Together They Stand

Chris Koebelin, general manager of the Magnuson-affiliated Silverdale Beach Hotel on the Kitsap Peninsula.

Seven years ago, Tom and Melissa Magnuson had a simple but
gutsy idea: create a hotel reservation and marketing model that would compete
with large hotel chains by pushing independent, non-franchised lodging
properties to the forefront of powerful internet hotel booking channels like
Expedia and Travelocity.

From a home office in Colbert, 14 miles north of Spokane,
the Magnusons took on the big guys, hotel franchise operations like Best
Western and Holiday Inn. This year, their company, Magnuson Hotels, was listed
in the Inc. 500 as the fastest-growing hotel company based on revenues, which
soared 119 percent in 2009 to $3.8 million from $1.7 million in 2006.

In 2003, its first year of operation, Magnuson Hotels
consisted of a staff of two: just Tom and Melissa as co-chief executive
officers. They signed a modest 12 affiliate hotels in the Pacific Northwest and
British Columbia.

By 2006, the company had added 500 boutique hotels, midsize
properties and full-service convention hotels. That number skyrocketed to 1,200
last year and the staff of two has grown to 62 sales, marketing and reservation
specialists housed in the historic, 1913 Carnegie Library building near
Spokanes Gonzaga University.

Today, 1,500 hotels across the United States, Canada, the
Bahamas and Puerto Rico carry the Magnuson Hotels banner, and this year, the
company took another bold leap by opening a satellite operation in the United
Kingdom. Even before the formal opening of its London office, Magnuson Hotels
had signed 50 properties in the U.K. By the summer of 2010, a staff of 10 hit
the ground running in the country, and in August, Tom, Melissa and their
13-year-old son, Frankie, moved to London to handle the offices startup and
expansion. Spokane remains corporate headquarters, with either Tom or Melissa
spending a week each month at the home office.

In an era when the average traveler finds a place to stay by
surfing the internet, Magnuson Hotels would seem superfluous. But the internet
and Magnusons partnership with travel booking behemoths is precisely why this
model works.

With 2,000 internet channels to contend with, the
independent hotel owner does not usually have the time, expertise or clout to
negotiate individually with search engines for presence, let alone high
placement, says Tom Magnuson. With a nationwide inventory of hotel
properties, Magnuson Hotels does.

Melissa and Tom Magnuson in the companys Spokane offices.

Lets say youre headed for Nashville on business. You click
your favorite internet travel search engine such as Travelocity, type in
Nashville and a lodging list of 250 hotels pops up. When Magnuson Hotels
represents an independent property in that city (in this case, the Alexis Inn),
itll be on the first page alongside top franchised hotels. You may never
realize you just booked your stay at a Magnuson affiliate, although affiliates
have the option of branding as a Magnuson hotel.

The internet has leveled the playing field for independent
hotels as well as emerging internet reservation companies such as Magnuson
Hotels, says Steven J. Belmonte, former president and CEO of the Ramada hotel
chain and current founder and chair of Hospitality Solutions, a nationwide
consultation firm specializing in lodging industry issues.

Positioning is everything, especially in the internet age,
says Morris Lasky, a 40-year veteran of the hospitality industry as well as CEO
and founder of Lodging Unlimited, a management, consulting, marketing and real
estate acquisitions firm. A hotel has to be [in] first, second or third place
on the search engine list because the average traveler wont go much further.
MH puts their hotels right in the catbird seat.

With nationwide hotel occupancy averaging 55 percent, a
50-year low, hotel owners have flocked to the Magnuson brand for another
reason: cost. In the typical hotel franchise model, hotel owners pay an initial
membership fee plus an average of 15 percent of total room revenue, regardless
of the booking source. Magnuson is compensated only on results. There are no
up-front fees, no contracts and the hotel pays 15 percent commission only on
bookings made through Magnusons central reservation system.

While the traditional hotel chains are in the franchise
business, we along with the hotel owners are in the hotel business, Tom
Magnuson explains. Just as the hotel owners have no safety nets, neither do
we. We both have to show up early every day and produce, or nobody gets paid.
There is no other company out there other than Magnuson Hotels that is making
hotels profitable again.

The Silverdale Beach Hotel on the Kitsap Peninsula joined
Magnuson in 2006, transitioning from a franchise branded hotel to an
independent hotel with Magnuson.

Our occupancies have been steady despite the down economy,
and though we are down in some segments year-over-year, we are actually up in
Magnuson bookings, says Silverdales general manager, Chris Koebelin. We have
seen a steady growth in our business. Overall, we are very happy with our
relationship as we get to pay for only what they book, which is the best model
that I know.

According to Steven Belmonte, Tom and Melissa take a
personal approach to the business. That extra effort makes them integral
components of Magnuson Hotels success story.

They understand the industry and have put hospitality back
in the hospitality industry, Belmonte notes. They are gracious, caring toward
their members and they understand the day-to-day operating difficulties that
hotel operators are up against in a harsh environment. Good people often
generate a good following.

Tom Magnuson hails from Idahos Silver Valley, an
evergreen-studded stretch of that states panhandle, once famous for precious
metal mines and the 3-million-acre forest fire of 1910, the largest ever in the
United States.

A bit of a rebel early on, he started working in his
fathers motel in Wallace at age 8, but took a youthful detour in his 20s to
play drums with bands in Los Angeles. Once that lifestyle was out of his
system, he enrolled and graduated from Harvard Business School with an emphasis
in marketing and competitive strategy.

By contrast, Melissa Magnuson is a Southern charmer with no
intention of losing her honey-toned Mississippi accent. Scrappy and smart,
shes worked as a sign painter and a graphic designer, owned an advertising and
marketing agency, and raised four children.

Its no wonder the Magnusons were ready to jump the pond
and take their successful branding and marketing model to new horizons.

Our research showed us an astounding 70 percent of U.K.
hotels outside London are not visible on global travel agent systems or main
internet booking channels. Theyre not part of any franchise, Melissa Magnuson
says. As an English-speaking country, language wont be an issue, and weve
had tremendously positive reaction to our sales and reservation model. Plus we
visited the U.K. three years ago and loved it. Just loved it.