The real cost of investing in hotel WiFi

A laptop open in a hotel room

Insight Comment
Another hefty bill for WiFi hardware? Hotel owners are right to be concerned about making unnecessary investments but, in spite of the rise of the 5G network, WiFi is likely to remain essential for the foreseeable future. 

Telecoms firms and internet service providers (ISPs) are not the most flexible or transparent organizations to deal with. Many of us know this from personal experience, but for hotel owners and operators, the pandemic drove the point home further.

While lockdowns reduced occupancies to single figures, operators were able to minimize a whole range of their running expenses, from staffing levels to water and electricity. In most cases, the same did not apply to internet access. While occupancies were running at 10%, some hoteliers continued to pay for WiFi as if it were business as usual. 

Typically, hotel operators pay a fixed monthly fee. Extra bandwidth can be booked in at a price, for example, if a bunch of sports teams are staying and movie streaming and data usage will peak. But the notice necessary for such flexibility tends to be at least one week, which is not great for unexpected increases in transient demand.

To keep some level of competition in play, sensible hotel operators will not sign any supplier agreement for longer than a year. Those working with the global hotel brands are tied to brand-certified ISPs in any case.

Hoteliers have long argued that WiFi should be treated like hot water or electricity – a utility paid for based on consumption. 

“Some of the WiFi providers and certainly some of the IP telefony providers are doing occupancy-based pricing now. Not all, to be fair, but there is a way of going with that,” said Carl Weldon, COO Europe for the Hospitality Financial and Technology Professionals (HFTP) Association.

Generally speaking, however, connectivity running costs are modest. The real cost of WiFi for owners is in the hardware. 

Costly Upgrades

Demands for costly WiFi upgrades are now becoming a source of frustration for some owners, particularly given that investing in internet access provides virtually no return on investment. 

“This is a highly emotive subject because it’s one where [hotel owners] continue to invest with little or no return, other than hoping that guest satisfaction is a part of it. WiFi will never become a chargeable item,” said Kevin Edwards, director global business development at Alliants.

At an 800-bedroom branded hotel in the Middle East, Edwards was brought in to oversee a WiFi upgrade project because the owners were not satisfied with what the operator was suggesting they do. $900,000 of the estimated $1 million total cost of upgrading the hotel’s network from WiFi 5 to the new WiFi 6 standard would go on replacing all of the hardware. 

The cost of putting WiFi 6 infrastructure in a new-build hotel is almost half compared to upgrading the same-size existing hotel.  

The global manufacturers of WiFi hardware are talking about reaching the mass adoption of the new wireless standard WiFi 6 over the next two years. Users are likely to predict a much longer timescale. As is so often the case with IT, some see disadvantages to early adoption.

“WiFi 6 is not market-ready yet in Europe. Until it gets into the mass adoption scale, there will always be that lead time when it’s definitely more cost-intensive and with teething issues,” said Vibhu Gaind, chief information officer at RBH Hospitality Management, a UK company with several brands in its 45-hotel portfolio.

At this stage, from a hotel guest’s point of view, the difference between the WiFi 5 and WiFi 6 standards would be almost unnoticeable. “Any operator going to their owner in this financial year wanting to upgrade a load of kit to WiFi 6 … 99% of the time, the business case is so poor. Often the operators are not really thinking it through. Certainly in terms of priority of investment currently for hotels, I would suggest that WiFi is probably fairly low down the list,” Edwards said.

Rise of 5G

The rise of the 5G wireless mobile network is cited as another reason why hotel owners should be cautious about requests for WiFi upgrades. 5G is expected to almost triple wireless capacity over the next few years. 

In major cities there can be WiFi blackspots and patchy connectivity due to the sheer number of devices using networks. To overcome such problems there is little appetite left from commercial providers or governments to carry on digging up roads and laying more cables. Building cell towers is a less disruptive solution to the exponential growth in internet usage.

5G infrastructure is already in place in most of the world. The next step will be equipping the global population with 5G-enabled phones and contracts. It is not clear how long this will take.

masts in fog

5G will shift some of the burden of connectivity away from hotels themselves and into the hands of the mobile network operators. Ultimately, if everyone has a 5G contract on their mobile phone with limitless data usage, switching over to the hotel WiFi will not be necessary.

“We’re really quite excited about the 5G option, this new world of instant connectivity. If you have the right providers and the right suppliers you could actually have a site up and running relatively quickly and at relatively low cost. Of course, it goes hand in hand with the scale of adoption. We’re just biding our time at the moment,” said Gaind.

5G is a further sign that connectivity is becoming more and more consumer-centred. Guests already use their phones for everything while staying in the hotel; they take their Netflix accounts and their internet connectivity in their pockets with them. Hotel staff do the same for work communications and scheduling. 

However, 5G is not expected to replace WiFi, at least not for the foreseeable future. At the moment there are certain functions such as electronic payment, IoT monitoring and contactless door entry, claimed Weldon, that rely on WiFi and cannot be delivered via mobile networks with the same required security protection.

Hoteliers will still need to budget for the cost of maintaining a WiFi network, not as an explicit extra charge to the guest, but within their pricing and P&L, argued Weldon.
“There is going to be an ongoing need to upgrade wireless as we go along. It’s a fact of life. Owners don’t necessarily want to do it, but it’s a bit like investing in a bathroom,” he said. 

Gaind added: “Very quickly you can double your IT spend without any real benefit so we are always mindful that what we bring in and when we bring it in is right and appropriate.”