The broadband wireless hotspot business is a little like real estate. Three things matter: location, location and location. And after airports, the hottest locations for wireless hotspots are hotels.
But judging by the soul searching going on at White Plains NY-based Starwood Hotels & Resorts Worldwide (www.starwood.com), hotels may not be the slam dunk for the wireless industry they once looked to be.
While some hotel chains chose to stay out of the technology business themselves and cut deals with the Wayports and Mobilestars of the world, Starwood is looking to take firm control of its own wireless future.
The trouble is, says Greg Goldfarb, director of the company’s Innovation Lab, the wireless future is frustratingly murky.
Starwood has 738 hotels with approximately 227,000 rooms in 80 countries. Many are franchise operations. Some of those have cut their own one-of deals with hotspot companies and wireless equipment vendors to provide wireless access to guests. No more, though, says Goldfarb.
“Right now it’s pretty much a hodge-podge [of different vendors and types of equipment],” he says. “But our plan going forward isn’t to have that kind of hodge-podge.” The company will likely standardize on equipment from Cisco for all its wireless and wired broadband networking needs.
Part of the reason Starwood wants to take control of wireless technology in its properties is that it believes there is more at stake than just broadband access services for guests. There are also important opportunities for using wireless to improve operational productivity, Goldfarb says.
The chain has experimented with a number of ideas, including queue-busting applications such as having employees equipped with wirelessly connected PDAs check guests in right at the curb as they arrive rather than making them stand in line at the front desk.
Starwood has even considered letting pre-registered guests with wirelessly-enabled PDAs check themselves in.
Another possibility is using wireless for internal communications. A supervisor could communicate directly with a phone- or PDA-toting employee to reassign him to a new task. Right now, the supervisor has to go and find the employee. And some of the properties are large enough that this wastes significant amounts of time.
All of these applications have either been field tested in the past at Starwood hotels or are being tested now, though Goldfarb isn’t very forthcoming about details of current activity.
“We’re trying to find the role of wireless for improving and changing operational processes,” he says. “We’re a fair bit down the road in figuring out where we want to take these processes, but I wouldn’t say we’re firmly committed yet to any particular wireless approach.”
In fact, seeing wireless as a potentially strategic technology is a double-edged sword. On the one hand, it raises the stakes. On the other, decision making becomes doubly difficult and fraught with peril.
Wi-Fi is the front-runner right now, but using 802.11b infrastructure in its hotels is by no means a given for Starwood. The company experimented with Bluetooth in the past. “The market looks today to be headed toward 802.11,” Goldfarb allows. But he’s not counting out Bluetooth.
Bluetooth has hit “the bottom of the valley of nay-sayers,” he says. The low point was a September 2001 J. William Gurley column in Fortune predicting its death (www.fortune.com/indexw.jhtml?channel=artcol.jhtml&doc_id=203737).
“The ultimate reality now is that Bluetooth is beginning to show up in consumer devices,” Goldfarb says. Not that he thinks Bluetooth has a better chance of serving the hotel chain’s needs – probably not, in fact. But standards issues create uncertainty.
“We don’t want to have to pick winners,” Goldfarb says. “We don’t want to be in a position where we have to say to a guest, ‘Because you have a Bluetooth card and not an 802.11 card, we can’t offer you service.’ We want to see a world where we can offer service regardless of the wireless technology.”
His group is closely watching efforts at a few companies to come up with technologies and strategies that would allow some level of interoperability between Bluetooth and 802.11.
But even if Starwood ignored the distraction of Bluetooth, that’s only one of the sources of uncertainty. As Goldfarb puts it, “the alphabet soup of wireless LAN technologies keeps adding new letters.”
With 802.11a coming to market and 802.11g on the horizon – both to a greater or lesser extent incompatible with the installed base of Wi-Fi equipment in Starwood’s hotels – the decision is getting harder not easier.
Installing 802.11b equipment to provide guest access in a few public areas and conference rooms is one thing, making a decision to install it throughout a hotel – or across the whole chain – involves a different order of investment and requires a higher level of comfort in the longevity of the technology.
“Anybody you talk to in this industry today, you’ll hear there’s a lot of uncertainty around demand [for wireless services] and doubts about recovering investment,” Goldfarb says.
The uncertainty is not so much whether customers want broadband access, he is quick to add. It’s whether they want it wirelessly and if so, which wireless standard to use.
Right now Starwood’s experience is that demand for wireless access is not that high because most guests still don’t have Wi-Fi-equipped PCs. One obvious solution is for the hotels to provide cards to rent – which some are – but that raises other potential problems.
It means the hotel has to be in the business of providing technology services to guests. “It’s a risky proposition for hotel staff to start messing around with the configuration of someone’s laptop,” Goldfarb points out.
Then there are concerns around security. The notion of using the same wireless LAN infrastructure for internal communications and business processes and for guest access to the Internet is a little scary.
“There are all kinds of snooping products and hacking tools out there,” Goldfarb notes. He doesn’t quite connect the dots and say that Starwood guests might try to hack into the company’s internal network, but this is clearly the concern.
“It would cause a bit of heartburn when it comes to the idea of putting everything on one network,” is how he puts it.
On the other hand, the idea of a “Balkanized hotel” with two or more separate networks – which would be very inefficient in terms of service and support – is not particularly appealing either.
So in the short and medium terms, Goldfarb says, Starwood has “a firm plan to better prove out the business models. We have a formal kind of testing and prototyping plan to prove the business models and the solution requirements” to at least offer guest access on a wider scale.
Perhaps Starwood is being excessively cautious in its approach, but the wireless industry would do well to heed its concerns. If continuing confusion around competing standards stops or delays the Starwoods of the world making decisions, it’s going to put the brakes on the industry.
As Goldfarb sums it up, “At this point, it’s very difficult for a company like Starwood to bullishly get behind one or other of these technologies.”