WASHINGTON In announcing its financial results for the year ended December 31, 2000, CAIS Internet revealed that it had determined that projected revenues from its hotel and multi-family properties were insufficient to continue operating many of these properties in a cost-effective manner.
The financial report further stated that based upon projected future revenues from hotel properties, the company has found that a number of its installed hotels are not generating sufficient cash flows to continue to operate the properties in a cost-effective manner.
These properties typically are smaller properties in smaller cities that do not have the infrastructure and meeting room facilities to support greater usage and revenues, said the company
CAIS has begun to discontinue service to those hotel properties with insufficient cash flows unless the property owners are willing to guarantee minimum revenue levels, said the report.
The company is also in the process of discontinuing service to substantially all multi-family properties, according to the release.
CAIS, however, apparently does not see the hotel industry as a total loss; it said it will continue to provide high-speed Internet service to certain larger, profitable hotels and utilize the business center and kiosk products as the core offerings for growth of properties.
CAIS has long been considered the leader in the hospitality industry when it came to providing high-speed Internet service.
When it became clear that high-speed Internet was the newest must amenity for the hospitality industry, CAIS went on a spree, signing contract with industry giants such as Cendant and Bass hotels which gave them the first right to negotiate with the thousands of franchisees in the companies systems. The concept of garnering so much of the industry s marketshare was based on the fact that CAIS whose business model called for the service to be installed at no charge would make its money from revenues generated from consumer usage of the service, which for the most part appears to not have transpired. Indeed, many hotels that have installed high-speed Internet services in general report that the percentage of usage, while rising incrementally over the past year, still hovers dramatically below the 10% mark.
While some hotels indeed did receive installations of the CAIS service, news did begin to leak out of installations having altogether stopped, and of hotels that had been expecting to receive the service simply not getting it at all. CAIS in February declined to comment to HOTEL BUSINESS. on the status of their installations.
CAIS is not the only provider to have faced the realization that its business model was not generating the amount of revenue it had expected. STSN, which had signed a chain-wide deal with Marriott International, halted its installations in December, due to a lack of continued funding. Marriott and STSN subsequently said they were coming up with a model that would require up-front cost sharing, spelling the end of the free-equipment model for hotels. (4/13/01) Ruthanne Terrero