Magnuson to start online travel venture
October 10, 2011
Magnuson Hotels, the Spokane-based hotel reservation management company, plans to launch a separate company that it says will operate as an international online travel agency.
Tom Magnuson, the company’s CEO, says the new venture, called Global Hotel Exchange LLC, will start as an online travel agency in January and will be similar to an Orbitz.com or Expedia.com website.
“We’re really leveraging our technology out rapidly much more beyond the independent hotel market,” Magnuson says.
“We’re in discussions with all of the top 10 global chains to be on our new platform.”
The company has hired about five new employees here in part to prepare for the new business but also because of company growth, he says, adding to a total of about 50 people in Spokane and 20 at its London office for European operations. The Spokane headquarters are at 525 E. Mission, near Gonzaga University.
Although he anticipates additional hiring in Spokane with the new company, Magnuson says he doesn’t have a specific employment number at this time.
In its eight years, the privately-held Magnuson Hotels has grown through its reservation management services, which now include affiliations with nearly 2,000 independent hotel properties and resorts across North America and in Europe. In August, the business began to offer support reservation services to franchised and branded hotels, and it says it will continue operating its Magnuson worldwide reservation system separately from the new online travel agency business.
Magnuson says the new online venture will offer people seeking hotel reservations a simple model, which he asserts will be less time-consuming than other travel sites that compare rates. The new site, at www.globalhotelexchange.com, will list a 52-week low and high range as part of the hotel searches, he adds.
“Let’s say you’re going to Portland or Seattle, and you say ‘I want to stay near the city center and in a three-star hotel,'” he says, adding that other travel sites may show 200 choices fitting that description. “It’s time-consuming to compare. What we’re doing when you ask that question on this website, instead of 200 hotels, we’ll return six, but they’ll be precisely matched to what you want.”
In a recent announcement about Global Hotel Exchange, Magnuson said the global online service will be offered “at no cost to hotels struggling with economic instability.”
“It’s a very different business model if you were to compare that to a Priceline or an Expedia,” he says. They often charge 25 percent or more to the hotel, Magnuson adds. “We are charging a small pass-through fee to the consumer, which is typically charged on the other sites as well, (but) it will be at a lower pass-through fee to the consumer.”
He says that pass-through fee will likely be in the range of $3, to underwrite the marketing and technology necessary to market and sell rooms without charging hotels a fee. “There’s no commission fee charged to the hotel (once a room is booked), so it’s radically different from anything proposed before,” Magnuson says.
Harry Sladich, executive vice president for sales, marketing, and distribution at Spokane-based Red Lion Hotels Corp., says Magnuson enters the online travel agency arena with a good track record of success. However, it’s entering a field full of competitors, Sladich adds.
“Tom’s shown he can take an idea and run with it,” he says. “I don’t have any doubt that Tom will make this successful. This is a very crowded space, however.” Spokane Journal of Business – The Business Newspaper For The… http://www.spokanejournal.com/article.php?id=7517 1 of 2 10/10/11 9:06 AM Sladich says online travel agencies gained market strength when the industry saw a decline in bookings after Sept. 11. Generally, hotels or chains pay companies such as Orbitz a pass-through fee and then a commission on actual bookings, Sladich adds, and larger hotel companies such as Red Lion have several partnerships with online travel agencies, called OTAs.
He estimates that Red Lion might use them for about 8 percent to 10 percent of bookings, while an independent hotel operator might use OTAs for up to 80 percent of bookings.
“I think Tom’s tool will be particularly beneficial to independent hotels,” Sladich adds, although he says Red Lion will take a look at Magnuson’s new offering as well. “I think his timing is good. Hotels want to see OTAs competing against each other.”
Sladich says most large hotel companies and franchises prefer to book guests directly, which is more profitable and a more direct relationship between hotels and guests. However, he says hotels still turn to OTAs because a segment of the population use them, and they’re also beneficial when hotels offer a promotion to boost room occupancy if certain booking dates are down.
“Hotels’ first line of defense is we’d rather have clients visit us on our phone line or our online site and purchase there first,” Sladich adds. “But OTAs offer some marketing might that is difficult to ignore, especially as you get closer to the date.”
Magnuson says the 52-week rate range that Global Hotel Exchange will display to clients will give people a transparent look at hotel market conditions. It also may show people a better time to book a room during a non-peak period for a hotel, if their schedules have flexibility.
“We’re stripping it all down to what it should be according to the market history, so people can get a transparent look,” Magnuson says. “We will do a futures rate, if you want to buy something far in advance, you can lock in a discounted advance rate.”
He adds, “One of the reasons we think people will like it is it’s so simple.”
In March 2010, Magnuson and his wife Melissa moved to London to launch an international office for the company. Tom Magnuson says the new Global Hotel Exchange will be launched simultaneously in North America from Spokane and in Europe from London.
Overall, Magnuson Hotels as a company reported a 15 percent increase in hotel reservations for the first half of 2011, compared with the same period for 2010. Magnuson says the average daily hotel rate hit $80 for the reservations it secured through its worldwide reservation system, about 6 percent higher than the average rate in the first half of 2010.
The company’s August launch of a support reservation system for franchised or branded hotels, which means these facilities can access low-cost bookings through Magnuson’s reservation network, allows such facilities to increase occupancy on a per-booking basis. The hotels pay a commission on audited bookings produced by Magnuson.
Magnuson recently added social marketing services as well, with support for hotels seeking to gain visibility through Facebook, Twitter, and TripAdvisor.
He says the nearly year-long launch of a European base has shown success. “We have our first 100 hotels here in the U.K.,” he says, which are affiliated facilities. “Our projections call for that to double probably by mid to late spring.”
“We’re going to follow the market conditions,” he adds. “We’re going to continue to expand our services for driving reservations for hotels in this tough market.”
About Magnuson Hotels, the fastest growing hotel chain in history.
In only eight years, Magnuson Hotels has become the world’s largest independent hotel group, representing nearly 2,000 UK and North American hotels with assets in excess of $5.5 Billion. One of the top 8 global hotel chains, Magnuson Hotels is the #1 Hotel Company of Inc. Magazine’s 5,000 fastest growing private U.S. companies.