Magnuson Hotels, a 5-year-old Spokane-based company that markets and provides reservation management services to independent hotels, says its business has soared since it launched a branding campaign last September.


About 100 hotels across the country currently are in various stages of changing their identities to the Magnuson Hotel brand, says Tom Magnuson, CEO of the company, which portrays itself as a low-cost alternative to expensive franchise chains. Another 500 hotels are affiliated with Magnuson Hotels, but arent using its brand name, he says.


We are growing quickly by offering a solution for those who want to have a brand, but are unsatisfied with their current franchisor, Magnuson says. He says a lot of franchise-affiliated hotels want to defect but still want to share an identity with a national company to remain more identifiable to potential customers.


Magnuson Hotels operates a Web-based reservation-booking system and negotiates group pricing on services such as listings on industry travel-listing systems originated by airlines. The systems, called global distribution systems, are used by more than 650,000 travel agents to book reservations. Magnuson Hotels also arranges discounted credit-card processing fees for its members. It charges its members per-reservation fees for bookings made through the reservation system it provides. It also derives some revenue from a system-access fee that it charges its clients based on the number of hotel rooms a property has.


Through the new branding program, the company offers its clients a method to terminate their previous franchise relationship, but maintain a way to identify themselves as part of a larger group, signifying a quality standard, Magnuson says. It also offers assistance with changing the hotels identity, including designing logos, which can be a significant expense for a hotel thats considering changing its identity.


Magnuson declines to disclose the companys revenue, but says that it grew about 45 percent last year and, due partly to the new branding campaign, is up 48 percent so far this year.


In March of 2007, the marketing and reservation management company set a goal of doubling the amount of revenue each hotel brings in by 2009. Its on track to meet those goals, Magnuson says. Already, he says, its member hotels have had average revenue increases of 32 percent.


Also, he says, Magnuson Hotels works with each hotel to set reasonable and conservative revenue target goals.


Magnuson says he wants the company to double the number of hotels it represents by next year and that continued increases in the number of both independent hotels and brand-affiliated hotels make the goal very attainable.


I think theyre both speeding up, Magnuson says.


The company now employs about 26 people, not including the Magnusons, which is up from 10 employees a year ago, and leases a 4,000-square-foot office at 605 E. Holland, on Spokanes far North Side. Its a finalist this year for one of Greater Spokane Incorporateds AGORA business awards, which recognize businesses that contribute substantially to the regions economic growth.


Now with 600 affiliates, the Magnuson Hotel group claims to be the 17th largest hotel group in the world. Also, Magnuson asserts that the groups members are outperforming hotels around the country by achieving better occupancy rates and a better average daily room rate than national averages. For example, he says, in the mid-price hotel segment, which nationally is charging rates between $65 and $85 a night, Magnuson-affiliated hotels are averaging rates of between $85 and $99 a night. Rates, of course, fluctuate daily as demand for rooms ebbs and flows.


In every segment, our hotels have been performing at the upper end of their sector, Magnuson says.


Magnuson, who founded Magnuson Hotels with his wife, Melissa, says the companys launch of its own hotel brand isnt a contradiction, but rather is an expansion of the companys original goal to help independent hotels compete in a franchise-dominated market.


As a growing company, you have to evolve, he says. He claims the companys new brand differs from that of a franchise chain in that it provides hotels a financial incentive for meeting performance goals, in the form of a 10 percent rebate on their reservation fees once they hit their revenue goals for each six-month period.


The Magnusons say they saw a need beyond traditional hotel franchises, and started the independent hotel group in their home with a dozen friend- and family-operated hotels as customers, and their kids stuffed marketing packets after school to send to hotels to attract them to the company. The son of North Idaho businessman H.F. Harry Magnuson, Tom Magnuson grew up in the hotel industry, starting with the Stardust Motel that his father built in Wallace, Idaho, in 1964, and operated hotels himself in Wallace. Melissa Magnuson operated an advertising agency in North Idaho until the couple decided to launch Magnuson Hotels together.


We had some abilities and talents that are complementary, he says. Word spread, and here we are now, 600 hotels later.


Magnuson attributes the companys growth to the benefits hotels receive from Magnuson Hotels for what he describes as a substantially lower cost compared with traditional hotel franchise fees, which he says average about 15 percent of total revenues, regardless of how much business a franchisor helps a hotel get. By contract, Magnuson Hotels member hotels only pay the company fees, which have a base rate of 15 percent, on the hotel bookings the Magnuson reservation system produces. In return, the hotels agree to provide a certain level of service and to resolve any customer complaints promptly, Magnuson says.


He contends that traditional hotel franchise chain fees amount to a gross revenue tax and that those companies frequently place restrictive and expensive demands on their member hotels, dictating amenities and even structural upgrades to hotel properties at the hotel owners expense.


Magnuson says independent hotels traditionally have had only two choices for marketing themselvesto affiliate with a major chain, or to go it alone in trying to compete for business.


Going it alone is a battle for survival, and makes it difficult for independent hotels to get onto listing services used by travel agents that are critical for increasing a hotels volume of room bookings, Magnuson says.


He says Magnuson Hotels customers either want to get the value of a reservation service without giving up their identity to a chain or have been affiliated with a chain and no longer can afford the rising costs associated with a franchise.


Magnuson Hotels has negotiated group pricing on such things as supplies from Home Depot that its members might need and on their credit-card processing fees. The most vital service, though, that the independent hotel group offers its members is its reservation-management system, Magnuson says.


The company markets its member hotels in several ways beyond creating a Web page for each one on the Magnuson Hotels central reservation Web site. It buys space on global travel agent listing services, Magnuson says. It also gets its clients listed on separate online travel Web sites. The most common are sites such as expedia.com and travelocity.com, but Magnuson says that through such links, the company is represented on about 2,000 online travel sites in all. It develops relationships to get its hotels the best possible positioning on those sites, so that when a person searches for a hotel in a particular city that has 30 pages with 10 listings per page, the Magnuson affiliates come up on the first page of 10 listings, for example, he says.


Finally, the company sends information about its member hotels Web sites to search engines such as Google and Yahoo.


Magnuson contends that traditional hotel chains also list properties, but only update their affiliates information once a season or annually. Magnuson, however, assigns each hotel to one of its marketing representatives, and that person manages the hotels room rates daily, adjusting them up or down depending on fluctuations in room inventory at their hotels and in the hotel market, and then adjusts online rates immediately, he says.


Theyre almost like electronic day traders, Magnuson says.


Though its customers continue to operate independently, Magnuson Hotels has defined a few benchmarks of a certain quality standard that it requires of its member hotels, Magnuson says. They must be nonsmoking properties, offer wireless Internet access, and offer some type of continental breakfast.


We insist on quality standards, but we do not insist on particular amenities, Melissa Magnuson says. Something that works for a property in downtown San Francisco wont work next to the airport in Kentucky.


In addition to its other services, Magnuson Hotels tracks hotel ratings online, through the reviews that customers submit to travel agent Web sites. If there is an unfavorable review, Magnuson contacts the hotel and asks it to respond to the customer within 24 hours and to let Magnuson know what resolution the hotel came to with its customer.


The consistency our company provides is great locationswere in every kind of locationand quality. People want a (good) location, good quality, and a fair price, Tom Magnuson says.


With the launch of the Magnuson brand, a hotel also has the option to use the Magnuson name on its signs, for no additional charge other than the cost it incurs in replacing its signs, he says. In addition to providing free logo design services to its clients, Magnuson Hotels offers a discount with a sign maker that a hotel can call for new signs. Magnuson contends that other hotel chains frequently charge sign makers a fee to get their business, and pass the cost on to their customer hotels when they buy signs.


The Magnusons say that maintaining a focus on helping their customers increase their revenues in turn has helped Magnuson Hotels achieve its substantial growth. The Magnusons say they still thrill at the individual successes of their clients every day.


Tom Magnuson cites one case in which a husband and wife who own a particular hotel were taking turns running the front desk on the day and night shifts, but thanks to an increase in revenue after they affiliated with the Spokane company, were able to hire an additional employee to work the night shift.


For some of these guys it was just like jumper cables, Magnuson says.


Contact Jeanne Gustafson at (509) 344-1264 or via


e-mail at jeanneg@spokanejournal.com.