From working as a bellboy at his parents' motel in Idaho to becoming head of the world's biggest independent hotel group, Thomas Magnuson has created an empire with his concept of a low-cost alternative to traditional franchising. His partners benefit from the opportunities afforded by belonging to a chain, but are still independent.
text: Stefanie Bisping // photography: Melissa Magnuson
Two computers at home, a fax machine in his son's room, an idea in his head. The story of Magnuson Hotels begins like that of many start-ups, but differs from most others due to its immense success – and its protagonist. "The idea was staring us in the face, but nobody seemed to see it," Thomas Magnuson, co-founder and CEO of Magnuson Hotels, remembers. Sometimes it takes a visionary to recognise the obvious.
Fifteen years ago, he and his wife Melissa invented an inexpensive alternative to the franchising system, allowing small, owner-run hotels to benefit from the reservation and marketing opportunities available to a large chain without relinquishing their independence. What initially seemed like trying to square the circle grew into a brand with over a thousand hotels on four continents. With more new additions in the last ten years than eight of the world's ten largest hotel chains combined, Magnuson Hotels is the fastest-growing brand in the history of the hotel industry.
None of it was planned. "I never intended to go into the hotel business," the 61-year-old says, "it just happened to me." Growing up in a small hotel run by his father and grandfather by the highway near the border between the US states of Idaho and Montana did not so much inspire him in his choice of career, as offer him plenty of opportunities to supplement his pocket money. "As a child I did every job going in the hotel. I manned the reception desk and worked as a bellboy." Magnuson is glad of the experience. "I learned a lot about people and gained a good understanding of how to deal with customers."
But initially he chose a different path. Magnuson, who was already earning money as a drummer at the age of fifteen, studied music in Boston and became a professional drummer. He spent ten years in Los Angeles, where he worked as a studio musician, playing the drums for bands like Jethro Tull. "My father and grandfather were quite old-fashioned in a way and set great store by discipline," he says, attempting to explain his success in this field. "I transferred those work habits to music."
But success brought enormous pressure. In his early thirties, he felt "hounded and burnt-out," Magnuson says. "I began studying business to get out of it. I hoped to find out at university what my next step could be." A phone call from his father helped him to decide. "He wanted to start retiring gradually and asked me for help." Suddenly he and his wife Melissa, who owned an advertising agency, found themselves in a small town with a population of 2,000 – and in the hotel business.
They learned first-hand what it's like to be a privately run hotel trying to hold its own on the global market. The internet, with the new booking possibilities it offered, was becoming an incalculable competitor to lone operators at the beginning of the millennium. Online booking systems were controlled by large chains, while small hotels had no access to them. "We struggled, but we also feared that collaborating with a big brand would require us to go through a very expensive standardisation process," Magnuson says.
The problems became even more evident when soon afterwards he began working for the board of directors of Best Western on a voluntary basis. Magnuson says, "I kept hearing the same sentence at the owners' meetings: Wouldn't it be nice if there were a brand that would give us the opportunities available to a large chain but would let us keep our independence?"
Thomas Magnuson knew the answer. In 2003, he and Melissa founded their company. First of all they developed an online booking system at their home in Washington State, with their two computers and a fax machine in one of their sons' bedrooms. They spoke to a dozen friends and relatives who ran small hotels or motels in the north-west of the USA, offering them a platform that would allow the hotels to keep their names and their independence, but would connect them to a global distribution system. In the year the company was founded, Magnuson connected his customers to 650,000 travel agents.
The results were overwhelming. The fax machine in their son's bedroom never stopped, spewing out a constant stream of bookings from all over the world. Thanks to the discipline he had learned from his father and grandfather and the professionalism he acquired as a drummer, Magnuson managed to maintain an overview during the initial hectic phase. The most important thing was customer satisfaction. "The owners were delighted," he remembers. One hotelier whose establishment was on the coast of Oregon next to a Hilton was suddenly receiving reservations from Europe and Asia – just like his neighbour, who had hitherto been much more powerful.
The rest is history. Word soon got around that there was a way to be connected to the world at a low cost – five per cent of gross income generated from rooms, instead of the usual fifteen per cent – and to benefit from the centralised marketing system of a large organisation. After a year the new company had a hundred members; soon afterwards, it had five hundred. Many new arrivals had terminated existing franchising agreements because they were dissatisfied with them, but did not want to be left without the protection of a big name. The Magnusons created three brand names for them in 2006: "Magnuson Grand" for upmarket hotels and resorts, "Magnuson Hotels" for mid-range establishments and "M Star Hotel" for the budget sector.
A saturation effect never occurred. On the contrary, "Growth is continuing," Magnuson says, sounding a little surprised himself. "All I wanted to do was help my father with the family business. But it turned out to be a vocation, and now it's grown into something universal." Recently concluded partnerships with Louvre Hotels and Jin Jiang in Shanghai now allow him to offer his customers membership of a global marketing alliance of 8,000 hotels in fifty countries.
Because it's not their thing to stand still, the Magnusons put out feelers towards Europe in 2010. They went to London to sound out the situation in the British Isles. This proved to be a challenging step. "It's a completely different market," says Magnuson. "While owners in the USA usually regard a hotel as an investment, as a property, many hotels in the UK have been owned by the same family for generations. They have a much closer relationship with their hotel." Furthermore, he adds, hotels in the USA are much more likely to belong to chains. The Magnusons therefore tend to sell their digital services more than their three brand names in Europe. Other problems are similar on both sides of the Atlantic: worries about occupancy rates and competition from chains like Premier Inn and Travelodge make life difficult for independent hoteliers in the UK.
The company acts like a lifeboat in this situation, Thomas Magnuson says. Owners delegate technology and marketing to the company, allowing them to focus on quality and service. They do not have to comply with set standards. "We don't work like that," says Magnuson, explaining that an average Google rating of three stars is a sufficient starting point. Then the company checks guest satisfaction – which is always at the heart of success – on social networks.
It's Thomas Magnuson's nature to regard problems as essentially solvable. "Sure, times are becoming more difficult in many respects," he concedes. However, he adds, "If you're open to new strategies and willing to try new things, you'll have a great many opportunities as a hotelier."