May 5, 2003 - With each ring, cellular phones and other wireless devices are not-so-silently eroding the earnings of Las Vegas hotel and motel operators and their peers around the globe. 

Last year, telephone revenues at approximately 4,000 U.S. hotels were $212 million, down 22.4 percent from the $273 million reported in 2001, according to a recent study conducted by the Hospitality Research Group of PKF Consulting, an Atlanta-based organization that monitors the hotel industry. 

"Revenues from hotel communication departments have been sinking like a stone over the past few years because of cell phone usage," said Jack Corgel, PKF managing director. "Fortunately it's not the bread and butter of the (hotel) industry." 

While telecommunications accounted for only 1.8 percent of the industry's $12.2 billion total revenues last year, hotel guests' increasing reluctance to pay for often-expensive in-room telephone services has presented another challenge for an industry that's still trying to overcome recent reductions in worldwide travel. 

Like mini-bars and pay-per-view movies, in-room telephone connection fees and long-distance charges have long played a role in maximizing a hotel's revenue per available room, commonly called "RevPAR." In recent years, though, the popularity of cellular phones, pagers, personal digital assistants (such as the Palm Pilot or BlackBerry) has skyrocketed, largely to the detriment of a hotel's bottom line. 

According to the Washington, D.C.-based Cellular Telecommunications & Internet Association, nearly 145 million Americans now subscribe to a wireless communications service; in early 1993, that total had only recently surpassed the 10 million mark. Such proliferation has allowed more hotel guests to use their own telecommunication tools while away from home. 

Jim Bowen, vice president and chief financial officer of Las Vegas' Hard Rock Hotel, cited the issue during an April 23 conference call discussing his company's first-quarter earnings. He said Hard Rock's 657-room hotel realized an approximately $100,000 decrease in telephone revenues compared with the same period a year ago, thanks largely to increased cell phone use among hotel guests. 

"As the cellular telephone trend keeps growing, we, like most of the other casinos, are experiencing some decreases in our phone revenues," Bowen said. 

Considering its quarterly net-income was about $2.6 million, Hard Rock's failure to maintain its previous telephone revenues in effect reduced its earnings by nearly 4 percent. 

Representatives from MGM Mirage and The Venetian also acknowledged small reductions in telephone revenues, though both companies said they're looking at other ways to offset phone-related losses including in-room, high-speed Internet connections. The Venetian spokesman Kurt Ouchida said his 3,036-suite resort also balances lost telephone revenues with fees generated from the use of in-room fax machines, a popular amenity among business travelers. 

Amy Cravens, an analyst with Scottsdale, Ariz.-based communications research firm In-Stat/MDR, said diminishing telephone revenues could lead more hotels to install in-room broadband Internet connections. 

"Hotels, especially those that cater to business travelers, see that their guests are demanding that type of service," said Cravens, who added many business travelers will now base their booking decisions on whether a hotel provides in-room, high-speed Internet access. 

Proving the old adage, " If you can't beat 'em, join 'em," some hotels have also allowed cellular service providers to place transmission towers atop their buildings, said Bear, Stearns & Co. Gaming & Lodging analyst John Mulkey. 

Ouchida said The Venetian in March 2001 worked with top cellular providers to boost their reception inside the property -- with The Venetian earning a portion of those company's profits. 

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