Hospitality Market Research
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Nearly every conceivable aspect of hospitality can be found in some form here.

TABLE OF CONTENTS:

• Latest information about Lodgenet

• Lodgenet’s Competition

• Total number of rooms served

• Market segmentation of hotels: High end, business travel, economy

• Hot international markets

• Trends on what consumer want at hotels by market segments: business traveler, families, etc.

• VOD server companies in this market, what they offer.

• Any overlap with hospitals?

• Triple play, double play or just video?

LodgeNet Entertainment Corporation is the leading provider of media and connectivity services designed to meet the unique needs of hospitality, healthcare and other visitor and guest-based businesses. LodgeNet serves more than 1.9 million hotel rooms representing 9,900 hotel properties in the United States, Canada, and Mexico, with presence in 20 countries outside North America through local licensees in addition to healthcare facilities throughout the United States.

LodgeNet's services include on demand movies, games, television programming, music and information, along with subscription sports programming and high-speed Internet access. LodgeNet Entertainment Corporation owns and operates businesses under the industry leading brands: LodgeNet, LodgeNetRX, On Command and StayOnline. LodgeNet is listed on NASDAQ and trades under the symbol LNET.

As of June 30, 2008, Lodgenet’s growth initiatives in the last quarter, which focused on hotel services, advertising and the sale of interactive systems to hotels and healthcare facilities, generated revenue of $42.1 million during the quarter, an increase of 20.5% over the same period last year. Revenue from non-guest entertainment services generated 30.7% of their total revenue in the second quarter, which reflects their ongoing efforts to expand and diversify their service offerings.

The Company also reported a net loss of $7.5 million for the second quarter of 2008 as compared to a net loss of $34 million in the second quarter of 2007. Net loss for the second quarter 2008 included $3.7 million of expenses for restructuring, integration and amortization of acquired intangibles related to the 2007 acquisitions of On Command and StayOnline.

The group Citizens for Community Values has been investigating LodgeNet — a South Dakota-based satellite provider of pornographic movies to hotel chains. The campaign to reveal the truth about LodgeNet is gaining steam as legal experts come forward with their findings.

Based on the number of hotels and rooms served, Lodgenet is one of the world’s largest providers of interactive television and broadband solutions to hotels serving approximately 9,900 hotel properties and over 1.9 million hotel rooms.

In their competition for the time and attention of the hotel guest they compete against virtually all aspects of the entertainment and communications industry. Competitors for pay-per-view services include, but are not limited to:

1. Hospitality Network, a product of Cox Business, is the #1 provider of advanced in-room video-on-demand and high-speed Internet service in use by the hotel gaming industry. These services include free-to-guest cable TV, hit movies on demand, adult programming, Internet TV, games, wired & wireless high-speed Internet and interactive guest services. Solutions are tailored to meet the specific needs of the hotel, including hotel-specific customized TV/Internet screens.

Hospitality Network is provided to over 100 hotel partners servicing over 125,000 hotel rooms, including 16 of the 20 largest hotels in the world. In Las Vegas alone, Cox Business has over 1,000 dedicated employees who provide exceptional on-site service every day to our hotel partners.

2. NxTV, Inc., based in Los Angeles, California, was recently named to the prestigious Inc. magazine list of the 500 fastest-growing private companies in America. The company is the first and largest IPVOD provider in the global hospitality industry, delivering to its customers IP-based, 100% digital in-room entertainment solutions. NxTV IP In-Room Entertainment Used by 25% of 5-Star Properties

The NxTV system delivers a full suite of digital IP-based in-room entertainment services including High Definition Video on Demand (HD VOD) and IPTV Free-to-Guest content, wired and wireless high-speed Internet access, and a customized guest interface.

Clients include the world’s most prestigious hotel brands, including Four Seasons, Peninsula, Raffles, W Hotels, St. Regis, MGM Grand, Le Meridien, Marriott and Hyatt. NxTV, Inc. has offices and customers in the Americas, Europe and Asia.

NxTV, serves 55,000 rooms in in four- and five-star hotels in 14 countries.

3. KoolConnect Technologies, Inc. is a leading provider of advanced digital and HD media on demand solutions to luxury and upscale hotels worldwide. KoolConnect was the first company to offer HD VOD in the hospitality industry and today serves nearly 20,000 rooms in prestigious properties in the US, Japan, Hong Kong, Dubai and the Caribbean. KoolConnect's solutions are available in a variety of flexible business models including complete revenue share options.

KoolConnect boasts a variety of customized services and solutions including standard and high definition Video On-Demand, high-speed Internet access, virtual concierge services, IPTV (internet protocol television) including FTG services, music On-Demand, in-room media device connectivity.

4. Guest-Tek is the world's largest provider of IP based technology solutions for the hospitality industry. Guest-Tek's OneView ™ platform provides hotels with delivers High-speed Internet, HD Video-on-demand, FTG, HD IPTV, supports IP Telephony, and offers a robust menu and communications platform to hoteliers. Guest-Tek is a preferred vendor to major hotel brands, providing services including network design, procurement, implementation, and post sales customer support to over 2,900 properties and over 506,000 rooms worldwide.

The company's head offices are in Calgary, Alberta, and it has major support facilities in Irvine, California, and Warsaw, Poland as well as Sales offices located throughout North America and Europe.

5. Quadriga is market leader in Europe and the Middle East in the provision of state-of-the-art digital-IP based entertainment and internet services Quadriga is (VOD, IPTV, DVB, FTG) for business and leisure guests staying in hotels, in over 4,000 hotels world-wide and 410,000 rooms under contract.

6. Acentic GmbH provides access to television, film and the Internet to over 235,000 hotel rooms in approximately 2,000 independent and branded hotels throughout Europe. Acentic is the second-largest company in its industry in Europe. Contracts range from five to seven years, with renewal rates in excess of 90%, providing for predictable cash flows. Acentic generates revenues from three sources: in-room movie rentals; hardware rental to hotels and installation fees; and wholesaling of systems to countries where Acentic does not support installation.

Total number of rooms served?

As of June 30, 2008, Lodgenet provided interactive television and other services to approximately 9,900 hotel properties serving over 1.9 million hotel rooms. Within that customer base, they also provide television programming, broadband Internet, and advertising media solutions in approximately 1.1 million, 220,000 and 825,000 hotel rooms respectively. In addition, they sell and operate interactive television systems that provide on-demand patient education, information and entertainment to healthcare facilities throughout the United States. As of June 30, 2008, their system was installed in 23 healthcare facilities.

(1) Total rooms served include rooms receiving one or more LodgeNet services including rooms served by international licensees.

(2) Guest entertainment rooms receive one or more Guest Entertainment Services such as movies such as movies, video games, music or other interactive services.

(3) HD rooms are equipped with high-definition capabilities.

(4) Television programming (FTG) rooms receiving basic or premium television programming.

(5) Represents rooms receiving high-speed Internet service included in total rooms served.

(6) Amounts shown are net of de-installations during the period. The gross number of new rooms installed was 14,676 and 20,623 for the three months ended June 30, 2008 and 2007, respectively, and 32,007 and 38,287 for the six months ended June 30, 2008 and 2007, respectively.

High Definition and Digital Room Growth LodgeNet continues to expand their digital base, including high-definition television (HDTV), as they install their HDTV system in newly contracted rooms and convert select rooms to the HDTV system in exchange for long-term contract extensions. Rooms equipped with their digital or HDTV system typically generate higher revenue than rooms equipped with their tape-based systems.

Total rooms served of Lodgenet and the competition listed above is 3,320,524 internationally. Compare this with the 4,389,443 guestrooms in the US alone (based on properties with 15 or more guestrooms

As of December 31, 2007, no single state or province accounted for more than 13% of the hotel properties served by Lodgenet.

The chart below shows the segmentation of high end hotel brands, leaving 44% of the business to other privately owned or business or economy class hotels.

Lodgenet states that their interactive hotel base is well diversified in terms of location and hotel class.

The primary market for their interactive television network is the mid-size and large hotel segments within the United States, Canada, and Mexico.

Advances in cost engineering, as well as focused design and feature definition, have allowed LodgeNet to create a new solution called LodgeNet VOD Basic, that provides customers the option of adding D2R VOD across a range of property categories, from luxury to mid-scale to economy.

OxfordSVI, One of Lodgenet’s competitors, is a digital solutions company concentrating on the secure high quality distribution of digital video content. OxfordSVI's teams are pioneers in the field of Video-on-Demand (VOD) and hotel PPV. OxfordSVI serves over 2500 hotels with VOD, High Speed Internet Access (HSIA) and Free to Guest services.  They serve mainly small and mid-sized hotels and motels -- a segment of the hotel industry previously underserved and unable to offer such services to their guests. This targeted market of hotel properties between 50 to 300 rooms comprises over 2.4 million hotel rooms in the U.S. and represents approximately 56% of the total hotel market.

Right now, Asia is the hot market.

According to the China National Tourism Association, 132 million foreign, and 1.61 billion domestic visitors traveled to or within China in 2007.  That was a 15 % increase over 2006. Tourism is expected to increase, especially with Beijing hosting the Summer Olympics in 2008, spurring demand for hotel rooms with cutting-edge entertainment, information and guest-connectivity services.

Demand for hotel rooms with five-star amenities is growing at a significant rate in China. There is a great opportunity for a company like LodgeNet to further expand in this region as it continues to grow.

According to The American Hotel & Lodging Association (AH&LA) findings of its 2008 Current and Future Technology Use in the Hospitality Industry study, Wi-Fi services, were, by far, the IT system that guests care about most, according to 82 percent of respondents; Eighty-six percent of responding hotels offered Wi-Fi services, and 20 percent of those not offering it plan to do so within the next five years

In-room entertainment systems and airline check-in kiosks were cited as important to customers by 48 percent and 38 percent of respondents, respectively. 

Results are based on 244 responses received from managers (61 percent) and directors of hotel operations (11 percent) with more than 10 years experience in the hospitality industry (81 percent).

In an article by Ram Gopal, the following are listed as the top 10 trends in the hospitality industry:

Spa Facilities - The hottest trend going in hotels is the spa, the more luxurious the spa the happier the guest. Be it guests staying just the night, or for meeting, or just for the weekend, they all want to hit the spa, even if only for an hour at the end of the day.

Breakfast - The breakfast is fast regaining its popularity. Comfort food, eggs cooked to order, and healthy options with low in fat and high in protein and nutrition. French toast and waffles are a growing trend. New takes on breakfast basics, such as the Lemon Soufflé Pancakes, are becoming more and more popular.

Big Spender's Big Demands - guests are demanding luxury, first-class amenities and added value in return for their money. Flat screen televisions, luxurious bath soaps, superior bed and bath linens, spa service, expectations are at their peek.

Quiet, please – This is said to be a very dominant factor when selecting a hotel or resort. There is a partiality for quiet or soundproofed rooms, along with noise reduction windows and walls.

Leisure Travel to Grow - Leisure Travel is expected to grow despite economic challenges in year ahead. Short getaways of four nights or less remain the most popular vacations and represent over half of all vacations taken by leisure travelers.

The Business Traveler - The newest traveler and spender on the block is the business traveler. With the economy on the rise and big salaries the economical business traveler has started spending big for amenities like individual service, great restaurants and bars, luxurious spas and specialization in g high-end conferences.

Big Corporate Spending - Going on advance bookings for corporate conferences from 20% to 50% over the start of the year, spending on company meetings is definitely on the rise Corporations are spending more and more to gather people together to launch, strengthen and accelerate initiatives. They are also providing their staff and customers full service hospitality environments for work and leisure

Competition Clause - The "Competition clause" is now demanded more often in contracts, precluding the presence of competitors anywhere on the hotel property while a company's executives are present. As competition within industries is fierce and industrial espionage is a big concern.

WiFi – WiFi is no longer a luxury or a convenience, it is now apparently as a necessity, it is not only expected, but is supposed to be free of charge. It's expected that a guest can log on and access email or the office from anywhere in the hotel.

Online Booking - This is a major trend, the majority 66% of travelers go solely to the Internet when planning a future vacation, while 57% report making reservations online.

Designer Website - Your website will be the first thing the guest will see, as mentioned that the majority of travelers go to the Internet to look and book the hotel. So be sure that it has both quality and is has online booking facilities.

A recent article by Darius Helm states that hotel companies have revamped their traditional brands and created new ones to appeal to the Gen X and Gen Y traveler, with hip design and hi-tech features like wi-fi and check-in kiosks. Boutique hotels, with sophisticated styling that is quieter than traditional hotels yet often more luxurious, have been developed by many of the major brands, as well as by smaller independent operators.

Also strong is the limited service side of the market, places like the Fairfield Inn or the Holiday Inn, that offer many basic amenities but few luxuries.

Concurrent has partnered with Miracle TV Corp. (MiTV), to provide state-of-the-art interactive TV ("iTV") technology that allows broadband service providers (BSPs), cable and telephone companies, and hotels to convert each TV into a point of sell. Through this partnership, cable operators and broadband service providers can extend their residential VOD system to support hospitality services, including VOD, to hotel properties. Easy integration with the most popular commercial or proprietary Property Management Systems (PMS) allows the cable operator to bill movies directly to the guest room

SeaChange International is a leading provider of software applications, services and integrated solutions for the management and monetization of Video on Demand (VOD), digital advertising, and content acquisition. The SeaChange GuestServe System delivers video-on-demand and other guest services, Internet access and PC games in a hotel environment for cable television and telecommunications companies. In addition, SeaChange has developed the SeaChange ITV (Interactive Television) System to provide residential video-on-demand and other interactive services for cable television operators and telecommunications companies.

ARRIS On Demand video solutions provides the latest digital video services, from VOD, IPTV, and Network PVR, to advertising and digital programming insertion.

Motorola’s The B-1™ Video Server solution provides a 100% solid-state, carrier-class delivery of on demand video services. It solves streaming scale, space, power consumption, reliability and live ingest issues related to deploying advanced video services such as video on demand (VOD), time-shifted TV, on demand ad insertion, IPTV, network-based digital video recording (nDVR) and ultimately, television on demand (TOD). Its solid-state, switch-based architecture eliminates mechanical hard drives from the server for video streaming.

The LodgeNetRX™ Interactive Patient Television System provides healthcare facilities with an end-to-end interactive solution. It offers on demand patient entertainment, education and communication solution that’s easy to install, use.

Hospitality Network offers a number of fully managed, capital-free revenue generating products and services for our client hospitals, including patient television and telephone rental services, patient internet, patient education services, and preferred accommodation programs. They also serve Senior Care facilities.

Lodgenet offers double play services including High speed broadband internet, WiFi and digital video solutions including IPTV, HDTV, VOD, OCD, and Free to Guest services.

Most of the competition offers the same as Hotels and Hospitals use an in house PBX system for phone services.

Readers who use this information for investment purposes do so at their own risk! Opinions expressed are just that and not based on insider information or information otherwise obtained illegally.

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