A few days ago we had the opportunity to speak with one of the most interesting and innovative thinkers we’ve engaged in some time. Tom Magnuson, CEO of the largest independent hotel brand in the world, Magnuson Hotels, is the subject in today’s profile.
Eventually, hard work pays off. Not always in the ways we expect, but pay it does. Such is the case with a chance (if there is such a thing) encounter via our travel news element, Argophilia Travel. An article there, about Travelport’s and Orbitz’s financial woes, evidently prompted Magnuson’s boss to contact me – which in turn led to this discussion.
To make a long story short, a brief call turned into a full fledged interview with one of the hospitality industry’s most successful and dynamic leaders. As you will see, Tom Magnuson has all the earmarks of a game changer.
So You Want a Success Story?
Tom and his wife Melissa Magnuson founded Magnuson Hotels from their Spokane, Washington home, believe it or not. Since then, the group has grown to become the biggest independent player in the hotel game – in only seven years. Magnuson is now the 7th largest hotel chain in the world. To be short and to the point here – Tom and Melissa’s accomplishments are astonishing.
At the core of this mercuric success story, is the Magnusons’ ingenuity, vision, but most importantly – honesty and logic system. I won’t make any bones about it, I liked the Tom instantly – and understood the reasoning behind his successes too. The Magnuson Hotels schema is pretty simple – a sort of deregulation of the hospitality industry – helping hotel owners make money, without killing the goose that laid the golden egg. A strategy that has finally found it’s perfect timing. Magnuson spoke with us from his South London home about this and other industry matters.
The Tell Tale Heart of the Travel Matter
The problem with online travel, with the systems for selling flights, rooms, anything online, is the middle man. Plain and simple, as costs are driven down by competition, something has to give. We are seeing this played out all over the Internet business landscape, but nowhere more acutely than airline tickets and hotel rooms. In our discussion, Magnuson cleared the air from the get go:
“The only way for the independent hotel owner to survive is by cutting cost without cutting the quality of services provided.”
Tom Magnuson did not need his Harvard Business School degree to decipher this reality! Just why the rest of the digital community has not raised the banner, is anyone’s guess. It’s probably because Expedia, Kayak, Orbitz, LastMinute, Travelocity, Sabre, and a score of other players shudder at the thought? If the big OTA’s thought Google and ITA software’s acquisition was a game changer – unfair search, as it were – Magnuson’s dogma will certainly be tantamount to Edgar Allen Poe’s Telltale Heart – a sort of maddening, fear-inducing lament that only waits its time. But, the time may be so near…
Hand Me the Booking Screwdriver, Will Ya?
I know all the readers out there have run across a kindred spirit of two over time. Talking with Tom took me back a bit, to a time when forthright openness seemed to fit more than it does most times these days. I discovered that for Magnuson and other such leaders, the time for subterfuge is done. For hotel owners (any kind of hospitality operators) we are talking about survival first, then thriving business. One big problem is the intermediary’s cut, so to speak. But, not just the cut – but what hotel owners get. Airlines to bike rentals it’s time for a la carte help services – economical and effective commerce between owners and providers. Magnuson explains:
“So often these days hotel proprietors just need a simple tool to boost their business, OTA’s and other providers are not so keenly focused on this economy of need. It is like the hotel owner is a mechanic asking a helper for a Phillip’s head screwdriver, and the OTA brings back the whole tool chest. What’s more, the big chest does not contain the screwdriver either!”
Google, Screwdrivers, and Hotels 2.0
And here’s where the real news comes in about Magnuson. In January of the coming year, Magnuson will launch a service called Global Hotel Exchange, an online startup resembling Expedia or Orbitz, but wholly differentiated by its business model – and its value to not only hotel owners, but in the end, hotel guests. Rather than a tool chest full of nice, but sometimes useless tools, a light switch (as Magnuson called it) for hotel owners. It’s a sort of “pay as you use it” conduit for bookings in my view. Magnuson explains a bit about Hotel Exchange:
“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.”
The model of no commissions works well, Magnuson has already proven this. Unlike Expedia and the others, Global Hotel Exchange will monetize differently. Just like the “light switch” analogy, hotels will only pay what is called a “pass-through fee” of about $3, to support the platform basically, not 24% of the booking like some. Simplicity, economy, reach, all things Magnuson can supply readily without massive innovation. Believe it or not, Google has already initiated a similar plan – all-be-it unbeknownst to many.
If this sounds like a sales pitch for Tom Magnuson, I guess it is. The question the critical reader should ask though, the one that will matter, is; “Why so transparent about advocacy for Magnuson?” The answer should be apparent. Because, whether anyone out there likes it or not, Magnuson just put a stake through the heart of the competition.
In essence, his initiative is all but foolproof. Just like Magnuson Hotels has garnered some 2,000 hotels across the US and the UK so far, Global Hotel Exchange will see flocks of partakers. This is not rocket science, just a digital fact. A sort of time/pressure physics no one can argue with (without sounding idiotic).
Two final notes for now. Being wrong about given’s like Tom Magnuson is just not something we do here. Not to brag, but transparency goes in both directions. From Wikia Search (which ended up costing me a good friend in Jimmy Wales- the truth hurts sort of thing) to Google Travel of late, predicting the obvious is not rocket science either. I will try and gain access to Tom’s new startup for a review, but for now it is enough to realize the execution of the idea is the innovation.
Second, we do not work for Tom Magnuson as of yet (Tom, if you are reading this, expect a proposal). But, I can tell you this, I would sooner write blog posts for a man like Magnuson, than sit at the strategy table with 100 so called “visionaries” I know. It’s not about success either. Magnuson seemed impressed by this writer’s “call it like I see em” character – well, who would not want to have played for Vince Lombardi?
I leave you with video of Vincent Price from Poe’s Telltale Heart, a look inside the corporate headquarters of Expedia perhaps – wondering if the telltale rumor of no commissions will beat-beat-beat resoundingly.