Hotel Wi-Fi Charges Are Myopic (2015 Apr)

by Barry A. Liebling

High speed access to the internet via Wi-Fi has become ubiquitous and often free-of-charge. In most cities you can enter food and beverage establishments, retail stores, public spaces, and hotels and have no trouble using their Wi-Fi connection gratis. But luxury hotels (in contrast to mid-level and budget hotels) have policies that defy the trend. Recently an article by Scott McCartney of The Wall Street Journal described how high-end hotels are routinely adding fees for internet access that are exorbitant and surprising to many hotel customers.

Of course, all hotels that deliver Wi-Fi have to pay for it. The question is whether to fold the cost of Wi-Fi into the bill or break it out (and inflate it) as a separate line item. The article explains that many luxury hotels tack on extra Wi-Fi fees when the customer checks out to reap extra revenue. Hotel executives calculate that even if their customers complain they will still pay their bills and their irritation will not inhibit them from booking rooms in the future. A naive reader might suppose that the Wi-Fi charges are the result of management’s design for maximizing profits. But when you consider the impact that extra fees are having on customers and potential customers you can see that adding a charge for Wi-Fi is counterproductive – and is almost certainly not the result of a careful plan.

Consider five problems that charging extra for Wi-Fi brings to a luxury hotel.

First, the extra fee does not enhance the customer experience. Some customers will overlook the charge, some will notice it but not be disturbed, and some will be annoyed. There is no upside with respect to customer satisfaction. The policy makes a few enemies but no friends.

Second, Wi-Fi is a commodity and customers do not generally detect differences among suppliers (unless there is a deficiency). By contrast, there is some rationale for charging more money for a room in a luxury hotel. The room might be more elegant, and the lobby is fancier. But objectively, the Wi-Fi service a customer obtains in a top-tier hotel is no more reliable and no faster than what he obtains at a budget hotel. Showing a high Wi-Fi fee as a separate line item suggests that the hotel regards its service as special (perhaps better). Savvy customers will realize that the suggestion is not true.

Third, charging extra for Wi-Fi alerts customer to scrutinize the bill for other added fees. Customers are likely to view the hotel as less trustworthy and to be more suspicious.

Fourth, a case was made in The Wall Street Journal article that adding the fee to the bill at the end of the stay makes the room seem less expensive to the customer at the time of booking. But the appearance of a better bargain is destroyed as soon as the patron sees the invoice. Furthermore, hotel customers who are highly price-sensitive are likely to look for rooms in mid-level or budget hotels. They are not the primary target in the luxury hotel market.

Fifth, some potential customers could go either way. They seriously consider whether to stay in a luxury hotel or a mid-level hotel. Having a reputation for charging extra for Wi-Fi encourages the undecided to be wary and stick with the hotel that offers “free Wi-Fi.”

Earlier I remarked that adding a Wi-Fi fee is almost certainly not the result of a careful plan. But in fairness some hotels might have legitimate strategic reasons for adding this line item to the bill. The fee could be a way of screening out customers who are habitually thrifty. Hotel guests who pay for premium rooms and are not bothered by added fees might be precisely the type of customers the hotel wants to have. Some luxury hotels do everything they can to attract guests who have extravagant tastes, profligate habits, will eat overpriced meals on the premises, and spend lavishly at the gift shop.

Still, it is most likely that luxury hotels that are charging extra for Wi-Fi service are unwittingly hurting their reputation and diminishing their chance of success. The myopic tactic of adding fees is not the way to go. Instead luxury hotels should focus on what should be their mission – to provide exceptionally positive experiences to their customers. That is the path to optimizing profits.

*** See other entries at in “Monthly Columns.” ***

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