In the hospitality industry, expenses are watched closely. All expenditures must be balanced with customer satisfaction, and reality dictates that some customer complaints cannot immediately be remedied. With the reduced revenue that’s come with the current economic climate, difficult decisions must be made about what issues to address and when.
While the quality of basic hotel services and comforts may still serve as the baseline for guests’ satisfaction, high-speed Internet service is quickly becoming a factor when choosing where to stay. This is especially true for business travelers.
In this article, we use interviews with NetEqualizer customers in the hospitality industry and our own experience to define the cost of a congested Internet pipe in terms of dollar impact on a hotel business. The conclusions below are based on a business-class, three-star travel hotel with 200 rooms. These same metrics can be scaled up to larger conference centers or smaller travel hotels.
We start with the online behavior that’s behind bandwidth congestion and then discuss the financial repercussions.
Causes of Bandwidth Congestion and Slow Internet Speeds
A hotel of this size typically has two to 10 megabits of shared bandwidth available to guests. We assume 30 percent of the guests (roughly 60 people) are using the Internet for business purposes (e-mail, browsing, Skype, etc.) in the early to late evening hours. We also assume that 10 percent of the guests (20 people) will use the Internet for more intense recreational purposes such as Youtube or Hulu.
With this ratio of users, the Hulu and YouTube users will easily overwhelm a 10-megabit link, causing a rolling brown out for most of the evening.
Cost of Rolling Brown Out
We conservatively assume that about 5 percent of hotel customers will remember a poor Internet experience and try another hotel the next time they’re in town. Considering this, the approximate loss of revenue amounts to about $500 per week as a result of poor quality of Internet service.
Obviously this loss could potentially be offset by new guests and competitors’ customers that were unhappy with their experience and crossed over to your hotel. However, if you solve the congestion issue — especially if other hotels in your area are encountering similar problems — your retained customer base would slowly rise over time.
And, as the old business adage goes, it’s generally cheaper and more efficient to keep customers than to constantly find new ones.
Cost of Support
Most franchise hotels outsource their IT services to a third party. Your IT consulting staff will likely try to remedy the congestion through trial and error by adjusting various on-site equipment. We will assign a $500-a-month cost to this effort. Even if this cost is absorbed by an IT consultant already on retainer, it still cuts into time they could spend improving other services.
Cost of Additional Bandwidth
One potential remedy that’s often tried, and comes with a price that’s most likely not simply absorbed into a retainer, is simply purchasing additional bandwidth. The good news is that bandwidth contracts are always getting less expensive. However, most operators have found that doubling or tripling the size of their Internet pipes has only a temporary effect on the congestion issue.
So, we’ll assign a cost to this solution of $400 per month, with varying effectiveness.
Based on these findings, bandwidth congestion on a hotel Internet link will conservatively cost about $1,000 per month depending on the specific circumstances and attempted solutions. Although there is no universal solution to the problem — even continuously purchasing additional bandwidth — an automated congestion control device like the NetEqualizer can potentially reduce this cost by 90 percent. And, unlike purchasing additional bandwidth, the cost isn’t recurring and the NetEqualizer generally pays for itself within a matter of months.
Therefore, as we repeatedly see in the experiences of our customers (in the hospitality industry and elsewhere), the solution to Internet congestion, and its ultimate cost, are often less dependent on the amount of bandwidth that’s available and more defined by how it’s managed.
Partial List of NetEqualizer Customers in the Hospitality Field
(Note: These are individual franchises)
October 14, 2010 at 4:01 PM
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April 28, 2012 at 9:26 AM
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