial partnerships in the hospitality industry. High end hotels naturally offer the best levels of financial return per venue, but contracts with other star level hotel chains can still generate significant income due to their sheer abundance. The managed service model can provide lucrative returns for the MSP, but it is also mutually beneficial to the hotelier, who reaps significant cost savings and connectivity benefits.

MSPs can provide varying levels of service, and deployments can be tailored to meet the requirements of almost any level of accommodation. Aside from the hotel industry, the MSP model can also be applied to a wide range of industries and vertical markets. Almost every industry is experiencing a high level of demand for Wi-Fi, and every day, more and more people are discovering the numerous benefits that MSPs have to offer.

Ruckus Wireless is a provider in the wireless infrastructure market, enabling carriers and enterprises to stay ahead of the exploding demand for high bandwidth applications and services. 


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