Leading in iTV
don't wager a dime to offer interactive TV services, but
the players rake in earnings.
interactive television services to hotel room guests is
an expensive yet booming business that has not yet turned
a profit. Hotels don't wager a dime to offer interactive
TV services, but the house rakes in a nice piece of the
In the hospitality
industry, explains Carmel Group analyst Sean Badding, the
interactive TV (iTV) vendor pays all costs for the
on-site installation of network cabling and equipment.
The hotel then shares its revenues with the iTV vendor
and the iTV content providers, like the Hollywood studios
providing first-run movies for pay-per-view (PPV) sales.
"That's the basic business model," he says.
The market leader
is On Command, Badding reports, owned since last April by
Liberty Media, which is developing and deploying its own
proprietary systems for end-to-end iTV services. LodgeNet
closely follows, and seems to be gaining ground.
KoolConnect ranks third, integrating licensed
technologies for hotels of all sizes.
Other key players
include set-top box manufacturer Inprimis, which supplies
all the boxes for LodgeNet and KoolConnect. Liberate
provides the iTV middleware to LodgeNet and KoolConnect.
nCube is the main streaming media vendor serving the
Based in Denver and
owned since last April by Liberty Media, On Command
concentrates on large hotel and resorts as a provider of
interactive entertainment, business information, travel
information, Internet services, and front desk or
concierge services. On Command serves more than one
million rooms in about 3,400 hotel and resort properties
in 19 countries. On Command claims to have offered
services to more than 250 million hotel
On Command's major
hospitality partners include Adam's Mark, Bass
(InterContinental, Crowne Plaza, Holiday Inn), Fairmont,
Four Seasons, Hyatt, Loews, Marriott (Courtyard,
Renaissance, Fairfield Inn & Residence Inn),
Radisson, Ramada, Starwood (Westin, Sheraton, W Hotels,
Four Points), and Wyndham.
On Command recently
introduced the "OCX" interactive TV platform, branded as
"@Hotel TV," already installed in more than 150,000 hotel
rooms. Core elements of the OCX service include PPV
video-on-demand (VOD) and broadband Internet access with
TV-centric Web surfing on a customizable browser.
Based in Sioux
Falls, S. Dakota, LodgeNet provides services to about
800,000 rooms in more than 5,000 medium to large hotel or
resort properties, mostly in North America. Hilton hotels
and resorts top LodgeNet's client list.
architecture mirrors the industry pattern of placing
digital equipment in the same basement room where once
were the video tape players that have delivered
movies-on-demand in hotels and motels for about 15
Two megatrends are
affecting the hotel TV market, says Mark Cortina,
director of business development for Inprimis Inc., the
set-top box manufacturer based in Boca Raton, Fla. First
is the shift from analog to digital. Second is the
emergence of streaming media-on-demand.
A lesser trend,
Cortina says, is the development of branded hotel network
portals in the room. The TV and PC portals will be
personalized to individual travelers frequenting the
hotel chains, he says, stressing the importance of opt-in
permission marketing in the hospitality industry, a
service-oriented business based on trust.
profiles on the hotel network is the most prevalent
solution (permission based with privacy secured). Network
access one day may be activated with smart cards that
travelers carry with them, the same cards authorized by
the front desk as door keys.
The convergence of
television, Internet and telephone services into one
easy-to-use interactive multimedia platform is the trend
being watched by Eran Segev, CEO of KoolConnect
Technologies Inc., the turnkey hotel entertainment system
provider based in New York.
application" on the near horizon is the introduction into
hotel TV services of personal video recorder (PVR)
software with VCR functionality, so guests can time-shift
TV programs to fit their own schedules, like clicking
"pause" in a movie to take a business call or take a swim
in the lagoon.
Hotel PVR systems
would cache content on network file servers instead of
placing costly hard disks in each room. He sees
scalability as the path to profitability.
Another killer app
is using ad insertion tools to drive traffic to hotel
amenities or special events. A Las Vegas strip hotel with
unsold seats for a midnight show downstairs could
inserted ads for discount tickets into any TV channels
being viewed in the room.
As for T-commerce,
he cites pizza-on demand trials as proof that video menus
can benefit room service. In the Hawaii VOD trial by Time
Warner, Domino's iTV pizza orders from the video menu
averaged 40 percent higher than telephone
want interactive information services than ever before,"
says Thomas DeMeo, senior director of Internet services
for On Command Corporation. They want to know the weather
when they're flying without waiting 15 minutes for The
Weather Channel to get around to their destination, or
they want to follow the news, like the recent Seattle
earthquake, especially if they're going
More women business
travelers also shape the content offered, he notes, like
yoga and other exercise videos, or concierge database
listings for finer restaurants as well as the nearest
sports bar. An explosion of music channels is another key
trend. For instance, On Command now offers more than 40
music genres to hotel guests.
On the technology
side, DeMeo says, instead of installing a fully
functional digital set-top box in every hotel room, the
latest strategy is installing a lesser number of boxes in
the basement "data closet" along with the network file
servers, then wiring these boxes into the rooms with
copper or coaxial lines. Fiber is almost never
"A hotel probably
will never have 100 percent occupancy with 100 percent
usage of interactive service," he says. "So it makes
sense as a business model to have fewer boxes and
allocate these clients as needed. Also, it's better to
service a box without ever going into a guest's
Cutting the box
count reduces the overall per-room cost for offering
Depending on the
level of services offered, says Peter Klebanoff, VP of
industry relations for LodgeNet Entertainment Corp., the
average cost per room ranges from $370 to $450, and
higher for the most advanced services at the big
declines to release On Command's average per-room cost,
the ventures' 4th quarter 2000 report said the company
wants to reduce its average to about $350 per room.
"With most of the
hospitality business models now in play," says Greg
Riker, Denver-based director of new media for nCube, "you
need to share revenue from hotels with at least 500 rooms
to really start make any serious money, like at the new
Aladdin in Las Vegas."
To serve the
smaller LodgeNet customers not willing or able to install
servers and new wiring in their hotels, LodgeNet and
Hilton are equal partners in a joint venture, InnMedia
LLC, chiefly building regional headends linking
LodgeNet's customers. One day InnMedia headends may offer
co-location services for other iTV vendors, he says, but
generating and serving LodgeNet customers comes
location, location," Klebanoff says, "The goal is filling
hotel rooms, and so your interactive services need to
beat the hotel across the street. But you have to make
sure the economics work."
industry has always led the home market when it comes to
advanced television services, Klebanoff observes. "Yet we
find that only about 20 percent of the hotel guests are
using the pay interactive services, such as video games.
There's a tremendous opportunity here to better serve the
"Leveraging the new
interactive services to win repeat business is the name
of the game," Badding says.
"Watch for a lot of
marketing hype about digital hotel rooms," Cortina
DeMeo warns that
problems displaying PC content on an analog TV screen are
not yet resolved, "but it's a heck of a lot better than a
few years ago."
Segev looks for
public interest to pull interactive services into more
hotels until eventually the market is saturated. "Hotels
need to ask themselves, what are the demographics of
their clients, business or leisure travelers, then give
them what they want."