Pricing Fail: In-Room Hotel Internet Access

In-room internet access: Inexpensive hotels give it away. More expensive hotels charge for it but give it away free in the lobby. Is this a sound pricing strategy?

Good pricing is largely in the eye of the beholder - what seems like a great value to one person may seem terrible to someone else. But sometimes a pricing practice irritates so many people, costs so many sales and causes so much resentment it’s hard not to label it a fail.

I put the high prices ($11.95 to $17.95 per day) charged by hotels for in-room internet access in this category. Why?

  • It generally isn’t very good. If you are going to sell something as a premium add-on it should be premium quality.
  • It seems completely out of line with the costs. We're trying to get beyond cost plus and price based on the value a product or service provides but you can go too far and break the spell. Renting a car seems to cost you somewhere between 2-4 times what it would cost you to own it - the car you rent for say $50/day ($1500/month) might cost you about $500/month to own (lease, insurance, maintenance). That seems reasonable. Hotel internet on the other had costs 10x-15x what you would pay at home.
  • It’s free at the less expensive hotel across the street. This is frustrating - less expensive hotels tend to provide free internet access while more upscale hotels charge exorbitant rates. You can argue this is actually smart - that by staying at an upscale hotel the traveler has indicated that price is not their primary concern and inadvertently expressed a willingness to pay for the convenience of in-room access… and that the hotel is simply catering to that.
  • It’s free in the lobby! Again you can argue that the hotel has cleverly created a hurdle - guests that value convenience can choose to pay for in-room access while price-sensitive guests can work in the lobby.
  • It’s free everywhere else. It’s free in the coffee shop you stopped at on your way to the airport. It’s free in the airport terminal. It’s free everywhere except the place you are actually paying to stay.
  • For $20 a month you can buy a personal mobile HotSpot that generally provides a better connection at a fraction of the cost.

The hotel is using a clever strategy to accommodate the values different guests put on the convenience of in-room internet access by offering free wifi in the lobby and upscale hotels are smart to try and profile their typical guest as not caring about the added charge. They are not making the mistake of being too simplistic in their pricing - they are taking a very sophisticated approach.

Maybe too sophisticated. Or too greedy. All I can say for sure is that several years I travelled with a special wifi pouch that included two hi-gain antennas and amplifier that greatly extended my range and would usually let me connect to a free signal (usually the lobby or adjoining conference center). More recently I have switched to a Verizon wireless HotSpot - something every one of my peers had already done. I don’t know how many people continue to pay the high prices for in-room internet but everyone I know has found workarounds.

What is the solution? Lower prices for in-room access might be tempting. They couldn’t be as low as the cost of a wireless HotSpot but they don’t have to be - I’d pay some premium to not have to worry about data usage, getting a signal or keeping charged.

Tiers might be another solution - lower speed in room access is free, higher speed comes at a premium.

My favorite approach (and one that is becoming more common) is the addition of rate categories that include internet access and sometimes free breakfast and/or parking. Seemingly designed to appeal to business travelers this approach invokes all the benefits of mixed bundling - I’m far more likely to pay an extra $15-$20 for breakfast and in-room internet access than I would for either individually. The hotel gets a happier guest (who is also more likely to return) and more revenue.