Ad swapping service hits hotel room TVs

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While others are still in the trial phase of targeting TV ads to select audiences using technology employed by the likes of TiVo and Replay TV, one small player is already doing so for its new client, United Airlines.

Hotelevision, a national TV media company that distributes cable channels to luxury hotels by satellite, has entered into an advertising deal with United that allows it to substitute the airline's advertising for normal cable spots sold by partnering networks. The overlaid spots run in hotel room transmissions.

The system is similar to personal video recorders, like TiVo, which use technology that can zap out ads but which lately is being sold to advertisers as a way to zap ads into broadcasts instead.

Jeff Stettin, senior VP-advertising sales at Hotelevision, said the cable networks have agreed to let the ads they sell get zapped out for Hotelvision ads because "they get their signal in front of this group of elite individuals, the business travelers, and they also share in our revenue." He would not discuss the terms of the revenue-sharing agreement or the cost to advertisers to participate.

Hotelevision raises the same questions that advertisers have voiced about TiVo. Does overlaid advertising squeeze out marketers that appeared on the original cable distribution?

"In one way it is a nice way to slice an audience across a recognized network. But on the other side of it, the regular advertisers are saying, `We bought your network because we believe in it, we believe in the audience, and now I have to go through another hurdle to fully close the loop? You're telling me that I'm not getting your full audience with these hotel viewers?"' said Tim Hanlon, director of emerging contacts at Bcom3 Group's Starcom Worldwide, Chicago.

Hotelevision's response is that the networks were not in these hotels in the first place. Hotelevision brought them in as an economic service for hotel owners, who would otherwise have to purchase their cable channels separately, so they opt into a basic system from a satellite provider.

"Eight of the 10 channels we work with have little to no distribution in these hotels," Mr. Stettin said. "So the original advertisers were never really in those rooms. People ask this question a lot: `Am I losing impressions?' You really weren't in the hotel in the first place. So this is a way to home in on that sector, the business traveler."

But some agency executives aren't so sure. "Cutting over existing commercials can be a major concern," said Arthur Schriebman, exec VP-director of national broadcast at Interpublic Group of Cos.' Initiative Media. "Not that Nielsen was ever counting hotel room use, but as an advertiser who is buying those commercials that are being covered up, I can't say I like the idea. People are probably going to say that it doesn't affect the Nielsen numbers, because those aren't measured. But it's not about what Nielsen measures, it's about who we are reaching," he said. "So if I'm going to reach fewer people because someone is going to cover up my spot, it doesn't matter if Nielsen reports it or not, that's a loss."

Hotelevision, which is distributed in Omni Hotels, Marriott, Hyatt, Loews, Sheraton, Hilton, Wyndham, DoubleTree, and Embassy Suites, has 10 cable partners: ESPN Classic, CNBC, MSNBC, The Golf Channel, The Weather Channel, History Channel International, Fox News, The Biography Channel, Bloomberg Television and Speedvision. The system reached 105,000 hotel rooms and operates in tandem with local channels and hotel TV services On Command and Lodgenet, which provide pay-per-view, Web TV and other cable channels. Hotelevision is the only service that overlays advertising into the hotel transmissions.

"We sell unit rates and CPM," said Mr. Stettin. "We sell very specific dayparts as networks do." Hotelevision's highest rated dayparts are morning prime, Monday through Friday from 6 a.m. to 10 a.m., and evening prime, 7 p.m. to midnight. Hotelevision sells inventory seven days a week, 12 minutes per hour, and their spots overlay both national and local advertising.

United is the company's first advertising partner. According to Mr. Stettin, the company also is in negotiations with an upscale automotive marketer, a major brokerage company with an online component, a car rental company and a telecommunications company. Hotelevision worked out the United deal with the media planning department at United's roster agency, Publicis Groupe's Fallon Worldwide, Minneapolis.

"This is an efficient way to reach an audience," said Lisa Duncan, Fallon's media supervisor. Her department not only negotiated the Hotelevision deal, they also did the buying, even though the overall buying for United is performed by Publicis sibling Zenith Media. "This is very much like a magazine buy. It is very targeted, which is a very smart approach in the current economic climate."

The private company was founded by Michael Goldstein and Paul Fiorello, former executives at Everex Systems, the Fremont, California-based PC manufacturer. Original investors were South-western Bell, Allied Capital, and two venture capital organizations, the Harbourton Group and the Rothschild Family.

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