Paid or free internet access in hotels?

Travel Agony Aunt received the following question from a traveler in agony:

Dear Travel Agony Aunt,
I frequently travel for business and always notice that 4 and 5 star hotels usually apply a surcharge for internet access in the room. When I go on holiday and stay in budget hotels, internet access is usually free. That doesn’t make sense at all! Shouldn’t it be the other way around? More “free” comfort in luxury hotels and paid extras in budget hotels?
Mijntje, age 31, from Holland

Dear Mijntje,
The practice of most luxury hotels charging for internet access while most budget hotels offer free internet access seems very strange, it actually makes perfect economic sense. Economist Robert Frank explains the economic principle of this puzzling anomaly in pricing strategies in his book The Economic Naturalist - Why Economics Explains Almost Everything.

The cost for hotels of offering internet access is flat: once the hotel has installed its wireless internet connection there is no extra cost to the hotel if additional guests log on to the system. It would seem logical to just include internet access in the room price.

The market for budget hotels is more competitive than the market for luxury hotels, simply because there are less luxury hotels than budget hotels and luxury hotels offer more specialized services. Hoteliers in the competitive budget market advertise the free internet access in order to lure away customers from other budget hotels that don’t offer this service for free. The free internet access becomes a competitive advantage.

Then why don’t luxury hotels do the same thing?
Luxury hotel guests are likely to be either rich or traveling for business on an expense account. They are not as sensitive to price difference than budget travelers are. The simple answer is: luxury hotels tend to charge for internet access because they can (for now at least). Budget hotels could charge for internet access too, but most of them choose to advertise their free internet to price-sensitive guests who will choose them over a competitor that charges for internet.

Topic:  Travel Agony Aunt | 0 Comments
Tags:  budget, comfort, luxury