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Hotels are finally dropping internet fees—only to replace them with "tiered service" and sometimes unimpressive speeds. So what's really behind that cost of connectivity?

May 14, 2015

After years of pressure from disgruntled guests over Wi-Fi charges, hotels are coming around. In the past year, nearly every major brand that was still charging for Internet access has done away with basic fees—either for all guests (bravo, Hyatt) or for loyalty-program members (Hilton, InterContinental, Marriott, Starwood).

That’s good news, but it comes with a catch: a growing number of properties have adopted a tiered model, offering free basic service but adding an often hefty charge— as much as $30 a day—for premium speeds. What’s more, basic Wi-Fi at many hotels measures less than three megabits per second (Mbps), which is just enough for e-mailing and Web browsing—leaving some guests no choice but to pay for the faster speed (see “The Price Tag,” below).

With no industry standard for minimum speeds, a premium connection may give you anywhere from 4 Mbps (sufficient to stream a buffering-plagued video) to more than 20 Mbps (good enough for gaming). Two exceptions: In a survey we conducted of hotels across North America, we found that many budget properties provided fast Wi-Fi for free. And at top-tier luxury properties, even standard speeds are exceptionally high. Peninsula Hotels offer free Wi-Fi at 100 Mbps, while Mandarin Oriental provides up to 1 gigabit per second complimentary if you book directly online.

Although Wi-Fi fees represent a considerable chunk of the $2.5 billion in ancillary revenue that domestic hotels take in each year, industry analyst Henry Harteveldt of Atmosphere Research Group says that many hotels are just trying to offset expenses. The pay-for-premium push “isn’t about getting more revenue,” he says. “There is a cost to providing Wi-Fi access.”

Properties are struggling to meet the bandwidth demands of a data-hungry world, in which the average guest has three Wi-Fi-enabled devices. Keeping pace with new technological standards requires major hardware upgrades costing tens of thousands of dollars every few years. The New York Hilton Midtown recently spent a full $3.3 million to modernize its Wi-Fi infrastructure.

Experts predict that within the next decade, data rates will reach a whopping 10 gigabits per second at hotels. That’s not overkill, if you consider our increasing reliance on the cloud and the advent of ultra-high-definition 4K displays for streaming our in-room entertainment. Given the amount of capital those improvements will take, premium fees are likely here to stay, at some hotels at least. Those travelers who want free and fast Wi-Fi will have to choose brands that decide to make it a priority.

The price tag

We checked on the wi-fi fees of 63 hotels in 11 major North American cities. A third had complimentary Wi-Fi—most of them budget hotels, which offered an average speed of more than 5 Mbps. Two-thirds of the hotels had tiered programs. And while, on average, they didn’t charge much for basic speeds, most connections were well below what’s needed for high-quality video streaming. What we found, on average, at properties with tiered charges:tbody { border-top: 0px; td { padding: 10px; }

LUXURY HOTELSMID-LEVEL PROPERTIESBUDGET BRANDS
Price for basic: $5Price for basic: $9Price for basic: $0
Basic speed: 3 MbpsBasic speed: 4 MbpsBasic speed: 1 Mbps
Price for premium: $14Price for premium: $14Price for premium: $5
Premium speed: 10 MbpsPremium speed: 9 MbpsPremium speed: 6 Mbps

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