CAIS Expects to Check in with Hotel Deals
By Bob Starzynski
An alliance with software giant Microsoft and others to install Internet capability in hotels should allow CAIS Internet to grow at a fast clip later this year.
CAIS, a McLean, Va., subsidiary of Washington-based CGX Communications Inc., has 34 employees and posted around $5 million in revenue last year. But if Redmond, Wash.-based Microsoft Corp. and CAIS have their way with a new Internet solution for hotels, revenue at the Internet service provider will double this year, officials said.
The companies have teamed with 3Com Corp. of Santa Clara, Calif., Cyntergy Corp. of Gaithersburg, Md., and Atcom/ Info Inc. of San Diego, and currently have trial systems running in 10 hotels around the country.
Those trials end this summer and alliance officials expect the first major contract with a hotel chain to come around that time. If any of the major hotel chains bite, CAIS and its partners could come out winners.
"I would like to see at least one major hotel implementing our technology chainwide this year," said Stan Julien, hospitality industry marketing manager for Microsoft. "That means putting the technology in several hundred hotels by the end of the year. And if one chain does it, there will be a domino effect."
Evans Anderson, vice president and general manager of CAIS
The companies are banking on the need of hotels to bring high-speed Internet access to each room without disturbing the existing telephone infrastructure. And this partnership touts itself as the low-cost provider.
"Depending on the complexity, we can wire a hotel for $200 to $300 a room," said Evans Anderson, vice president and general manager of CAIS.
Most hotels built before the Internet became popular were wired with phone lines under the assumption that the average phone call lasts three minutes, Anderson said. Now, guests are going to their rooms and dialing up the Internet on their laptop computers and tying up lines for 30 minutes or more. Hotels are having trouble giving guests enough communications lines, he said.
Competitors in this rewiring market, including large telecommunications companies and Internet service providers, are much more costly because they replace existing equipment in the hotels rather than merely expanding the capabilities of that equipment, Anderson said.
For CAIS, this project could be a major new niche in the highly competitive ISP world.
Ulysses Auger, son of legendary Washington restaurateur "Blac-kie" Auger, bought CAIS in 1996 and put it under the CGX umbrella along with Cleartel Communications, a network of pay telephones. To date, CAIS is most recognized as a provider's provider, supplying other small ISPs with wholesale Internet service.
Although CAIS now provides less than 20 percent of CGX's $29 million annual revenue, Anderson conservatively estimates that the subsidiary will at least double its revenue this year thanks to the new alliance.
In the hotel market, here is how the partnership works:
The system is centered around a Microsoft server-based local area network, which acts as the hub for Internet traffic into and out of a hotel.
Atcom/Info's IPORT technology links Ethernet data ports in each guest room to a high-speed Internet line that bypasses the hotel's existing telephone hub (otherwise the existing hub would have to be swapped for an upgraded system). The data ports are supplied by 3Com.
CAIS sets up its OverVoice technology, which allows both voice and data transmissions to move simultaneously through the hotel's existing copper telephone lines without the need for more elaborate fiber or cable lines to be strung.
Finally, Cyntergy supplies the hotel and guests with 24-hour technical support once the system is in place.
The IPORT/OverVoice system testers include several Marriotts and a Hyatt hotel. The test sites are in California, Oregon, Washington state and Washington, D.C. If a large chain like Marriott hired the partner companies to wire all of its hotels, the team could stay busy with nearly 1,500 properties.
"Considering the market for business travelers, there will be a substantial demand increase for Internet in the rooms," said Gordon Lambourne, vice president of national public relations for Marriott International in Bethesda, Md.
Marriott will evaluate the IPORT/OverVoice system over the next few months, Lambourne said. Marriott also owns Residence and Fairfield Inns and Ritz-Carlton hotels, among others.