Why it is time for a free global distribution system
February 5, 2012
Standing at the leading edge of 2012, most of us are so worn out from the relentless battering of global uncertainty, we’ve forgotten what we are working for. To have a happy home, with kids dreaming big dreams, planting a garden, having that fishing boat, maybe even taking art lessons someday, these are the things many hotel owners dream of. But, by the time we all pay a third of our falling hotel revenue to franchises and OTAs, there’s not enough resources, let alone strength, left to protest.
Back in 2002, my wife Melissa and I had a dream, to move to a safer part of town and enroll our six-year-old son Frankie in a good school nearby. I had sealed a deal with a small 15 hotel Canadian chain to build a global marketing and distribution platform. With this deal, we had an expectation of a 3-year contract, so we closed on that house and our son Frankie enrolled in school.
Like many entrepreneurs, I didn’t have the contract signed the day before we started work. As I got in the car to go to Canada in late November 2002 to sign, I received a call from the Canadians, “Tom, you don’t need to come up, we’ve changed our minds.”
I walked back in the house absolutely crushed. “Melissa, what are we going to do? We’ve built the infrastructure to support a global chain, but we have nothing to put into it. We can’t build this one brick at time.” You may identify with this moment, a moment when she said; “What choice do we have? This is exactly what we need to do.” So, I got back into the car and over the next couple of months convinced 12 independent hotel owners to trust us to provide ‘all the power of a global chain, but without the high costs.’
Nine years have passed now, and the global hotel market has flattened. Falling occupancies, lower room rates, higher operating costs. We get no answers from our government leaders, and there are no growth engines anywhere in the world that will drive our occupancies back from the 30, or 40, or 50% occupancy to anywhere near the 65-70% we need to survive and grow.
In the US alone, over $20 Billion a year in franchise and OTA fees are paid, leaving less and less for owners. Less money locally means unemployment rises, property conditions deteriorate, and the economic negatives trickle down. Some 10,000 plus US hotels face a record number of hotel foreclosures. There are no funds available from the bankers, and no revenues headed to them either.
The only way hotel owners will survive this new landscape will be by reducing costs, which is why it is time for us to launch a free global distribution system. http://www.globalhotelexchange.com/ will go live in March of 2012, providing worldwide Internet reservations with no merchant discounts, commissions, or distribution fees of any kind.
I grew up out West in a small silver mining town called Wallace, Idaho. Down at the local penny mining stock exchange, my dad Harry Magnuson and his pals had a warning for the Wall Streeters who’d come to town looking for easy takeovers back then. “There’s room for the bears, there’s room for the bulls, but there ain’t no room for the pigs.”
We may not make much money with Global Hotel Exchange, but that’s not why we built it. Global Hotel Exchange is simply the right thing to do, at a time when it is most needed. What the world needs now is a return to free-market principles transparently aligned with the interests of hotel owners, not publicly traded corporations immune to the sheriff’s padlock.
Nine years ago today, Magnuson Hotels went live. Thanks to those 12 first hotel owners and nearly 2000 more independent hotel owners, we now are a global organization comprised of a world-class team of marketing, pricing, sales, SEO, financial and technology specialists. In the next few weeks, we will expand soon as Magnuson Worldwide, to ready ourselves for the next task.
It is time for a free global distribution system, and time for every one of the 300,000 hotels in every corner of the world to stand up for ourselves and make the right decision. Let’s eliminate the uncertainty of the world by simply having faith in ourselves and in each other. Register for free here to join Global Hotel Exchange.
What will you do with an extra 35% back in your business? Will your home be happier with a little less stress? Will you hire another employee so you can take an extra day off each week to paint, plant a garden, and spend more time with your kids?
Taking our hotels back cannot happen in one day, and it won’t happen without your help and our hard work. But it will get done, and we will do it the same way we did it before.
We will build it one brick at a time.
Thomas Magnuson CEO,
Magnuson Hotels and Global Hotel Exchange