Why do expensive hotels charge for Internet while less-expensive ones don't?

Before you tell me to go do this, I did - and I still don't have a good answer.

I was reminded of this issue when I learned that a couple of friends were off this weekend to the snowy Rocky Mountain West attending the 2009 Carnivore Conference: Carnivore Conservation in a Changing World sponsored by Defenders of Wildlife at the Grand Hyatt Denver. Some of these folks are graduate students and freelance writers who are on tight budgets.

The most recent article I found on this issue was by Barbara E. Hernandez at BNET. She asked the same question as I, made some observations, and asked rhetorically why high-end hotels don't seize on such a low-cost, good-will amenity instead of aggravating us all with yet another charge.

I suspect that the answer is, "because they can."

I suspect that marketing studies show that people who can afford to stay at expensive hotels (or, more likely, who are doing so on a business's dime) don't really care about another $9.95-$12.95/day Wi-Fi charge whereas someone staying in a $40/night hotel isn't going to pay another 25% for internet when they can go down the street and get it for free at another budget hotel.

So, why do we tolerate it when we go to a big scientific conference?

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Because they can.

My 1/50 $:

As you say, the answer is probably "because they can". Or rather, "because with everything weighed in, they make more money that way".

As long as:

1) a large number of guests accept paying the extra charge,

2) few people making a reservation ask for a room rate including a connection and then base their choice of hotel on that rate,

then this is extra income for the hotel which will "go straight to the bottom line", as they say.

This is not very different than, for example, some airlines charging extra for checking in luggage or car dealers structuring their prices as a "base price" plus "options".

Some hotel chains will have this as part of their loyalty programs, so that you will always have an internet comection when you stay there, or include it when negotiating rates with large clients.

When it comes to the conferences, I think that is the best option: the organizers, when negotiating rates for conference attendees, should state that the rates should include internet access.

I think it's because many people staying at such a place are staying on a business account. Notice that breakfast at cheap hotels is often free, while it's insanely expensive at expensive hotels.

or, more likely, who are doing so on a business's dime

This is the key: if I'm spending other people's money, I am less likely to keep a close eye on expenses than if I'm paying for the trip with my own bank account. In this respect it differs from airline baggage charges: the checked bag fee is designed to hit the low end customer traveling on a cheap ticket, while first and business class travelers are typically exempt. Unlike with hotels, it is not so easy to switch airlines if you have a cheap ticket--but if you are paying full fare you can walk over to the next ticket counter and fly the competing airline that won't charge you to check luggage. Frequent customer waivers in both cases serve the same purpose: they don't want to encourage their best customers to use the competition.

By Eric Lund (not verified) on 16 Nov 2009 #permalink

We tolerate it because charge the access fee to our employer/grant/account etc.

Also worth noting, as I am about to leave for a conference, that if I were traveling on my own dime I would be staying at a much less expensive hotel as well.

Probably for the same reason they are able to charge $30/day for parking ... because if you have enough cash to be able to pay for the overpriced room and parking, you probably won't notice the $10-15/day for internet.

The same reason they have $7 bottled water?
People are very susceptible to marketing, and water tastes better if it's more expensive. Internet service seems zippier if it's $14/day.

Oh, this isn't the worst of it. Around three or four years ago, I was at a conference and staying at the Marriott in San Diego, which charged the usual $12.95 for wifi Internet access in the room. I assumed that would allow me to use the wifi in the lobby and other public areas of the hotel. No go. That was a different wifi system for which the Marriott charged--you guessed it!--another $12.95 a day to use.

You know, Orac might have mentioned this before but it makes one wonder if NIH is cool with this - what does one estimate might be the cost to NIH of Wi-Fi charges via grant travel funds?

I often travel on business. I find that the hotels that cater specifically to corporate travelers on expense accounts are the ones who usually charge more for Internet access. To these travelers, who usually pay far more per day merely for parking, the charge for Internet is a small, acceptable business expense.

Budget hotels, that cater to small business owners, salespeople, and other "road warriors", know that their clientele is penny-pinching. The perk is well worth the low cost to the hotel.

That said, when you work for a really large corporation, as I do, you often have the option of staying in good hotels that are on a "preferred" list. Our company has negotiated special deals with these hotels, and the quoted room rate usually includes Internet even if included Internet isn't generally offered to others.

By speedwell (not verified) on 16 Nov 2009 #permalink

I've noticed a similar phenomenon in which smaller, rinky-dink local airports offer free wifi, but large ones charge crazy hourly rates.

Abel @9, there is another complexity which relates to the old problem of hotel *phone* charges.

I just enjoyed $17.99-$19.99 (for speed differences apparently..) per 24hrs of wifi at a hotel. add the odd wifi fee in airports along the way and you could be closing in on $100 per meeting without trouble.

Cheaper, of course, would be some sort of fractional recharge of your bill if you chose to have some fancy tetherable smart phone or a cell-network based network connection for your pc. the institutional accounting systems I've been around are not good at doing this sort of thing, at least for us drones.

-and yes, I pay for essentially all of my business-related phone activities when traveling, and often when in town, myself. Also a ton of work related email-connectivity. Because I use my cell phone.

By BikeMonkey (not verified) on 16 Nov 2009 #permalink

In addition, there's the perverse fact that they got into it early. Back when "internet access" involved spending money to wire the rooms, add routers, etc. the hotels got a jump start by contracting it out to the "who the hell are they?" people you see on the login screens.

The hotels didn't have to pay up front, they got "internet access" for the cost of allowing the service providers to collect fees. Sounded like a great idea.

Now everyone adds internet access for the cost of a little bit of Cat6 and some $100 access points, and the big hotels are fat dumb and happy with the same idiot arrangements they made ten-plus years ago. Some of them may even be stuck in long-term contracts for all I know.

I do know from being in the conference-planning loop that a good conference planner will insist on having the access included free with the rooms. Your mileage may vary.

By D. C. Sessions (not verified) on 16 Nov 2009 #permalink

Another way to look at it is to ask "Why doesn't Motel 6 charge for WiFi?", to which the answer is of course "Because they can't."

Since the hotel's cost per user is negligible, once the capital cost of the system is amortized, the fee (if any) is pure profit. The big hotel would rather have the profit, while the little commodity joint would rather not lose customers to their neighbors who do offer free WiFi..

So I guess it's the Rinky Dink hotels that actually appreciate the business enough to have enough respect for their customers right?

Keep in mind that Boutique hotels provide free wi-fi in their rooms too, but then they're just expensive Rinky Dink hotels with rates that seriously challenge and surpass those of the crappy overpriced rip-off chains which also have pathetic so called business centers. Those places could easily provide free wi-fi but they are of the thinking that they don't have to work so hard to take your money.

The best way to deal with this attitude is to ask if they have free wi-fi, when they tell you there is a fee, just thank them and hang up. Then call the nearest boutique hotel and book your room, you will probably find yourself with a much better deal.
That is the only way it will change once they see it affects their bookings. I

I generally travel a lot and hate getting stuck in these crappy overpriced chains. Boutique hotels on the other hand always come through with free wi-fi. Thats only because like most little guys they have to work harder for your dollar.