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.

Is it the end of the Set Top Box as we know it?

Google managed to send the industry abuzz with chatter about the TV Set Top Box being ‘on its deathbed’ after it emerged the search company would axe the STB business it will inherit from acquiring Motorola for $12.5 billion. While Google’s prime motivation is likely to be that its Android OS is not compatible with current STB chipsets and technologies, the company most certainly can also see that the market for STBs in their current format is in decline.

The question where the STB is heading is an interesting topic that seems to pop up more and more frequently not only when discussing consumer equipment, but also regularly features high on the agenda of hotel IT managers, who may question the necessity of STBs to deliver in-room entertainment in the age of content anywhere and on any device.

It’s a fair question, particularly for someone who needs to make decisions about entertainment equipment that has to last a 5-year lifecycle. 

While there is no denying that the advent of connected devices is starting to seriously challenge the dominance of STBs, to put them on the ‘deathbed’ is in my opinion a little premature. The fact is that their inherent mobility and backward compatibility are yet to give STBs legitimacy and relevance for some time to come. 

Connected TVs are often seen as a prime challenger of the STB. All models more or less provide services including full web browsing, Wi-Fi connectivity, high-resolution graphics, Android apps and even console-quality gaming experiences. But the reality is that connected TVs also still rely on the good old STB – except that it’s inside the TV, rather than attached to it. So from a cost perspective, connected TVs will not necessarily make things cheaper: you either have to pay for an external STB with a casing, or an internal STB without it. The cost of these internal STBs can certainly be driven down to a certain extend due to TV manufacturers’ economies of scale. But they have to be paid for nonetheless.

And what about the content? In the long run it is imaginable that a majority of TV viewers will receive their content from the cloud, i.e. through OTT. But this requires the precondition that all household TVs are connected TVs and run compatible versions of Content Apps for Android, or iOS (if Apple ever comes out with their TV set).  The day may come, but the changeover period will be rather drawn out. It’s similar to the mobile world, where despite the smartphone craze there are still considerable numbers of users preferring to use a mobile just for voice calling and SMS rather than watching video.

A complicating factor for the hospitality industry is that it’s a secondary market for TV panel vendors who primarily target the mass consumer market and their needs and wants. Given that different TV models with different features raise backward compatibility constraints, the STB (or another piece of hardware) is still necessary to provide TV manageability for hotels for some time to come. 

Having said that though, a more interesting trend that we are seeing right now is that the tablet eco-system is starting to invade the STB eco-system.  As tablet chipsets get ever more powerful, and certainly more powerful than STBs, the stage is almost set for tablet technologies to challenge current STB technologies. That’s the philosophy behind AppleTV, whose “STB” is essentially an iPad without touch screen, but with a network port and HDMI interface.  

While you can be forgiven for dreaming about a future where Ethernet renders any hardware obsolete, it realistically will not happen for some years to come. It’s a paradigm shift that will take time to establish itself. 

So the reality is that for the foreseeable future there will be a piece of hardware that is involved in the delivery of content, whether we’ll call it an STB or not. But it currently it looks like that there’s a fair chance that the next generation STB will be a stripped down tablet.

Hotels should make the most of tablets with advanced video offers

Adoption of smartphones and other personal connected devices such as tablets are soaring in all corners of the world, but nowhere more so than in Asia, where Nielsen sets the interest in buying one in the next 12 months at a whopping 50%. The question now seems to be not when people will buy such a device, for that seems to be inevitable, but what they’re most likely use it for.

Early usage patterns show that smart device users tend to consume twice as much media as others and according to In-Stat, 86% of them are using them to watch video. Savvy hoteliers should take note of these figures as they give valuable insights to their guests’ preferences and provide an opportunity to offer powerful value added services.

Most higher-starred hotels around the world have launched smartphone and tablet-specific applications that mainly offer booking functions, facility information and guest services, but precious few offer what guests probably most likely want while staying at a hotel, which appears to be video content, if statistics are to be believed.

There are two main reasons for this. Firstly, most vendors who offer tablet applications or hospitality-specific video solutions haven’t got the technical capabilities to offer such a service. To be able to offer video services for tablets or second screens, particularly live video, requires a vendor to own or be part of the whole IPTV ecosystem within the hotel, which is only possible with a thorough understanding of Walled Garden IPTV, Mobile TV and Broadcast TV, and years of working experience with service provider platforms. This is something not easily achieved which is why most vendors in the market today are merely able to provide a hotel web portal for tablets, rather than fully fledged video services.

Secondly, the fact that offering these services within the hotel requires essentially a telco-grade solution has created the perception that it must be complicated and expensive to deploy.

But this is actually not the case. Yes, for second screen video services hotels need a robust IPTV-based video platform, with cost effective encoding and transcoding capabilities in the headend, as well as a carefully deployed network of wireless access points throughout the hotel (or at least in those areas hotels want guests to do so, which may not include the Michelin-starred restaurant).

But this type of solution may be more affordable than many hoteliers think, as a lot of telco-grade equipment to which this type of streaming capability was traditionally restricted, has now been re-engineered for the enterprise world with a suitable price tag to match (offered, for example, by MVI Systems). So for hoteliers it would certainly pay to shop around and ask the right questions when choosing their IT technology partner.

Watching a sports game on your tablet in the bar while you are having a quiet drink, catching up on the latest news from CNN while you are having breakfast or watching a VoD movie to make your workout at the hotel gym less daunting: all of these things guests would be able to do with a video enabled connected device system may sound already very attractive in their own right. But hoteliers should consider that this type of service is actually very unique even outside the hotel environment – not even mobile operators are able to replicate this type of service at this point in time.

While mobile operators today are able to offer reasonable quality TV and video services on regular smartphones, they are still a long way away from being able to offer high quality mobile video on a tablet or even a mobile phone with a larger screen, due to bandwidth constraints. Even with the imminent roll out of LTE technology in many countries within Asia it will take years for operators to be able to develop anything that resembles a fully fledged, stable and reliable big screen mobile TV service. Large screens, by the way, are a major trend for smartphones according to researcher Mintel, which found that 27% of survey respondents wished their phone screens were larger and that the 4″ smartphone screen is quickly becoming standard.

So hotels have a real opportunity here to wow their guests with a unique technology application that not even a mobile operator can offer.