The Real Value of IPTV for Hotels

Too many times when we talk to hotels the question comes up whether the hotel will be able to recoup the investment in an IPTV system through VOD receipts, so I think it is high time I set the record straight on where the true value of an IPTV lies.

To say it upfront: it’s not ROI, or at least not first and foremost. As I have written about in a few previous blogs, VOD revenues are declining steadily for a number of reasons, and while some hotels have bigger hit rates than others, there is an inevitable trend away from VOD being a major revenue contributor. In fact, we see more and more hotels adopting the Free to Guest model (FTG) when it comes to VOD. These hotels understand that providing movies for free creates intrinsic loyalty and is another building block for creating lasting brand value.

And that’s the key word: brand value. That’s exactly what IPTV allows hotels to create, and in an ever increasing competitive landscape, this is more important than ever.

Scanning through industry research, you can sense that guests increasingly select hotels by price which puts hotels in danger of being commoditised. A recent report by Cornell University School of Hotel Administration titled Eight Trends for the Hotel Industry 2012, found that:  “Given the strength of third-party distribution portals and the push toward commoditisation, the hotel brand will become more important than ever, particularly in the context of developing customers’ loyalty”. 

So in a nutshell, IPTV provides differentiation and can turn a TV into a hotel brand ambassador that helps in building a loyal customer base that will be there, even when times are tough. It is not only the on-brand look and feel of the User Interface when guests switch on the TV. It’s the variety of services and features a hotel offers, and how they are tailored through the system, that will ensure a personal and unique experience that guests will come back for.

On the supply and demand side, if hotels are interested in giving their customers what they want (and en route increasing their loyalty),they need to take heed of consumer expectations and  going without an IPTV system is almost impossible. Here are the items respondents ranked items as either “important or very important” to be available on the guest room television for the HFTP Guest Survey from June 2011:

•       Room controls — lights, weather, temperature, etc. (49 percent)

•       Connections that allow guests to play own media (48 percent)

•       Television shows on demand (29 percent)

•       In-room messaging (29 percent)

•       First run movies (27 percent)

•       Subscription services — Hulu, Netflix, Pandora, etc. (22 percent)

•       Closed captioning in multiple languages (10 percent)

All of these services and features can be supplied with an IPTV system – and then some. Let’s not forget the additional opportunities guests traveling with their own connected devices pose. Being able to integrate a tablet or connected device on an IPTV network gives hotels the opportunity to provide innovative new services as well as improve operating efficiency. And yes, due to its interactive nature, an IPTV system can also deliver revPAR generating services that will add to the bottom line. 

So let’s summarise what IPTV can do for a hotel:

•     BRAND VALUE: Enables delivery of tailored features valuable to the guest that will create a positive brand relationship and long-lasting loyalty

•     EFFICIENCY: Streamlining backroom operations through TV-based housekeeping and concierge functions

•     FUTURE-PROOF technology that enables adding future technologies/devices easily and cost efficiently

•     BOTTOM LINE 1: opportunity to increase revPAR by enhancing features such as in-room dining

•     BOTTOM LINE 2: opportunity to create new revPAR creating features, such as eCommerce/boutique shopping features

But like with many other services, it’s how you do it that will make all the difference. Hotels should focus on their brand and work with an IPTV provider who can customise and create a system that is in line with the hotel’s values and heritage and underpins its brand image. Getting it right will mean hotels have the opportunity to build a long lasting relationship with guests, and that should more than justify the investment.