International phone cards cut into profits

THE Hongkong Hotels Association is concerned that the growing popularity of long-distance call cards is eroding the profit of members' telephone departments.

At a recent meeting, it advised members to apply fair and correct telephone charges since the telephone cards - aggressively marketed by telecommunications companies like AT & T, Sprint and MCI - could become a serious threat in the future.

A member of the association said many companies required travelling employees to use the home-direct services' long-distance cards instead of hotels' IDD call facilities as the cards offer volume discounts, convenient monthly billing and easy monitoring of telephone expenses.

As a result of aggressive marketing by telecommunication companies, ''more international travellers are beginning to use home-direct services to make long-distance calls and they are beginning to compete with IDD services which hotels offer'', he said.

Most affected have been business hotels which have a much higher useage of IDD calls. These hotels also have invested heavily in installing IDD facilities and fax machines in rooms.

The hotels association source estimated that a property would need up to $12 million just to open a telephone system, excluding labour costs for round-the-clock operation.


He said the association would encourage fighting the competition in the pricing arena.

''We encourage hotels to apply fair and correct telephone charges and we have to protect the revenue base to continue offering service at a reasonable price,'' he said.

''Hongkong hotels offer among the cheapest telephone services around the world,'' the association member said.

An informal survey by the Hongkong Hotels Association showed that IDD calls from hotels were still cheaper than home-direct services.


The survey also showed that the territory still charged competitive telephone rates compared with cities such as Paris and New York.

He said the phone cards also were beginning to be an issue in most other international cities as ''hotels rely heavily on IDD phone calls for profit''.


Hongkong Telecommunications made available the home-direct service about two years ago although the service has been available for many years in other countries.

The association member said home-direct services were a relatively new phenomenon in Hongkong and ''a way for telephone companies with their enormous marketing power to sell their service internationally and expand their revenue bases''.