IHS Inc. : Growth of North American Hotel Television Market Slows in 2012 Due to Saturation

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With flat-panel televisions already installed in nearly every hotel room in North America, the growth of television shipments to the region's hospitality business will slow dramatically in 2012, according to an report from information and analysis provider IHS (NYSE: IHS).

Shipments in 2012 of flat-panel televisions comprising both liquid crystal display (LCD) sets and plasma models into the for the United States and Canada are projected to reach 1.21 million units, up a relatively tepid 7 percent from 1.13 million in 2011. This compares to the vigorous 28 percent increase achieved last year.

Growth in the North American market also will continue to moderate in the following years ahead, with annual expansion from 2013 to 2015 hovering in the 4.0 and 5.5 percent range, as shown in the figure below.

The forecast numbers, which do not include any in-room hotel TV smaller than 25 inches, also show that overall shipments are anticipated to hit 1.40 million units by 2015.

"Hotel TV shipments surged in 2011 as hotel chains raced to comply with corporate mandates to replace bulky cathode ray tube (CRT) television sets featuring old analog technology and upgrade them to digital, high-definition flat-panel models," said Sanju Khatri, director of signage and public information displays research at IHS. "The mandates, set by the corporate management of hotel chains, included the imposition of fines on hotel properties not in compliance within the time frame for the migration. Upscale hotels, along with management or corporate-owned properties, were the first to comply with the high-definition switchover, followed then by individual franchisees. However, this replacement wave is waning in 2012 as nearly every hotel room now has a flat-panel television."

Big Hotel Chains Go for Flat Televisions
Among the hotel chains that strived to enforce the upgrade mandate last year were InterContinental Hotels Group, Hyatt Hotels Corp., Hilton Worldwide and Marriott International Inc., which together held 1.35 million rooms out of a total 5.80 million supply of rooms in North America. This year, it will be up to the late movers-including the likes of Best Western International Inc., La Quinta Inns and Suites, and Wyndham Worldwide, which have mandates to conclude their upgrades in 2012-to nudge the market forward.

Hotel Tvs: A Breed Apart from Consumer Sets
Televisions outfitted for the hotel and hospitality TV market are not the same as regular television sets sold through retail to consumers. For instance, hotel TVs are likely to be equipped with embedded Pro:Idiom technology that allows the sets to get premium high-definition TV content from cable or satellite services, with no optional cards or external set-top box needed. The sets are compatible with most major video-on-demand and pay-per-view systems requiring digital rights management to the available content or material being shown.

Some manufacturers also offer customized services for their hotel TV offerings, and the sets are Energy Star-compliant for efficient power consumption.

Televisions intended for the hospitality and hotel trade are generally more expensive than sets destined for the consumer channel. It costs an average of $850 for a 42-inch, full HD, LCD hotel TV unit with the Pro:Idiom encryption technology tailored for the industry. In comparison, a similar consumer-grade TV model and brand would cost an average of $650 in retail.

Growth Opportunities Lie Ahead Despite Near-Market Saturation
So far, the hotel TV market is nearly saturated from the flat-panel upgrade, which occurred after LCD and plasma technologies were chosen to replace the long-serving bulky, analog televisions of old. But despite slowing growth in the space, further opportunities for expansion lie ahead, specifically through early hotel-chain adopters to implement TV sets featuring the more advanced light-emitting diode (LED) backlighting technology.

Many luxury and upscale hotels now are poised to upgrade to LED TVs to replace once state-of-the-art LCD and plasma sets, with the midscale hotel segment expected to follow suit in short order. Already owning LED TVs at their own homes, travelers in the luxury segment are increasingly vocal about television viewing preferences when on the road, so the jump to provide LED TVs among high-end hotels is a logical move, IHS believes. LED TVs also have the additional benefit of sporting a slimmer profile-an important consideration in hotel rooms, where space is at a premium-along with better picture quality that allows hotels to future-proof purchases, and 30 percent improved energy efficiency that can lower the electricity cost for hotels.

Hotel Construction Slows

A former driver of growth in the hotel TV space, the construction of new hotels in North America, will play a less significant role in 2012 compared to prior years. U.S. hotel companies in particular, emerging fresh out of a tough economy, are likely to rein in capital expenditures on new construction, choosing instead to focus on the renovation of existing infrastructure.

In the North American hotel TV market, South Korea's LG Electronics remains the market leader, but share is growing also for fellow South Korean rival Samsung. Panasonic Corp. likewise continues to be a strong competitor in the hospitality trade with its line of LCD sets. Each brand offers its own specific technology set and price point, leveraging strengths against those of the competition to continue vital customer and channel relationships.

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IHS (NYSE: IHS) is the leading source of information and insight in critical areas that shape today's business landscape, including energy and power; design and supply chain; defense, risk and security; environmental, health and safety (EHS) and sustainability; country and industry forecasting; and commodities, pricing and cost. Businesses and governments in more than 165 countries around the globe rely on the comprehensive content, expert independent analysis and flexible delivery methods of IHS to make high-impact decisions and develop strategies with speed and confidence. IHS has been in business since 1959 and became a publicly traded company on the New York Stock Exchange in 2005. Headquartered in Englewood, Colorado, USA, IHS employs more than 5,500 people in more than 30 countries around the world.

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