DOES ANYONE WATCH HOTEL TV ANYMORE?
By Joe Brancatelli
January 9, 2013 --LodgeNet, which beams television programs and movie rentals into more American hotel rooms than any other company, spent the New Year's holiday planning a pre-packaged Chapter 11 bankruptcy filing that will culminate with the firm's sale for just $60 million.
Don't be fooled into thinking that this is the beginning of the end of in-room video entertainment as we know it. Except for the occasional live sporting event or breaking-news story, most business travelers have already abandoned in-room televisions and companies like LodgeNet.
Despite an installed base of 7,700 hotels, 1.6 million rooms and some recent attempts to go high-tech, LodgeNet hasn't been profitable since 2006. That's chronologically logical. Business travelers haven't had much use for LodgeNet's pre-Internet model since the invention of Hulu (2007), since Netflix began streaming (2008) and since Apple unveiled the iPad in 2010. Throw in the ubiquity of free porn on the Net—half of hotel movie rentals traditionally have been X-rated—and LodgeNet these days is as relevant to business travelers as fax machines or paper airline tickets.
"Everyone shows up at check-in with four Internet-connected devices. Very few people even uses the hotel TV anymore," explains Nick Patel, chief financial officer of Naman Hotels, owner-operators of 16 brand-name hotels around the Carolinas. "The days of paying for anything on your hotel TV is close to being gone."
The decline of in-room programming in general and LodgeNet in particular has come so fast that business travelers have hardly noticed. "The last movie I rented in a hotel room? I don't know. Maybe Titanic  or Frida ," says Jane Hartson, a 100,000-mile-a-year flier. "I know it's been a long time. It's just not something I do anymore."
I've never been a particularly big in-room movie buyer—I did rent the obscure British flick Made in Dagenham in 2010—but I was always an eager consumer of news programming on hotel televisions. Since American hotels and LodgeNet rarely veer from the standard Fox News/CNN/MSNBC triad, however, I don't even do that much anymore.
And I was sure I saw what I thought was the future of in-room entertainment as early as 2007. That's when Hyatt Hotels introduced what it calls the Hyatt Plug Panel. Any possible cable connection you could imagine for connecting a laptop, music player, game system or other consumer product to the TV monitor was on the panel, including the then relatively new HDMI port. I made sure my next laptop had a HDMI plug and I've judged the quality of hotel tech against the Hyatt Plug Panel ever since.
"It's a generational thing," he says. "The younger you are, the less you care about the box in the hotel room. You watch your content on your own laptop or your tablet or your smartphone. So it's not just that you're not likely to rent a movie. You're not even likely to turn on the room TV at all."
PKF Hospitality's statistics track the rapid decline of business travelers' interest in hotel-provided in-room entertainment. Annual movie-rental revenue per available room dropped from a high of around $275 in 2000 to about $125 in 2011. As a percentage of total hotel revenue, movie rentals dropped to 0.28 percent in 2011 from 0.76 percent in 2002.
"Revenue from in-room entertainment has gone the way of revenue for in-room phones," Mandelbaum adds. "It's no longer even large enough to be a reportable line" on a hotel profit-and-loss statement.
And there is this from LodgeNet's 2011 annual report: During 2011, the number of rooms equipped with LodgeNet systems declined by 203,000 rooms. That represents a startling 12 percent drop in the company's installed base in just one year.
Some of LodgeNet's problems are of its own making and some are attributable to the way video is distributed generally. Patel of Naman says that LodgeNet systems are less flexible than those of the company's major competitors--local cable operators and DirecTV--and often cost 2.5 times more to install, operate and maintain.
"The money you make from in-room systems is miniscule, so that cost disadvantage is a real problem," he says. "Besides, if you go with a local-cable operator or DirecTV, they'll provide a better Internet product. As a hotel operator, you get more complaints about slow Internet than you do about your TV."
(Which explains why LodgeNet's Chapter 11 announcement talks about a "strategic" future partnership with DirecTV, which it says will "help it deliver new and improved services" after the bankruptcy filing.)
In many ways, the Internet is what helped unravel LodgeNet. With so many guests bringing their own content on their own device, in-room Internet service is more crucial to business travelers than TV offerings. The speed and price of in-room Internet has been an issue for years, but we may not care about a hotel's connection options for much longer, either.
Five major cable companies are now allies in a program called Cable WiFi. It permits customers of one system to freely access the WiFi hotspots of any of the companies. I often get a compatible (and free) Cable WiFi connection in my hotel room when I fire up my laptop.
And I've been testing a 4G LTE mobile hotspot device that Verizon Wireless calls a Jetpack. Side-by-side tests at my office, where cellular service has traditionally been extremely weak, shows the Jetpack offering Internet speeds comparable to my wired cable-Internet connection. It's certainly faster than many in-room Internet systems that I've used.
In other words, we're not far from the days that we bring our own devices, our own programming and our own Internet to our hotel rooms. Who's going to use an in-room TV or buy in-room programming then?
ABOUT JOE BRANCATELLI Joe Brancatelli is a publication consultant, which means that he helps media companies start, fix and reposition newspapers, magazines and Web sites. He's also the former executive editor of Frequent Flyer and has been a consultant to or columnist for more business-travel and leisure-travel publishing operations than he can remember. He started his career as a business journalist and created JoeSentMe in the dark days after 9/11 while he was stranded in a hotel room in San Francisco. He lives on the Hudson River in the tourist town of Cold Spring.
THE FINE PRINT This column is Copyright © 2013 American City Business Journals. All rights reserved. Reprinted with permission. JoeSentMe.com is Copyright © 2013 by Joe Brancatelli. All rights reserved.