Cell Site Leasing for Hotel Owners: How Wireless Data Will Impact Your Bottom Line
In 2012, wireless subscriber use surpassed 100% – meaning that the average person in the US has more than one wireless device. Wireless data use is expected to quadruple between 2012 and 2017 (CTIA) The problem for wireless carriers who provide these data services is that their cellular systems were designed to accommodate voice traffic not data traffic. Since voice traffic is significantly less burdensome on a wireless network than data traffic, the wireless carriers will invest over $25 billion in 2013 to improve their wireless networks. This capital is going primarily to new cell site development and to modifications on existing cell sites. In either case, hotel owners stand to gain additional revenue from rooftop cell site leases.
Currently there are over 285,000 cell sites in the United States, some of which are located on hotel rooftops. Some industry experts expect that number to grow by a factor of 4-8 times over the next decade. Because of the NIMBY effect (Not-In-My-Back-Yard), it is harder to get a new cell tower approved and wireless carriers are looking more towards existing structures including rooftops. Furthermore, the carriers have been using shorter, more frequent sites to add capacity to their networks. This translates to use of buildings that the carriers had previously ignored.
Most hotel owners like that the revenue from rooftop cell site(s) is ancillary and is not subject to fluctuation due to the general economy. A rooftop cell site rarely impacts any usable space in the hotel as the carriers place their equipment on the roof itself. After initial construction, the wireless carrier sends technicians to the site on an infrequent basis and most hotel owners rarely notice their presence. The downside from a rooftop cell site is the occasional disturbance when construction or maintenance work is being completed. Furthermore, the average cell site lease is for 25 years so the hotel owner who signs a lease with a wireless carrier may be limiting future redevelopment of the property. Despite these small issues, most hotel owners would prefer to acquire additional cell site leases and the revenue.
The lease rates that are paid by the wireless carriers fluctuate fairly widely with most hotel owners receiving between $1,000/month and $3,000/month per each individual lease. These leases typically escalate at 3% per year and are rarely terminated. The primary factors that we have identified that impact lease rates are as follows:
- Difficulty of Zoning Regulations: How restrictive are local zoning ordinances regarding the placement of cell sites?
- Availability of Suitable Alternative Rooftops or Structures: Are there other rooftops of similar height within the area that the wireless carrier is searching?
- Underlying Demographics: What population does the subject site intend to cover? Are they high capacity users of wireless services?
- Purpose of the Cell Site: Is the site intended to add capacity to the network or is it intended to expand coverage of the system?
Before you raise your hand and say that you want a cell site lease, it is important to note that in 99% of existing cell site leases, the carrier identified the specific property and approached the landowner. There are companies that will “market” your property for a percentage of revenue, but there is no need for the average hotel owner to use these companies. First off, each of the wireless carriers has a free form on their website for submittal of properties for consideration for lease. Secondly, these marketing companies rarely procure interested carriers who are not already aware of your property. There is no reason to give up a percentage of revenue from cell site leases to a third party company who is unlikely to improve your chances of getting the lease in the first place.
If you already have a cell site lease, chances are you have been contacted or will be contacted in the near term by the carrier to make modifications. Sometimes the carrier will ask for your consent to perform “maintenance” on the rooftop equipment and in other cases, they will offer to compensate you for the modifications. In either case, the smart hotel owner should ask for construction drawings before they consent to any modifications. In many situations, the wireless carrier has no right to make the modifications and is asking for consent to avoid paying the hotel owner additional rent which would otherwise be required. Thus, before you grant consent, make sure you understand whether your lease allows for these modifications. If it does not, you may be entitled to extra compensation. If in doubt, contact an expert in wireless leases.
Because of escalating data requirements by the wireless carriers, hotel owners are well situated to procure new revenue from either new leases or from expansion of existing leases.