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By: Daniel F. Prosser -  June, 1997

1992/1997 Hotel Industry Vendor Long Distance Share
1994/1997 Hotel Industry Vendor  PBX Market Share

The results of the 1997 Telecommunications Survey of Hotels & Motels, co-sponsored by Hotel & Motel Management and Houston-based Telman, reveal some soft trends in the industry. This is the third nationwide telecommunications survey in five years.

The survey was mailed to selected hotel managers and hotel company executives across the country. The intent was to provide vendors and hotels with insight into the ever-expanding, complex territory of hotel telecommunications.

The survey looks at management's level of satisfaction with current services. along with their concerns and interests. Respondents were asked to:

• Describe their property or company;
• Describe their current telephone systems and services;
• Rate their current telephone systems and service providers; and
• Rank their concerns and interests related to telecommunications.

 Results are based on the hotels or hotel companies responding to the survey. We make no claim that the results are an absolute representation of an exact market situation for a service or system or for a particular vendor.

Managers Like Long Distance Carriers

Respondents were asked to rate their satisfaction in 10 telecommunications services. In 1997 (as was found in our 1992 and 1994 surveys), respondents reported the most satisfaction with their 1+ long-distance carriers. In 1992, 88 percent said they were satisfied with their carrier. In 1997, 88 percent once again reported no change in response.

Respondents also are satisfied with their 0+ long-distance carriers for guest room credit-card calls, giving them an over all 85.4 percent satisfaction rating. This rating is down slightly from 1992, when the rating for 0+ carriers was 87 percent.

Awareness of answer-detection systems has grown since 1992, 75 percent of respondents in 1992 did not even
answer the question relating to answer-detection system satisfaction faction. In 1997, answer detection was ranked favorably at 65.4 percent.

 Managers reported they are not satisfied with the level of their staff's telecommunications expertise. And. frustration is growing. Five years ago. 30 percent of respondents rated their staff's telecommunications expertise low or less than average. Today, the number has grown considerably to 45 percent.

The area that has disappointed hoteliers the most in the past several years is in-room fax machines. In l992, in-room fax was virtually unheard of. In 1994, responses indicated only 22 percent as being not satisfied, owing to relatively few installations. But now marketing of in-room fax has grown. In 1997, respondents reported an increase in dissatisfaction of 54 percent.

Also in 1992, voice mail was beginning to gain interest among hoteliers. At that time, more than 82 percent of respondents did not answer the question. indicating no experience with the system. The '92 survey showed a hotel market penetration of less than 12 percent. Today, respondents reported 60 percent of all hotels have voice mail. And the level of satisfaction is increasing.

In 1994, 39 percent of respondents gave voice mail a low or below average satisfaction. In 1997, 20.7 percent reported dissatisfaction with their voice mail system.

Poor Phone Profit

A recent study of telephone profitability, reported in the 1996 HOST Study by Smith Travel Research, shows that despite years of reduced expenses and increased revenue,  hotels are losing ground at a rapid pace. Cost reduction programs created by chain-affiliated hotels have added measurable profit for their owners. However, managers' responding  to the 1997 survey continue to be unhappy with the overall impact.

In 1992, 37 percent of respondents were discouraged by profits.  In 1997, sentiments haven't changed with the same 37 percent seeing red.

Guest satisfaction continues to be moderately high, however, with 75 percent of managers giving a satisfied rating. In contrast, 1992 came in at a slightly higher 78 percent.

The local service satisfaction level is one of the most interesting responses. considering the major long-distance telephone companies' marketing efforts to convince authorities to allow them into this segment  .

 Since 1992, managers' satisfaction in local service has come down by only six points, from 83 percent to 77 percent. Satisfaction seems to continue at high levels.

The biggest surprise centers around the interest in in-room Internet access via the guest room television. Four percent of our respondents said they already have it, while 38 percent of respondents said they want it in the future for their hotels. Fifty-eight percent said they are not interested at all.

We also posed the first Internet-related question this year. Respondents indicated a high level of interest in obtaining Internet services for their hotels and getting on-line with e-mail. Twenty percent of hotels are already connected. while another 60 percent want it.

Also interesting is the apparent awareness that equipping the guest room to support business travelers is an important convenience. Simply providing phones with dataports was a virtually unheard-of detail when we began the survey in 1992, when less than 15 percent of all respondents said their rooms were equipped. In 1997, 70 percent of respondents said they have dataports in the guest room and another 22 percent said they want them. Eight percent have no interest.

Another important decision many hotels have made in past years is to allow free local phone calls. We were surprised that almost half of respondents. 48 percent. said they provide guests with free local calls. Another 1 percent expect to offer free local calls in the future, while 37 percent are not interested at all.

Hotel management is clear that there are amenities in which it is not going to invest. There appears to be surprisingly little demand for personal computers in the guest room. Four and seven-tenths percent of our respondents have them. while 65 percent said they're not interested. Pagers and cellular telephones were included in this category. Nearly half of all respondents said they won't be offering those services to their guests.
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While AT&T has always had the lion's share of the pie, second place has changed over the years. AT&T's lead in the 1+ arena has remained somewhat constant. In  1992. AT&T captured a response of 63 percent.  In
1997, the company dropped to 61 percent.

This is not the case with  Sprint and MCI In 1992, MCI dominated Sprint by almost double (MCI 12 percent vs. Sprint 6.8 percent). In 1997, Sprint appears to cut dramatically into MCI's position. In 1997, Sprint stands at a response of 16.7 percent, with MCI having fallen to 9 percent.

That leaves little market share for others. Other long-distance sellers have made some inroads into the hotel industry - but not much.  With the sheer size of the multibillion-dollar long-distance market being so large, even a small I percent share translates to major revenue.

The little guys keep chipping away at the growing market, while respondents said that  their use in the industry has dropped from 18.2  percent in 1992 to 12.8 percent in 1997.

What's also important to note is that respondents said they have little or no interest in switching either 1+ or 0 + providers at this time. Our guess is hotel managers have seen enough price cutting and don't want to expose their guests to a potential unnecessary  inconvenience for a fraction of a cent-per-minute drop in rate.
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We see the most challenging direction for telecommunications to be in the area of guest interface technology and support. The areas that capture the most interest from responding managers are not the telephone system upgrades and replacements that we saw in previous years' surveys. For the most part. that has become a concern of secondary  importance.

There is high interest in outfitting the room with speakerphones, data ports, easily accessible connections, phone rates that are competitive with other hotels, and overall guest satisfaction with telecommunications. This, perhaps, will be a strong focus for the future in the hotel industry.

Clearly, telecommunications technology will play a dominant role in the growth of many hotel companies. Managers know that the more convenient they make doing business outside of the office, which predominantly involves telecommunications, the greater share of travelers will be interested in their product.

One thing that we found disturbing from responses to the survey is how many respondents don't know their numbers. The survey asked if respondents knew how much they were making from guest phone calls. The answers will surprise you.

For bill-to-room phone calls, 55.6 percent answered "Don't Know," For operator-service provider charges for a typical five-minute call, 82 4 percent said they "Don't Know." When it comes to what a 0+ call nets in commissions, only 27.1 percent said they did know. And on profit-per-room sold, 52.9 percent had no knowledge.

The hotel industry has huge opportunities available to provide the services that guests want. Of course, not every hotel is going to want to provide the same services. That's what makes the hospitality market so interesting to watch and gauge over the years.

 Someone said. "The only thing you can count on is change." Or was it. "The more things change. the more they stay the same"?

 One thing we can all count on is that changes will happen in the hotel industry, if telecommunications is involved.

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