Why are these luxury hotels still charging for Wi-Fi?

May 3, 2015, 1:06 PM UTC
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Signage for the W Hotel New York - Times Square, a Starwood Hotels & Resorts Worldwide Inc. property, is displayed in New York, U.S., on Wednesday, Oct. 23, 2013. Starwood Hotels & Resorts Worldwide Inc., the owner of the Sheraton and W brands, rose the most in three months after it reported third-quarter earnings that beat estimates and forecast an increase in revenue growth for 2014. Photographer: Craig Warga/Bloomberg via Getty Images
Photograph by Craig Warga — Bloomberg via Getty Images

It’s been the year of sort-of-free hotel Wi-Fi. Earlier this year the premium brands of Mariott and Starwood Hotels began offering free connections to guests — if they had a loyalty membership and booked direct. Hyatt tossed in Internet for all guests with no extra requirements.

“We can’t continue to differentiate and innovate our guest experiences when we’re charging some guests for the technology that powers future improvements,” wrote Kristine Rose, Hyatt’s vice president of brands, in a blog post last December.

It’s the continued industry thrashing over whether to help guests get on the Internet without helping themselves to additional fees.

Edward Malinowski, CIO of Shangri-La International Hotel Management, knows Wi-Fi. He’s had to pay for plenty of bad hotel connections in his travels away from the company’s properties.

“I pop open my laptop and try to synchronize my email and it takes five minutes,” Malinowski told Fortune. “When I pay for it, I expect a high degree of service.”

While hotel companies like Shangri-La offer free high-quality Internet access, some premium chains only drop the connection charge under special conditions. When room rates start at $300 or more a night, asking another $15 or $20 to go online can seem … grasping.

“I thought by 2015 there would be no hotels charging extra for Wi-Fi,” Rudy Maxa, consumer travel expert and host of the public television series Rudy Maxa’s World, told Fortune. “Every poll I’ve seen about what bothers hotel guests most is paying for Wi-Fi.”

Who is still charging — and how much? Here is a rundown, with information coming directly from the companies or corporate websites:

  • Fairmont: free access to only to loyalty club members. Non-members pay between $10 and $15 a day, although some of its hotels offer free access to all guests.
  • Four Seasons: free basic Internet service — for four devices to check email or basic surfing, although the speed could probably support streaming video — at 90% of its hotels and resorts. If you want six times the bandwidth for six devices, a typical charge would be $20 a day.
  • Hilton: some of the more economical, hotel brands offer free Wi-Fi. Guests at pricier brands must be third or fourth tier loyalty program members for free Internet or pay a fee “competitive within the market” that depends on the specific hotel. For example, the Hilton Boston Downtown/Faneuil Hall charges $14.99 a day. By summer, all loyalty program members who book directly or through one of the company’s corporate travel partners will receive free connectivity, according to what the company told Fortune.
  • Hyatt: as of February this year, free standard Internet to all customers across all its brands.
  • Mandarin Oriental hotels offer free premium Internet connections to guests who create an online personal profile and book directly. Otherwise, daily rates are $15 in the U.S. and $12 to $20 in other parts of the world.
  • Marriott began in January this year to offer free access at participating properties for loyalty card members who book directly. Otherwise, prices can run from $12.95 to $16.95 a day.
  • Peninsula offers free Wi-Fi not only in guest rooms and public spaces, but in its own car service fleet.
  • Ritz-Carlton (owned by Marriott) offers free access at participating properties for loyalty card members who book directly. Otherwise, prices can run from $12.95 to $16.95 a day.
  • Shangri-La offers free Internet access to all guests and also provides service in its fleet of hotel cars.
  • Starwood Hotels’ upscale brands began in February 2015 offering free Wi-Fi for loyalty club members booking directly. The company didn’t respond to Fortune’s question about prices for non-members. A check of the Westin Copley Place in Boston found that basic Internet was $14.95 a day and premium, $19.95. Some of its more moderate brands offer all guests free Wi-Fi.

For perspective, Starbucks stopped charging for Wi-Fi access in 2008. At least 64% of hotels offer free Wi-Fi, according to HotelChatter.

Preliminary data from an Accenture survey (which was provided to Fortune) found that free in-room Internet access was ranked the second most important factor after room cost in choosing a hotel. Property-wide free access was the fourth most important factor. Charging for Internet is a vexation.

It’s not as though the cost of providing Internet access is overwhelming. In-room Internet rates “haven’t changed that much in the last 10 or 15 years,” even as the cost to the hotel of providing service has dropped dramatically, said Marcio Avillez, a senior vice president at Wi-Fi network access company iPass.

“It’s the elephant in the room,” Malinowski said. “Why are chains charging for it? Because they can. It is a source of revenue. For many hotels, that’s something they’re not willing to give up.”

But hotels can get into trouble. Marriott got into hot water over charges that it jammed Wi-Fi hotspots in one of its event locations. Convention attendees had to pay from $250 to $1,000 per device to go online. The debacle eventually cost the chain $600,000 to settle an FCC complaint over the situation.

As for chains that differentiate between loyalty club members and other guests, Mandarin Oriental told Fortune the income “allows us to continue to invest in higher levels of bandwidth in our hotels,” which can make or break Wi-Fi experience and a customer’s satisfaction. Guests who create profiles get free access because “[e]stablishing a direct relationship is of tremendous value to us.” And according to a Marriott spokesperson, “Free Wi-Fi is a meaningful way to reward our most loyal customers and continue to attract next-gen travelers.”

As several experts told Fortune, the loyalty program membership and direct booking hurdles provide behavioral incentives: better information for hotel marketing and the removal of commissions otherwise paid to travel agents or online booking sites.

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