Netflix Is Coming To More Hotel Rooms: Can This Boost The Company’s Revenues?

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Recently Netflix (NASDAQ:NFLX) announced a partnership with hospitality company Enseo to provide the Netflix app in more hotels. Under this agreement, guests staying in hotels with devices powered by Enseo can watch Netflix content either by using their existing Netflix account or signing up for a new one. Enseo’s systems are available in 300 hotels in the U.S. and the company says that it has more than doubled its revenue every six months for the last two years. We believe Netflix’s expansion in the hospitality segment ensures that its loyal customers can watch its content more conveniently  on a full screen TV, avoiding Wi-Fi constraints and small screen laptops when travelling. Easy availability of its content while traveling can also attract new consumers who can try the service while on vacation and convert into regular subscribers later.

See our complete analysis for Netflix

Convenient Access While Travelling Can Attract New Consumers

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While making its content available in hotel televisions via its app can benefit existing Netflix subscribers, the company can use this strategy to lure new customers. Existing subscribers can watch their favourite shows while travelling without incurring additional Wi-Fi charges. However the availability of Netflix on the hotel television can also lure new customers to sign up and try the service while they are on holiday. According to an analysis by Enseo , Netflix was the number one most used channel by hotel guests regardless of demographics. Hotels like having the Enseo system in place as a perk for guests and it also frees up their Wi-Fi network for guests needing internet access for other purposes such as checking email. Enseo is the fastest growing hospitality integrator and has recently expanded its services outside continental U.S.  An increasing number of hotels are likely to use Enseo systems in future, giving Netflix a broader distribution base in the U.S.

As per our estimates, Netflix’s U.S. subscribers are likely to increase from around 49 million in 2016 to nearly 60 million by the end of our forecast period.

A faster pace of increase in these subscribers can lead to an upside in our price estimate.

While Netflix is extremely popular in the U.S., largely due to its original content, it faces tough competition from Amazon and YouTube Red. Making its services more broadly available in hotels can ensure that customers remain dependent on its services, with no need to seek other alternatives while travelling. This strategy can also attract more customers to its platform as they experiment with the service on vacation and drive revenues in future.

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