Grassroots Wireless for Hotels
August 06, 2002
Global Logics is targeting limited service hotels with low-cost wireless broadband systems that are free to the guests.
One more unfunded, unheralded start-up trying to sell the hotel industry on installing wireless LANs to provide guests with high-speed Internet access has popped up. Global Logics, based in Sheboygan, WI, announced recently it had completed installations of its Global Guest Link system at two Sheboygan-area Holiday Inn Express properties.
Global Logics believes it has found a formula for kick-starting a WLAN business in the unforgiving hospitality industry -- aim low, keep costs down and make it simple for the hotelier. The company is targeting so-called limited service properties: relatively small, low-priced hotels with no food or beverage services. The Holiday Inn Express brand is a key player. Fairfield Inn, part of the Marriott stable, is another.
"A lot of companies are hitting up the big hotels and chains," notes Global Logics president and CEO Luke Pfeifer. "Someone has got to do the small guys. Besides, if I can do ten 80-room properties in the same time it takes others to do one 800-room hotel -- and make more money at it too -- that has to be good."
Global Logics has a third property in Brown Deer, WI (north of Milwaukee) almost installed and has sold another, in Goodlettsville, TN (near Nashville). The ownership group involved in the Goodlettsville property has six more in the Nashville area for which it has requested quotes from Global Logics.
Pfeifer initially aimed at being in five hotels by the end of this year. He's now confidently talking about being in two dozen in 2002 and 100 by the end of 2003. However, he readily admits the company will have to take a couple of important steps before it can hit these targets.
Global Logics, founded in Sheboygan in 1995 as StaffNet (the name was changed in 2000), has come to the hotel WLAN market by a somewhat circuitous path. It started out as a Web site design house, a business it has only recently wound down. In 1996, it launched a dial-up ISP in Sheboygan, which it then sold in 1999.
This turned out to be just in the nick of time -- a fire wiped out Global Logics' offices shortly afterwards, forcing the company to lay off all its staff and resort to a virtual mode of operation that it is still using to keep costs down. Last year it launched an online domain name registration reselling business, EasyDomains. This year it launched Global Guest Link.
Today the company is Pfeifer, partner and vice president Steve Bellanger and two part-time sales agents, one in Florida, the other in California. It also has an arrangement with a technical services outsourcing firm. For now, Pfeifer and Bellanger are doing the wireless installations themselves.
Some of Global Logics Web design customers were in the hospitality industry. "I also worked in a hotel myself," Pfeifer adds. "In fact, I still help out in one of the Holiday Inn Expresses here in Sheboygan. Having industry knowledge was a big help."
It helped him work out a business model that he believes will ensure his success. He knew, for example, that owners of the small limited service hotels he was going to target were very cost conscious and would never agree to the kind of deal where the WLAN company charges for installation and monthly support but owns the network assets.
"They would say, 'What? You charge so much for installation and then we don't even own the equipment?'"
Global Logics sells the hotel the network -- the access points and wireless modem cards -- installs it, trains hotel staff, provides in-room marketing materials and leaves behind a binder with legal forms for network card loans, first-level support information and additional marketing materials.
It also installs a network access server, which the hotel does not own, that allows the hotel system to interface with the Internet service provider, present local information on start-up and relay e-mail.Pfeifer allows one access point for each ten rooms as a rule of thumb. The company uses relatively low-cost equipment. In some cases, it even installs access points from Linksys that are designed for the SOHO and small business market.
"What we use depends on the property and what the managers want," Pfeifer says. "I don't like to use Linksys, but in a 60-room hotel, to buy Avaya equipment you're dealing with some cost problems. Besides, small hotels don't need the same equipment as big hotels."
A typical hotel pays $10,000 up front -- but it ends up with an asset, which it can sell or even continue to use if Global Logics goes away. Despite being so cost conscious, hotels don't see this as a huge investment, Pfeifer adds, because they already pay about the same on a quarterly basis for the lease on their phone system.
The hotel pays Global Logics a management and support fee that typically works out to no more than 25 cents per room per day. So a 60-room hotel would be paying about $450 a month -- less than many other hotel WLAN system providers charge. For that, the hotel gets on-site service when needed and guests can use a toll-free technical support line.
"For the hotel it's low cost, for us it's high profit," Pfeifer says.
Some properties will raise room rates by a couple of dollars to cover the cost, others will justify the expenditure on the basis that having the service gives it a competitive advantage and helps to fill more rooms.
The only other expense for the hotel is bandwidth. Global Logic uses low-cost broadband connections. In all cases, so far, it's cable modem service from a national provider -- AOL Time-Warner and Charter Communications. Using the cable service is something of an experiment, Pfeifer admits, but so far it's working "flawlessly."
The company is not committed to any one bandwidth provider or type of provider, though. If the property owner knows a local provider, Global Logics will work with that company. Or it will bring in a national provider. (It would also welcome calls from local or regional ISPs that have hotel customers or prospects that might buy the Global Guest Link system, Pfeifer says.)
Global Logics hotels all give the service away free to guests. Pfeifer believes that it's only a matter of time before broadband wireless access becomes an expected amenity at hotels -- like cable TV and HBO. In the meantime, it's a value-added service that provides a competitive advantage.
The company would consider a for-fee set-up but would charge quite a bit more on a monthly basis for support. Nobody, he adds, has asked for this.
According to Pfeifer, the business model he's using means each hotel installation is profitable for Global Logics from day one. While he has some of the infrastructure set up to execute the plan now on a national basis -- sales agents on both coasts, outsourced telephone support -- he doesn't have everything in place he needs, even given a commitment to a virtual mode of operation.
"My guy in Florida has 150 hotels he's ready to give proposals to," Pfeifer says. "But we have to make sure we have the resources to handle them first. That means being able to get solid technicians to the sites. You have to have people you trust even if you outsource them."
He might be able to achieve his optimistic new year-end targets for 2002 and 2003 without additional funding, but it would be easier with venture capital support, he admits. "We could easily get it off the ground for under $1 million."
That would cover setting up a few installation centers around the country and hiring more full-time help. It would also give him enough money to further develop the Global Logics network access server and turn it into a low-cost product he could sell to hotels and other businesses that want to do it all themselves.
As Pfeifer says, somebody has to go after the little guys.