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A study of accepted pricing points for in-room entertainment technology amenities by guests

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A study of accepted pricing points for in-room entertainment technology amenities by guests
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  Astudyofacceptedpricingpointsfor in-room entertainmenttechnology amenities by guests Anil Bilgihan  Rosen College of Hospitality Management,University of Central Florida, Orlando, Florida, USA Abstract Purpose – In-room entertainment technology continues to evolve in the hotel industry. However,given the multitude of entertainment products available in the market place today, hoteliers have littleclarity of guests’ willingness to pay for those in-room entertainment technology amenities. In thishighly competitive environment for travelers, lodging managers should better understand whatin-room entertainment technology amenities their guests will purchase. The purpose of this study is toexplore accepted pricing levels for in-room entertainment technology amenities by hotel guests. Design/methodology/approach – A sample of 2,500 US travelers was drawn randomly from anational database by rent-a-list.com for this study. An online survey was distributed. The responserate was 16.32 percent with 408 respondents. Findings – Findings showed that guests want most of the in-room entertainment technologyamenities as complimentary. However, they are willing to pay for gaming consoles in their guestrooms. Originality/value – This is the first paper that investigates the phenomenon of in-roomentertainment technology amenities. Implications are vital for hotel firms that aim to install theamenities. Keywords In-room technologies, Entertainment technologies in hotels, Accepted pricing points,Guest rooms, Hotels, Consumer behaviour, Travel, United States of America Paper type Research paper 1. Introduction Travelers have many choices when choosing hotels. In this highly competitiveenvironmentfortravelers,lodgingmanagersshouldunderstandtheirguests’needsandwantsinordertokeepcurrentcustomersandattractnewcustomers(Ananth etal. ,1992;Howell et al. , 1993; Sammons et al. , 1999). Lodging companies use technology as avalue-added service to their guests. By doing so, hotels can create differentiation,enhanceguestsatisfaction,andbuildlastingloyaltyamongcustomers(Cobanoglu etal. ,1999). Contemporary travelers demand technology applications and amenities before,during, and after they stay in hotels.Olsen etal. (2000)suggestedthatinformationtechnologywasthesinglegreatestforcedriving change in the hospitality industry and would continue to alter the way theindustry conducts business in the future, regardless of property size, segment, andgeographic location. In this regard, it has become important to continue to identifytheamenities,services,andtechnologyapplicationsthatguestsdemandfromhotels.Suchinvestigations enable managers to offer a meaningful set of guestroomtechnology applications to guests. Technology evolution has made significant progressand these developments are coming at ever increasing speeds, thus there are a plethora The current issue and full text archive of this journal is available at www.emeraldinsight.com/1757-9880.htm  JHTT3,1 24 Received 9 September 2011Accepted22September2011  Journal of Hospitality and TourismTechnologyVol. 3 No. 1, 2012pp. 24-31 q Emerald Group Publishing Limited1757-9880DOI 10.1108/17579881211206516  of multimedia entertainment products for home, work, and on the go. Since customershaveoptionswhenselectingtostayatahotel,theymaybeincreasinglyexpectingawidervariety of choices for entertainment in their hotel rooms. However, most hotels areindecisive about offering the latest technology to their customers. Since the early 1990shotels have spent significant amounts of money to install and upgrade to newtechnologiesintheirproperties,muchoftheseinvestmentsweremadewiththepurposeof satisfying the customers (Deeb and Murray, 2002). The improvements in multimediaentertainment over the last few years has resulted in an increased acceptance byconsumersandnowthismayheightentheimportanceofin-roomentertainmentofferingsin hotels as today’s luxury is tomorrow’s expectation (Boukis, 2007). In-roomentertainment services are a revenue producing opportunity for hotels, which allowsfor guest-customized experiences. In-room entertainment technology amenities includepersonalizedwelcomingmessagesonHDtelevisions,videoondemand(VOD),highspeedWi-Fi, interactive TV systems, video games, in-room fitness, and many more. As hotelin-room entertainment technology products have evolved there are many optionsavailabletodayinthemarketplace.Itisnotclearwhichin-roomentertainmenttechnologyamenities will be demanded by guests at which price. Today, hotels are beginning toinvest in in-room entertainment technology amenities in an effort to gain market share.However, deployment of these investments has not resulted in consistent acceptancelevels and the importance of these services among consumer segments when selecting ahotel. This study seeks to identify the pricing range for those in-room entertainmenttechnologyamenities.Thesefindingswillprovideinsightsintocustomeradoption,whichcan be used effectively by hoteliers and in-room entertainment technology amenitiesdevelopers when evaluating the potential of in-room entertainment products for theirbusinesses. Therefore, the following research question is generated:  RQ1. What are the accepted pricing points for in-room entertainment technologyamenities by guests? 2. Review of literature Guest-room technologies have turned out to be the spotlight of recent industryinitiatives to replicate home-based technologies in hotel rooms and keep pace with thetechnologies used by US consumers (Beldona and Cobanoglu, 2007). According toBrewer et al. (2008) hoteliers will increase revenues and enhance the guest experiencethe application of technology will be the focus in the future.The hospitality industry has witnessed remarkable technological changes betweenthe late 1980s through to today. Today, in-room entertainment technology amenitiesoffer inviting guestroomstoguests byimprovingthe “homeawayfrom home”comfort.Amajorchangehasoccurred in the lodging industry,which is; historically guests wereexperiencingnewtechnologyinhotelroomsbeforeitwasavailableinthemainstreamof society. Today, hotels are challenged to supply an experience as good as or better thanthe guests might have at their homes. The colossal development of the multimediaentertainmentproductsoverthelastfewyearsreflectstheacceptanceandimportanceof in-roomentertainmentofferingsinhotels.In-roomentertainmentisquicklybecominganopportunity for the hospitality industry to generate new revenue streams by providingtechnology supported amenities that broadens the experience of customers and allowsfor guest-customized experience. The diversity of amenities can consist rangefrom personalized welcoming message on the HD television, VOD, high speed Wi-Fi, Accepted pricingpoints 25  interactive TV systems, video games, in-room fitness, and so forth. In-roomentertainment amenities available in hotels have evolved over the years. Today, withmany options available in the market place, it is not clear what in-room entertainmentoptionswillbedemandedbyguestsandwillhaveapositiveimpactonguestsatisfactionandimprovetheirloyaltytothebrand.AccordingtoMicrosoft,in-roomentertainmentisone of the fastest growing revenue generating opportunities in hospitality. Thegeneration that grew up playing video games is today’s business travelers. Microsoftmarketstudiesindicatethatguestsareshowingagreaterwillingnesstopayformovies,VOD, in-room games, and high-speed internet access (HSIA). Not long ago, most of thehoteliers provided little or no entertainment amenities in the guest room aside fromconventional cable television. Given the significant improvements in entertainmenttechnologies, guests’ expectations of entertainment options have also increased toincludehigh-definitionbroadcasts,videogames,VODequipmentandothers.Itappearsthat technology will be the key competitive advantage for the hospitality companies(HansenandOwen,n.d.).Ifhospitalityorganizationswanttocompetesuccessfully,theymust do so by using technology to drive value to both the customer and to the firm(OlsenandConnolly,1999).AsstatedbyAH&LA,over67percentofbusinesstravelers,morethanhalfofthemintheagegroupof35-54arelikelytospendtheirtimeintheguestroom. There seems to be a growing demand for the high quality of in-roomentertainment(McMullen,2006).Theseguestswillexpectthatguestroomamenitieswillmatch the options available to them at their homes and offices (Amdekar, 2006).  2.1 In-room entertainment systems In-room entertainment systems provide guests access to audio-visual forms of entertainment and information including the products and services described below.  Free-to-guest  . Free-to-guest (FTG) typically gives the guest a fixed line-up of televisionprogrammingatnocosttotheguest.FTGincludesprogrammingdeliveredbyvarious sources including off-air (local market stations), satellite (DirecTV,Dish Network, etc.), and cable (local market cable provider, e.g. Comcast, Cox, etc.).Each of these sources represents a different technical challenge for hoteliers because of different modulation, encoding, security, and conditional access mechanisms. Video on demand  . VOD provides the guest with a broad selection of pay-per-viewcontent delivered when the guest is ready to view. VOD content provides access tovideo content from a range of sources including major Hollywood studios, second-tierand independent content producers, as well as srcinal content creators such as, HBOand Showtime. The percentage of hotels offering in-room pay-per-view movies isgrowing, which jumped to 54 percent in 2006 to 61 percent in 2008 (AH&LA, 2008).  Promotional video . Promotional video, is typically delivered free of charge to theviewer, this programming includes welcome to the property videos, hotel promotions,and the promotions of local venues such as, restaurants, theaters, and other places thatmay be of interest to hotel guests.  Music . Music programming include local and national radio stations, internet-basedradio, satellite-based radio (XM, Sirius, etc.), as well as large libraries of stored musicand music videos presented to the viewer either as free or for a fee. Content may comevideo services provider or it may come from standard in-room items such as the clockradio. Today, 35 percent of hotels are reporting that they offer iPod docking stations  JHTT3,1 26  in their guestrooms (AH&LA, 2008). However, the upper upscale (76 percent) andluxury (58 percent) segments were the most likely to offer this amenity. Games .Gamingcontentmaybedeliveredtoaguestthroughconsumer-basedconsolestyle high action “twitch” games (Nintendo, Sony, Sega, etc.), internet delivered games(Doom, etc.), and non-console/non-internet games (e.g. Solitaire).  Internet on TV  . Internet on TV provides guests with access to the internet using thetelevision as the display device and the input device can either be a keyboard or remotecontrol. Guests navigate the system with either a PC-like cursor using “point-and-click”ora“highlightandselect”link-hoppingprocess.Contentreformattingforanalogdisplayshasbeenthebiggestbarrierforatrulysuccessfuldeliveryofwebcontent;howevernewerdigital displays may remove this barrier. Guest services . Guest services are typically value-added applications deliveredto the guest through the television. These include applications for activity bookingreservations, room service, property and local maps, weather forecasts, and so forth.  In-room DVD player  . DVD is an application built on top of DVD-ROM. DVD playersare connected to TV to view DVD-Video (Taylor, 1999). Today these amenities are notcommonly found in many guest rooms. Only 12 percent of hotels reported offering thisin-room entertainment technology amenity. On the other hand, this amenity is popularfor the luxury hotel guestrooms, with 59 percent of the luxury hotels reporting toprovide in-room DVD players (AH&LA, 2008). Guest device connectivity . Unlike older hotel entertainment systems, tomorrow’ssystems need to accommodate the entertainment and business devices that the guestcarries with them, such as media players, digital cameras, personal computers, PDAs,andmobilephones.Guestswhoareaccustomedtodockingthesesystemsintotheirhometheater systems at home will expect the same capabilities in hotels. One of the newertechnologies that require guest device connectivity is Slingbox, which is a personalbroadcastergadget.ThisgadgetcanbeamanyliveTVshowcomingintoanyhometoaninternet-connected Windows PC anywhere in the world. With that device, one can alsoremotely watch shows that they have recorded at home on a TiVo or other digital videorecorder(Mossberg,2005).ThedevicegivesthecompletecontrolofhomeTVanddigitalrecorder even thousands of miles away. One may switch the channels of TV fromanywhere just as they were sitting in front of their set. Moreover, the home TV does nothave to be on at the time. Slingbox basically installed between cable or satellite receiverand broadband internet connection and it broadcasts TV programs out via the internet.Withthistechnology,travelerscanwatchtheirownTVchannelsfromtheirguestroom.Itmight change the future of guestroom TV.  In-room internet service . According to AH&LA, now, HSIA is the industry norm.AH&LA, 2008 Lodging Survey showed that 93 percent of respondents purported theyprovide in-room HSIA , up from 89 percent in 2006 and 50 percent in 2004. In-roominternetserviceisapotentialtogenerateadditionalrevenue(ifhotelsarechargingfortheservice).Furthermore,itisavalue-addingamenityforguests.AH&LAstudypointedoutthatluxury(75percent)andupperupscale(91percent)hotelsaremorelikelytochargeforinternet access in the room than the hotel types. Lastly, AH&LA (2008) Lodging SurveyWireless Internet access is represented in 91 percent of the respondents’ properties, upfrom 35 percent just four years earlier. Accepted pricingpoints 27  3. Methodology 3.1 Instrument  Aself-administeredquestionnairewascreatedfrominformationobtainedfromthereviewofliterature.Apilotstudyofthisquestionnairewasconductedamongtravelerstotesttheefficacyandclarity ofthequestionnaire.Revisionstothequestionnaireweremadebasedon the recommendations of the respondents of the pilot study. The instrument askedrespondents how likely they were willing to pay extra for the in-room entertainmenttechnology amenities. The final section of the survey consisted of demographic typequestions,suchasgender,maritalstatus,age,educationalbackground,andjobtitle.Thisstudy employed online survey methodology. 3.2 Sampling plan The target population consisted of US travelers. The sample used in this studyconsisted of 2,500 Americans drawn randomly from a national database byrent-a-list.com company. 4. Results and discussion 4.1 Respondent profile Data analysis was conducted from 408 completed surveys. The online survey wasaccessed by 1,812 respondents; however, first question of the survey askedif respondents stayed in a hotel in the past 12 months. If the respondent selected “No”as their response, the survey was terminated. There were 749 surveys where therespondents had notstayed ina hotel over the past 12months.Additionally, there were655 surveys where the survey was initiated but not completed, for a variety of reasons.The net response rate was 16.3 percent. 4.2 Reasonable prices for in-room entertainment technology amenities according torespondents Almost 60 percent of the respondents denoted that they would agree to pay between$1 and $5 for VOD, which is the most frequent choice for the respondents for VOD,followed by $0 with a 28.7 percent (Table I). Reasonable prices for in-room entertainment technology amenities per day$0 $1-$5 $6-$10 $11-$15 $16-$20 More than $21VOD (%) 28.7 58.6 9.6 1.2 1.7 0.2Music (%) 78.7 15.4 3.2 1.2 0.5 0.2Game console no. 1 (%) 19.1 40.7 24.8 9.8 2.9 1.2Game console no. 3 (%) 19.4 41.4 24.5 7.8 3.2 1.7Game console no. 2 (%) 19.9 41.9 24.8 7.6 3.4 1.0Internet on TV (%) 38.2 35.5 18.9 3.7 1.7 0.5Guest device connectivity (%) 67.6 21.8 5.6 2.5 0.5 0.2In-room fitness (%) 46.8 16.9 19.1 9.3 3.4 2.7In-room desktop computer (%) 35.5 23.0 19.1 10.0 6.4 4.7HSIA (%) 68.1 18.4 8.1 2.0 1.5 0.7Universal battery charger (%) 64.7 22.8 8.1 1.7 1.5 0.2 Table I. Reasonable price rangesfor in-room entertainmenttechnology amenities  JHTT3,1 28

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