Phones become room keys as hotels race to upgrade

Chains are ratcheting up their technology offerings in hopes of attracting younger travelers.

By MSN Money Partner Jul 28, 2014 2:43PM
By Craig Karmin, The Wall Street Journal

Hilton Worldwide Holdings (HLT) is placing a $550 million bet that hotel guests increasingly will use smartphones to choose rooms, check in and even unlock doors.

The company plans to announce this week new technology intended for its 4,200 properties world-wide. Targeting younger travelers, Hilton is aiming to leapfrog competitors that already have rolled out new services like turning mobile phones into room keys.

Guests already can check in and check out with a few punches on a smartphone or tablet-computer screen at all of Hilton's hotels in the U.S., the company said. By the end of summer, travelers will be able to see the location of and select their own rooms by mobile phone at six brands, from the midscale Hilton Garden Inn to the luxury Waldorf Astoria.

Next year, Hilton says, arriving guests can begin using their smartphones to unlock the doors to their rooms, rather than waiting on any lines clogging the front desk to pick up a key. That feature will be available at most of the company's hotels world-wide by the end of 2016.

"We are giving customers unprecedented choice and control at scale, and in the palm of their hands," says Christopher Nassetta, Hilton's chief executive.

Hilton's salvo ratchets up the technology arms race among operators such as Starwood Hotels & Resorts Worldwide (HOT), Marriott International (MAR) and InterContinental Hotels Group (IHG), which are also offering some of these mobile features at select properties.

More than 40 percent of visitors to Marriott's website view it on a mobile phone, up from less than 1 percent four years ago. "That was the biggest indicator of the need to get moving" on mobile, says George Corbin, Marriott's senior vice president of digital.

Hotel companies view being the dominant competitor in these mobile-phone services as crucial to winning over millennials, often defined as people born between 1980 and 2000. But there are potential risks, too, if money invested today is allocated to technology that goes out-of-date faster than expected.

"It's a race for loyalty," says Guy Langford, head of Deloitte LLP's U.S. hospitality and leisure practice. "There will be a first-mover advantage for the company that provides a seamless technological experience. But these companies have to constantly evolve and understand the millennial's changing preferences."

A successful mobile strategy is also seen as a way to combat the expansion of online travel agents such as (EXPE), which charge hotel companies a fee. Hotels also build brand loyalty if travelers use their apps rather than online agents.

Industry executives see mobile services as an important way to collect more information about their guests' preferences, the better to sell them everything from room upgrades or spa treatments to bottles of their favorite champagne.

On a recent day in July, for example, a guest booking a standard room at the Hilton Miami Downtown on a mobile phone was offered the opportunity to upgrade to a junior suite for an additional $25 a night, saving $40 from the original website price, depending on availability.

Hilton isn't the first to offer at least some of these customized features. Starwood, for instance, is already testing mobile-phone room keys at two of its Aloft brand hotels and plans to offer the option at roughly 150 Aloft and W hotels by the end of 2015.

Marriott says that 967 of its hotels offer mobile check-in and check-out, and more than 4,000 hotels globally will offer those services by year-end. The company is testing mobile-phone push notifications, too, such as sending a message to alert a guest to a discounted spa treatment. InterContinental also sends out these push notifications, including two-for-one drink specials at the bar for guests who just checked in.

In the long run, hotel companies are also betting that if their customers can use a phone for multiple functions that have been traditionally performed by front-desk staff, they can run a leaner operation that is likely to reap savings. "I think over time there is the opportunity to gain efficiencies," Mr. Nassetta says.

Hilton, which owns, operates or franchises about 650,000 rooms worldwide, said it can roll out these mobile services on a large scale because of the $550 million in technology investments it has made since 2007, when Blackstone Group (BX) acquired the company and hired Mr. Nassetta for the top job.

Chief Information Officer Bill Murphy says the company unified 13 property-management systems into one backbone, replaced its servers and other back-office equipment, and spent "tens of millions of dollars" building out the digital platform.

Unlike some hotel companies, which offer mobile check-in when a front-desk employee manually inputs guest information into the central booking apparatus, Hilton's operations allow guests to interact directly with the reservation system. That is what enables Hilton to roll out these services rapidly across all brands, Mr. Murphy says.

Mr. Nassetta says that while Hilton is picking up the bulk of the costs for the mobile rollout, owners of Hilton-franchised hotels would be required to make a "modest" investment in their properties to upgrade them for the new mobile technology.

More from The Wall Street Journal
Jul 29, 2014 11:21AM

so last week MSN writes an article stating the economy is getting better, and this week they publish an article stating that 35% of americans have debt collectors calling them.


LOL 35% of americans far enough behind on their bills for creditors to be making phone calls.  Thats 100 million americans!!!


LOL some recovery.  Thanks obama.

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