South Dakota – from www.tnooz.com – All of that free Wi-Fi and widespread availability of Web-based adult-entertainment viewing may be contributing to pressure on LodgeNet, which provides various electronic guest-services to 1.9 million hotel rooms.
The Sioux Falls, S.D., company withdrew a $435 million debt offering because it said the pricing and terms were unacceptable. The company planned on using the proceeds to pay down debt, and is considering alternatives.
LodgeNet gets more than half of its revenue from providing hotels with guest services, including movies and entertainment viewing, Interactive TV, high-speed Internet access, and other connectivity solutions.
In the second quarter of 2010, LodgeNet recorded a net loss of $3.1 million, which was substantially less than it lost a year earlier.
However, LodgeNet has posted net losses for 2007, 2008 and 2009.
In the second quarter of 2010, revenue from guest services fell 12% to $66 million.
“The decline in per room revenue continued to be driven by conservative consumer buying patterns as well as less popular theatrical content during the quarter as compared to the year-earlier period,” LodgeNet stated.
Adult-entertainment viewing undoubtedly is a big-ticket item for LodgeNet and other vendors in their in-room, on-demand offerings, and the widespread availability of porn on guests’ laptops these days may be contributing to the “less popular theatrical content” which LodgeNet referred to.
And, the growing popularity of free Wi-Fi in some hotels can’t be helping revenue streams.
Overall, LodgeNet has been hurt by the slump in business travel and “materially lower purchases by consumers.”
LodgeNet is attempting to turn things around by diversifying its revenue stream and by reducing debt, although the withdrawal of its $435 million note offering is a setback.
The company states: “LodgeNet is fully compliant with the covenants in its existing credit facility, and expects to remain compliant while executing its business plan. The Company will continue to evaluate its capital structure and optimize its overall cost of capital.”
LodgeNet is trying to diversify out of a business line in decline.