Advantages and Challenges of Delivering a Networked Hospitality Experience Part 2: In-room Entertainment

There seems to be a consensus that aside from mobility, Cloud computing is the technology trend at the forefront of transforming the way businesses operate. It can help making operations more efficient, enables faster time to market, delivers higher quality and lowers cost – items that are on top of the of every hotelier’s concern list. Some hotel technologies and operations are more suitable than others to be placed in the Cloud, such as PMS systems. But is the Cloud ready for in-room entertainment?

The answer is yes - and no, if digital TV comes into play. Delivering digital TV through the Cloud requires at least 1Mbps per room, making it prohibitively expensive in the majority of countries today. On top of that, most countries require providers to acquire a broadcast licence to deliver TV services through the Cloud, which particularly in Asia can be fraught with red tape.

So for hotels who want to provide a high quality, digital TV viewing experience, a walled garden IPTV solution remains the only option for the foreseeable future.

Ready for the Cloud: Hotels with
bigger emphasis on
 individualised guest services

TV aside though, delivering other features and guest entertainment services through the Cloud (including VOD), is a viable alternative for hotels, provided certain criteria are met. 

The beauty about Cloud-delivered entertainment services is of course is that hotels can do away with the expenses of having server equipment on their premises. And if hotels have invested in the latest SmartTVs, they also don’t need an STB in the room, provided the in-room entertainment provider integrates with the major SmartTV providers like Samsung and LG. In this scenario, the service could even be provided on a monthly subscription basis, which reduces hotels’ upfront CAPEX and allows more flexibility in terms of service updates. In this scenario TV remains analog but even then, delivery at an acceptable quality requires reasonable and reliable bandwidth to the hotel.

However, in some locations and for some hotel brands which are content with analog TV and have a bigger emphasis on individualised guest services, using the Cloud or a hybrid, minimum equipment solution may well suffice. The question is: why aren’t more hotels taking advantage of delivering their services through the Cloud?

The main reason is that it is always hard to change established ecosystems and the people that have been trained within it. And Cloud technology is particularly disruptive, which goes against the grain of the established IT ecosystems in hotels and elsewhere.

An analogy is the Windows monopoly that took years for Apple to crack with ground shifting business models and technologies. Similarly, the Cloud has been around for a while in some shape or form, mainly known simply as the Internet. But the mobile/connectivity world we live in today has created one of those inflection points where the simple Internet has transformed itself into the Cloud, with the business models and technology advances to match. This hopefully will also result in the next generation of IT managers embracing Cloud technology at a much quicker pace.

It won’t happen overnight as hotel IT managers have to deal with legacy systems and architectural constraints, among other things. But they should certainly be ready and look for ways to take advantage of the Cloud in every which way possible – including in-room entertainment.

.  

Really, there is no free lunch. Not even for OTT in Hotels

The recent HTNG Awards for “Most Innovative Hospitality Technology” went to Philips MediaSuite Hotel TV, which says it offers hotel guests online apps like YouTube, Twitter, Facebook, Catch-up TV, local and international news, weather, games and more. In their marketing blurb, TP Vision, who owns Philips’ hotel business in EMEA, claims that with their system “there is no longer a need for a set-top box or heavy head-end investments, reducing the total cost of ownership for a hotel.” 

If only. Of course, eliminating the set top box and head-end equipment is a very attractive proposition for hotels. But, as I said in a previous blog, the scenario of removing a set-top box or head-end is simply not realistic, and won’t be for some time to come. 

To illustrate just how far away Philips and similar OTT-based solutions are from providing a viable option for in-room entertainment for hotels, you only need to do some simple maths around bandwidth requirements for the various services offered on an OTT-based hotel solution.

Sure, social media apps don’t take up a lot of bandwidth, and even VoD is manageable with a streaming bitrate of 2 Mbit/s for SD, and 8Mbit/s for HD. Assuming that the maximum viewing concurrency doesn’t exceed 10% on average, this will require a 250 rooms hotel to have a 50Mbit/s – 200Mbit/s pipe to meet this type of viewing behaviour.   

But TV is where the bandwidth issue becomes more perilous.  If a similar traffic model is applied to a cloud-based TV channel delivery service to a hotel room, the bandwidth requirement would be at least 3 to 4 times higher than for VoD.  So hotels are looking at 150Mbit/s – 800Mbit/s they have to provide to ensure reliable delivery of broadcast quality TV channels to their guests – a big challenge to any hotel in developed countries as it comes typically at a big cost.

According to industry analysts, video currently consumes 29% of network bandwidth, which is predicted to increase to 40% within the next year. However, the same analysts say that the operators they surveyed so far have only set 10% of their network capacity aside for video technologies. But even where investment in FTTH and other infrastructure technologies eases the issue of bandwidth availability, the cost to actually provide the service reliably and offer hotel guests the QoS they expect, will remain prohibitively expensive for a long time to come. And this of course negates the supposed savings suggested by doing away with the traditional walled garden equipment.

And let’s not forget the increasing wariness of network owners about the demands the influx of these bandwidth hungry OTT services have on their infrastructure. South Korea’s KT has been very vocal in chastising big technology companies for free-riding on their networks and has warned of a “big data blackout” if OTT players don't agree to help pay for the rapid growth in data traffic that they are contributing to. 

There is a reason why network operators are nervous about this. A network provider typically pays a price per m/bit far in excess of the charges it passes on to its end customers, hotels included. This is because the retail market is not prepared to pay the same price per m/bit, particularly in Asia, where upstream costs can be as high as US$18 per m/bit. So in order to hedge against this imbalance, network providers use something called over-contention. It’s a bit like the common practice of airlines selling more seats than they have available to minimise empty seats. For the most part it works, but occasionally, for whatever reason, some passengers have their travel plans thrown into chaos. Translated to the hotel business, this means that in-room entertainment QoS cannot be guaranteed, which is probably not the type of experience you want to expose your guests to.   

So unless the day comes when hotels are willing to pay for the bandwidth required or the cost for a 1,000Mbit/s pipe goes down to today’s cost of a 10Mbit/s pipe, OTT in a hotel environment remains only really a best-effort delivery of long-tail content.  

In the light of these issues it is puzzling to me why HTNG would give this technology its stamp of approval as its most innovative technology. What is and isn’t innovative may be debatable, but in my mind, a technology that is endorsed by an industry body should be a viable solution, not a piece of wishful thinking that for the foreseeable future remains out of reach for most hotels. 

A Tale of Two Hotels – An example for why one size does not fit all (and never will)

Once upon a time there were two five star hotels in two major cities within the Asia Pacific region. They both had around 500 rooms and operated under well established brands within their respective markets. Both revamped and upgraded their in-room entertainment systems along similar parameters, albeit with some small but significant differences.

Hotel A wanted a system heavily reliant on video on demand content that featured an extensive selection of Hollywood blockbuster movies as well as Asian and Western adult, on top of some standard interactive hospitality features, such as weather and world time.

Hotel B also wanted to have Hollywood and Adult content, but was more interested in using technology in an innovative way to offer services such as interactive in-room dining and second screen applications that can be accessed through a tablet.

A few months after both hotels introduced their new systems, a look at how the two compare gives some surprising insights. 

Let’s take VOD hit rates first. Hotel A scores average monthly VOD hit rates of around 5% and healthy revenues in the 5-digit US$ range, almost suggesting the heyday of VOD hit rates in hotels are back again. The hit rates for Hotel B on the other hand, are limping along at a low 1.2%, much more in line with the picture of declining VOD revenues hotels have been reporting over the past few years.

So what’s the difference between Hotel A and Hotel B? Hotel A was aware that it was particularly popular with regional business travelers and consequently ensured that the entertainment portfolio was well stocked to meet this demographic’s preferences. They also adopted a flat-rate content business model that allows them to price their VOD library at a premium and thus make the most of the demand for this service.

Hotel B, on the other hand, is located within a prime shopping district and is frequented primarily by shoppers, honeymooners and families – not the demographic that would necessarily watch movies in the hotel room (and certainly not adult ones) when there are plenty of things to explore around the hotel. 

The key here is that Hotel B recognised this not be a disadvantage– quite the opposite. Being aware of the fact that VOD would not be a prime contributor to the bottom line, Hotel B decided to offer Hollywood VOD free to guests, creating instant, albeit more intangible value. I wrote in previous emails how Free to Guest (FTG) VOD is an inexpensive option for hotels to gain brand differentiation that can be more valuable than the (inevitably) declining revenues generated by offering it as a chargeable item (not to mention the administrative effort attached to managing the usual revenue share business model). 

And Hotel B did more. It focused on other interactive features that would not only enhance the experiences of their specific guest profiles but also add to the bottom line. Using the Second Screen, where guests can stream all hotel-specific features, including TV and VOD, on their iPad within the hotel for the duration of their stay prove to be a big hit. So did the interactive in-room dining menu that enables guests to order room service straight from their TV screen, which increased the overall in-room dining revenues significantly.

The moral of the story is of course that one shoe doesn’t fit all. If you feel ham-strung by declining VOD revenues because your demographic simply doesn’t want to watch anymore, offer it for free and get some brand mileage out of it. But if your guests are heavy users of VOD, maximise this revenue opportunity by stocking up your portfolio with appropriate selections and revise your business model. 

There is no doubting that content consumption as a whole is in a state of flux. However, as I said before, it will be some time until a business model emerges that connects the technology, delivery mechanism and content available today in a meaningful way that is also applicable at an enterprise level. Until then, hotels shouldn’t shy away from using the available features and services to differentiate themselves and add to the bottom line.

As long as the approach is not of the one-size-fits-all variety, that is.

How Hotels can Replace Dwindling VoD Revenues

Using smart in-room technology to increase revPAR post VoD

I don’t think anyone would disagree with the statement that new technologies, when used creatively more often than not maximise revenue-generating opportunities for hotels. It’s a logical expectation and a simple premise, yet so seemingly hard to put into practice.

The first time hotels felt the pinch of diminished returns from technology investments was when the meteoric rise of mobile telephony dented IDD revenues in the 90’s. Fast forward to today and the new culprit – no surprises here – is the Internet and its wider ecosystem. Since the Internet started to morph from information to entertainment medium a few years ago, it has created a vortex that draws in and transforms almost anything associated with everyday life. Think about how consumer technology devices evolve and multiply with enormous speed while doubling processing power with each new release, making consumer preferences, such as interactivity, on demand and control, ever easier to fulfil. The content delivery world has responded to this pull by transforming itself towards an on demand, interactive and, most importantly, online delivery service.

How should hoteliers react to these developments? Some hotel managers I have spoken to have seen VoD returns falling so sharply that even switching off the entertainment system for a day or two to test its popularity resulted in zero complaints. That’s some hard evidence that cannot be ignored when it comes to deciding on future IT investments. However, these hoteliers have also been busy thinking about other services they could introduce in an effort to entice their guests to spend money while they are in their rooms to replace the VoD revenues of old.

There are a number of options hotels have to intelligently use technology to replace this erstwhile lucrative revenues stream. For hotels, competition drives the need to differentiate, so the key is to opt out of simply adding easily replicable technology gadgets that may add to guest experience but don’t actually contribute to revPAR. Technology is at the heart of a lot of value added, revPAR generating services but for them to succeed, aside from being relevant for a hotel’s specific clientele, they have to fulfil three essential conditions: they need to be convenient to access, easy to use and, from the hoteliers’ perspective, have to add to the bottom line.

Let me give you two examples. Firstly, room service. The usual in-room dining menu may be printed on high quality paper embossed with golden scripture, but what it doesn’t show, is a picture of what you will be served. Now you may argue that you don’t get a menu with images in a five star restaurant either but that misses the point entirely. When I go to a five star restaurant I have usually made up my mind that I want to eat there. I may have researched the menu online, and if I have any specific questions regarding the menu my waiter will hopefully be obliged to be of assistance. On the other hand, when I look at the food menu in my room I am far from having made up my mind of where to eat, particularly if I have a myriad of choices right outside my hotel. So in other words, giving guests a bland in-room dining menu is a missed opportunity.

I often tell the story of when I travelled to the Middle East for the first time and was confronted with an in-room dining menu that listed, among other items, Foul Medames. Now if you are new to the country and culture you probably neither know what it is nor would you be too enticed by the name of the dish. Even the printed English translation, “Stewed Broad Beans”, may not sway you. But if you have the chance to study an image, or even a video of the chef preparing it on your in-room entertainment system, you may get an idea of how delicious this specialty actually is and it may just convince you to place your order - even more so if you can order the dish directly via your TV screen without having to pick up the phone and deal with staff who may not speak your language very well.

The other revenue opportunity that is attracting the attention of hoteliers is using technology to provide a vehicle for in-room shopping. Shopping on the in-room entertainment system is an entertainment option that taps into travellers’ predisposition towards opportunity buying. Many hotels have a shopping annex or Duty Free emporium attached to their premises. This makes it comparatively easy to aggregate appropriate content for an in-room, on-screen shopping catalogue, combined with a simple fulfilment processes that would suit even the shortest of short stay travellers. The limitations of the remote control as a navigation tool can be overcome by turning either a hotel-provided, or the guest’s own tablet or smartphone into a touch-based selection tool. Having all transactions linked with the hotel’s PMS system enables timely delivery and convenient payment options upon check out.

There are many more examples of how this type of online interactivity adds to revPAR, from direct booking of hotel restaurants and facilities, to local maps where local businesses in the vicinity can advertise their trade. Provided hotels are using a capable IPTV system, the technology is certainly mature enough to so the key is for hoteliers to get creative and find the type of service that suits their hotel’s and their guests’ identity and requirements.     

The Problem with Predicting Future Technologies for Hotels

While science fiction movies routinely deliver the inspiration for technology innovation, it's what they don't predict that's really interesting

Being able to peek into what the future will bring has been at the forefront of human desire for as long as we have existed. It’s the basic foundation from religion (heaven and hell come to mind) through Nostradamus and right down to the more recent fascination with all things futuristic, that probably started when H.G. Wells published his novel “The Time Machine” in the dying days of the 19^th century. A few years back, the science fiction movie everyone loved to quote in our industry was Steven Spielberg’s Minority Report, released in 2002, which was a marketer’s dream for its depiction of a world in which advertising is so tailored, targeted and ubiquitous that it merges seamlessly into everyday life, to do its work of subtle (or not so subtle) persuasion. It seemed all so very plausible and within grasp then, not least because digital signage technology had just made an entrance into the advertising world in a major way.

Fast forward nearly 10 years and we haven’t really moved on that much. According to film lore, Spielberg consulted numerous scientists in the lead up to the film in an attempt to present a more plausible future world for the year 2054 than usually imagined in science fiction films and many articles have been written over the years about how many of the film’s imagined technologies have become reality. But let’s not get too carried away. Yes, companies have invented a lot of things that make an appearance in the movie, such as electronic paper, facial recognition advertising billboards and 3D televisions, and some were most probably even inspired by the movie to do so.

The thing is though, that precious few of these inventions have entered the main stream (3D TVs being the exception), not even facial recognition technology, which has been hailed as the holy grail by digital signage providers for years now. But then you can reasonably argue that with the movie set in 2054, we haven’t done so bad after all, given that we have another 40 odd years to make all the other technologies mainstream.

However, far more interesting than what science fiction movies from the Jetsons to Star Wars and yes, Minority Report, did predict, is what they did not predict: the Internet, for one. Or Facebook  Or Twitter, in fact the whole social networking phenomenon. These technology-driven trends have, and continue to shape our lives at almost every point like no other and yet every single look into the crystal ball has missed mentioning them.

So it was with some trepidation that I consumed the recent predictions of what the hotel room in the year 2030 will look like by Ian Paterson in the study “Travelodge Future of Sleep”.

There are a lot of technologies in there that sound great and believable, being connected in our own virtual reality through a visor or contact lenses and interactive video panels are two that instantly come to mind. This and other useful innovations I can actually imagine making my hotel stay more pleasant, but others seem more appropriate as home applications, rather than additions to the guest experience in a hotel. For example the “Dietary advice from night time monitoring”, which may be a great help when I’m at home and in my weekly routine, but the last thing I want when I wake up in a hotel room is a reminder of the banquet meal, pub crawl and karaoke marathon with my customer the night before. Not the least because it will probably require something a lot stronger than is on offer on the breakfast menu to get me back on my feet.

I am also slightly puzzled by the various home-upload features, particularly the 3D room re-skin home away from home upload, where lonely business travelers will be able to choose from a range of layouts including ‘virtual family’. The incredibly sad image this produces in my imagination aside, unless I suffer from pathological homesickness I think I’d rather not have that appearing on my hotel bill.

But then that’s just my preference and this is exactly the problem with trying to predict the future: technological ability and readiness does not equal ubiquity of adoption. The road to innovation is littered with plenty of brilliant ideas based on technological innovation that never got off the ground for one reason or another. What these failed innovations neglected to take into account is something that will be near impossible to quantify for generations to come, maybe forever: human behaviour, which is complex, irrational and variable.  As much as generations of marketers have tried to predict human behaviour through market research, the cold hard truth is that it cannot easily be squeezed into bell curve modeling.

Think about the phenomenal success of Groupon, which left the business world speechless for the simplicity of its premise, even though it is based on satisfying one of the most basic of human instincts: to get a good deal. So for my part, the next time someone asks me what I predict the next killer-app for a hotel to be, I think I opt for a good bed.