Magnuson Hotels thrives with independent owners
SPOKANE, Wash. – February 2008 - In the hotel industry, common
logic has it that the big chains hold a competitive advantage over their
independent counterparts. But, don’t tell that to Tom Magnuson, the founder,
principal owner and chief executive officer of Magnuson Hotels Inc., a
Spokane-based company that offers independent hotel owners many of the
same benefits typically enjoyed by chain hotels, but without the costs
and requirements imposed on franchised hotel owners.
“Magnuson Hotels was established as a low-cost alternative to the franchise
model, which can be very expensive,” Magnuson said. “How this company differs
from the franchise system, and what we provide our affiliates, is somewhat
synonymous; we offer complete brand power to our member hotels without
the costs and requirements of the major hotel brands.”
The five-year-old company, which bills itself as the “world’s largest
independent hotel group,” provides independent hotel owners with low-cost
access to a worldwide reservations system, hotel supplies and medical savings
networks. Its mission is to help independent hotels compete directly with
the big boys by saving them money, and it appears to be working.
In March 2007, the Atlanta-based Asian American Hotel Owners Association
chose the Alexis Inn & Suites – an independent property affiliated
with Magnuson Hotels located in Nashville, Tenn. – to receive its Independent
Hotel of the Year award. Not bad, considering the Alexis Inn competes with
more than 147 chain-affiliated hotels in a six-mile radius.
“As an independent hotel, we needed all the help we could get to stand
out among the big brands, so we affiliated our hotel with Magnuson Hotels,”
Atul Kapadia, Alexis Inn & Suites president, said. “We didn’t want
to be subjected to the traditional high fees brands charge; instead, we
paid Magnuson Hotels – our hotel marketing and reservations company – only
for performance-based results.”
That is the foundation upon which Magnuson, an AAHOA member, started
his company. "I grew up working for my parents, who owned franchised and
independent properties," Magnuson said. "At the age of eight, I was either
working behind a front desk or schlepping pizzas with my dad, and I still
own property with my 85-year-old dad. I incorporated the experience that
I gained from working for my parents into Magnuson Hotels. As an owner
who writes checks daily, I know what our affiliates go through. That's
how I designed the Magnuson Hotels business model, which is a fee-based
system that is dependent on the success of our reservations system."
Simply put, the company's fee structure is based on the number of reservations
it delivers to its affiliates, who are not bound by long-term contracts.
Customers make their reservations via the Internet and Magnuson Hotels'
massive computerized reservations system, which is linked to over 650,000
travel agents worldwide, more than 2,000 Internet booking channels and
many major commercial airline Web sites.
Additionally, Magnuson Hotels offers its affiliates guaranteed priority
national and international placement on Orbitz, Travelocity, Priceline
and TravelWeb; priority search-engine visibility and targeted advertising
on Yahoo!, Google, MSN and AOL; and group tour sales and representation
via the National Tour Association and other group-tour Web sites.
But the hallmark of Magnuson Hotels is the company's "Payback Brands
program," which is designed to give affiliated hotels the highest average
rates within their competitive sector by clearly communicating the property's
location, service type and quality; it is so named because Magnuson-affiliated
hotels that align with one of the Payback brands receive a cash rebate
annually. The program, which Magnuson Hotels launched in Sept. 2007 at
its own expense, includes: M Star Hotel, Magnuson Hotel and Magnuson Grand
"Our mission is to increase our affiliates' revenues and lower their
costs," Magnuson said. "So we developed this at no cost to our affiliates
and it doesn't cost them anything to join – we don't charge them any brand
fees like chain hotels charge their franchisees. The real key differentiation
here is that we are the first company in the hotel industry that gives
money back to the individual hotel owners; for every affiliate who joins
the Payback Brand program, we set a revenue target with them that we hope
they will meet, and every six months we measure their performance. If they
meet or exceed it, then the hotel owner receives a brand rebate in the
form of a check."
Magnuson founded the company in 2003 with his wife, Melissa. The couple
persuaded 10 independent hotel owners to sign on with the fledgling company,
which quickly generated reservations for their hotels. That initial group
of hotel owners – thrilled with the results – then told other independent
hotel owners about Magnuson Hotels, and the business quickly grew. And
it hasn't stopped – today, the company is the 17th-largest hotel company
worldwide, with more than 620 member hotels and 43,400 rooms. It employs
12,500 people in 48 states and Canada. The combined assets of Magnuson
Hotels’ affiliate base are worth $3.5 billion, according to the company.
Magnuson estimates that 60 percent of the hotels affiliated with his company
are AAHOA members.
For Kapadia, the president of the Alexis Inn & Suites, and his business
partner, Khirrit Bhikha, Magnuson Hotels has helped the company do more
than just survive, which was their goal when they purchased the property
in 2003. In the four years since the acquisition – and the Alexis Inn’s
subsequent affiliation with Magnuson Hotels – the property’s business has
thrived, growing an average 30 percent per year. It currently ranks among
the top-10 hotels in the southeastern United States on travel-booking Web
site Travelocity.com, it ranks among the top-10 Web searches for Nashville
airport hotels on Yahoo! and has maintained a 3-star rating with AAA.
“Magnuson Hotels has been wonderful for our business – their philosophy
mirrors ours very much,” Bhikha said. “We don’t think of Magnuson Hotels
as a huge company, but how they can improve our business. And when they
do that, we win and they win.”