I, Hotel

By Gerry Blackwell

August 18, 2004

The 18-month-old provider of Wi-Fi systems for (of course) hotels think it has an infallible formula for success, and so far has a track record to back it up.

The hospitality industry continues to be a hot market for hotspot service and software providers. Add one more vendor to the increasingly crowded roster: I-hotel International, a Canadian Wi-Fi systems software, integration and management services company.

Like most vendors in this market, I-hotel believes it has an infallible formula for success. They can't all be right, of course, but I-hotel, unlike some others, does have a solid track record to back its claim -- even though it's only 18 months old.

The company announced in July that it had added 14 more hotels to the list of deployed properties with its Wi-Fi-based systems -- bringing the total as of late July to 71, with 7,300 guest rooms. Installations include Quality, Best Western, Holiday Inn and Days Inn properties.

"We quickly recognized that if we wanted to make our mark, we had to focus on the mid-market segment," says Sylvain Boudreau, the company's vice president of business development.

"Everybody is chasing the Deltas and Paramounts. We've stayed focused on the mid-market and we've been very successful as a result."

What are the other ingredients in the company's sure-fire success formula? One is that most of the I-hotel team -- including Boudreau and founder and vice president of technology Samuel Schmidt -- have deep backgrounds in the hospitality industry. They're not just technologists.

"So the first thing we bring to the table is our knowledge of the industry," Boudreau says.

This probably does count for something, but not enough on its own. More important is that the company's triple-A-billing-network management software was developed from the ground up for hotels.

In fact, the software came before the company. Schmidt began developing it as part of a freelance consulting contract for the Quebec-based Gouverneur Hotels chain. Gouverneur wanted to install a custom-built Wi-Fi access system. It had looked at offerings from wireline systems vendors but decided they were too expensive and not flexible enough.

Schmidt ended up forming I-hotel to complete development on the software as a commercial product when he realized he had come up with something that would be in demand. I-hotel used one of the Gouverneur hotels as the guinea pig during eight months of development and testing.

"That's why we've been successful, because the software was built specifically for hotels," Boudreau says. "That's where we're quite different from most of our competitors."

Then there is I-hotel's business model. The company is a one-stop shop, Boudreau stresses, and that is very appealing to hotels. I-hotel quotes an all-included price for consulting, hardware, software, installation and training.

A typical installation in a 200-room hotel with eight access points costs about $15,000. That includes a Dell server, Colubris Networks access points, and cabling between server and APs.

The hotel then owns the network and handles day-to-day management. It pays for the high-speed Internet connection -- in most cases it's cable modem access from one of I-hotel's two distribution partners, Videotron (mostly in Quebec) and Cogeco (in Ontario).

I-hotel also charges a monthly fee -- about $1.50 per room -- that covers network maintenance, software upgrades and 24/7 toll-free telephone technical support for guests and staff, in both of Canada's official languages, French and English.

Boudreau says the fact that the network in an I-hotel installation is managed entirely from an onsite server on which the I-hotel software resides -- and not from an off-site hotspot service provider's network operations center -- is another important technology differentiator.

He agrees with industry players at BT Syntegra and Single Digits who have noted recently in this space that hotels generally want to run their own show when it comes to high-speed Internet access.

"That's where the difference was initially for us when they were comparing us to hotspot [service providers]," Boudreau says. "They give [the hotel] very limited control. We give them full control of the solution. They manage it. They decide who is on and at what price."

The other thing hotels liked, he says, is that with I-hotel, there was no long-term contracts and no sharing of revenues. In more and more cases, hotels aren't looking to generate any revenues from high-speed access.

Boudreau estimates that currently about 65 percent of I-hotel hotels are providing the service as an amenity. He expects that to go to 70 or 75 percent over the next year. Where they are charging -- often because the chain mandates that they do -- local managers want to be able to make decisions on a guest by guest basis so they can provide service free to regular customers.

"The latest trend," Boudreau says, "is that it's free for the guest rooms, but there's a daily charge for the meeting and conference rooms."

Even with an airtight business model, I-hotel was still a small start-up with little market credibility compared to formidable competitors such as telco Bell Canada, which markets the Data Valet solution licensed from Travelnet Technologies, and Spotnik Mobile, which is backed by Canada's number two telco, Telus.

I-hotel got its big break when another Quebec company, Videotron, a virtual monopoly provider of cable TV services in the province, decided I-hotel was just what it needed to help sell its high-speed Internet services into the hotel market. Videotron later made introductions to Cogeco.

The two cable companies are now exclusive distributors of the I-hotel solution in their trading territories. In areas where neither operates, I-hotel sells direct to independent hotels, chains or management companies and makes deals with local or regional service providers for Internet access.

"That was the push we needed," Boudreau says of the Videotron partnership deal. "It gave us the credibility we were lacking initially. Now we can compete with Telus and Bell."

Has I-hotel found the magic formula for selling hotels on Wi-Fi and also making money at it? Maybe. Revenues for the company's first fiscal year, just ended, were over $770,000 -- "which is phenomenal for a first year," Boudreau says. I-hotel is on track to post sales in excess of $1.8 million this year. It expects to have 150 to 160 properties up and running by June 30, 2005.

The grand plan is to first consolidate the company's position in eastern Canada. Most of its properties are currently in its home province of Quebec, with a growing number in nearby Ontario and a few in Nova Scotia on the east coast.

Then it will strike out for the west -- and the U.S., where Boudreau says it has already garnered some interest from chains that have properties in Canada using its solution.



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