Major chains from Marriott to Ritz-Carlton are moving beyond pay-per-view programs and video checkout to offer movies on demand, videogames, local directories, shopping and even gambling, all on in-room TVs.
"It will happen in hotel rooms before the home," said Mark Haley, ITT Sheraton Corp.'s information systems manager. "I see hotel in-room entertainment being a lab for the larger marketplace."
Hotels are easier and less costly to equip with the proper technology than homes-largely because only a few buildings need to be wired-and their desirable demographics make them a prime test site for interactivity. Advertisers want to reach upscale hotel guests, who tend to be more technology-savvy and have above-average education and income levels.
Interactive TV may also be a lucrative market for hotels. Fees are charged for movies and games, and in some cases hotels get a cut of advertising and shopping revenues.
"Companies are cutting back on travel expenditures. More people are traveling alone and spending more time in their room," said Michael Ribero, Hilton Hotels Corp.'s senior VP-marketing and strategic planning. "The more enjoyment we can provide, the more money we can make."
No one knows how much money there is to be made, given that most interactive TV ventures are only getting started. But Mr. Ribero boldly predicts that interactive TV in hotels could be more than a $1 billion industry within the next five years.
"This is only in its infancy now," Mr. Ribero said. "There could be on-demand programming, pay-per-view, in-room gaming, per-minute charges for videogames."
A billion dollars is quite a tall figure, given that hotel pay-per-view programming is only about a $250 million industry, according to Bear, Stearns & Co. estimates.
"Advertising-supported services could be a very big market," said Ned Zacker, VP-analyst at Bear, Stearns & Co. Though he was hesitant to make predictions, he said the ad-supported interactive TV market in hotels could eventually equal the size of the hotel pay-per-view market today.
With dollar signs in their eyes, providers of hotel in-room entertainment and services are scrambling to come up with the best interactive TV offerings.
On Command Video, Santa Clara, Calif., in April began a test of interactive TV at the Santa Clara Marriott. The test, conducted in conjunction with technology company Fourth Communications Network, San Jose, Calif., and Bell Atlantic Directory Services, offers an on-screen shopping mall and a multimedia directory of local restaurants and points of interest.
Guests can order room service or make hotel reservations by clicking the TV remote control. The catalog shopping mall offers merchandise from companies including 800-Flowers and Lands' End.
Via Bell Atlantic's InfoTravel service, guests also can preview sights and sounds of local shops, restaurants and attractions on their TV, make a reservation and get a printed map with directions from the front desk.
The experiment has been successful enough that Bell Atlantic last week said it is rolling out InfoTravel in 1995 to six Marriott and Hilton hotels in Washington.
In Santa Clara, 40% of an average 320 occupied rooms used InfoTravel twice a day.
"The usage is tremendous," said Tom Pelletreau, director of new-business development for Bell Atlantic Directory Services.
Bell Atlantic contracted with Fourth Communications Network only for the Santa Clara test. It will roll out its service with On Command Video and another technology provider.
Fourth Communications Network plans to offer interactive TV in hotels to 25 to 50 hotels by yearend, said Scott Lewis, president. It plans to work with a host of content providers, including other interactive Yellow Pages directory services.
LodgeNet Entertainment Corp., Sioux Falls, S.D., this month will begin rolling out to 19 Ritz-Carlton Hotels an interactive multimedia directory offering still photos and sound promoting other Ritz-Carlton properties. Advertising, catalog shopping and infomercials could be added late this year or early next year.
LodgeNet already offers movies on demand, basic cable service, Super Nintendo videogames, guest surveys and guest room inventory in some 2,000 North American hotels.
CityKey, developed by U S West and SpectraVision, Richardson, Texas, has been in test since April 1993 and will expand to six cities next June.
Eleven San Francisco hotels now offer the TV directory service, featuring text and photos showcasing restaurants, tourist attractions and local shopping information. Seventy-five advertisers, including Macy's and Nordstrom, participate for $3,000 to $40,000 a year.
Hilton thinks casino gaming, such as blackjack, will be a hot interactive TV application. It is working with On Command Video and expects to start a test within four or five months, allowing monetary bets where legal.
"We think there are four killer applications that guests tell us they are interested in: programming on demand, shopping, playing videogames and gaming," said Hilton's Mr. Ribero.
He is less enthusiastic about directory services, however.
"Guests can get all that information from the hotel concierge, but that could be the fifth viable option," he said.
Hotels also are cautious about becoming too enamored with technology.
Hyatt Hotels Corp. is considering interactive TV, but it also is making some of its rooms technology-friendly for computer users and providing an in-room fax.
This could allow a guest to access their own electronic mail or online travel-related service.
"We don't want to do technology for technology's sake," said Chris Elam, Hyatt's corporate director of rooms. "A certain level of traveler has a higher demand to do things for themselves.
"In the future, there will be demand to access the networks themselves."