Magnuson Hotels is expanding into the UK, and CEO Tom Magnuson is promising owners there not another brand, but a platform.
Magnuson described the need for independent hotels to compete not only with the corporate brands but the sharing economy as the country’s market undergoes fundamental changes.
“Fundamental industry changes have been taking place in the UK,” Magnuson said. “Eight or nine years ago, it was 80 percent or 90 percent unbranded. People didn’t want to think about a brand—but there has been a huge increase in brands with Travelodge and Premier Inn, and now that 80 percent to 90 percent is 49 percent. The brands are tipping the scale.”
The average 70-room UK hotel, operating at 70 percent occupancy and £70 average daily rate, could see a three-year net profit increase of £624,654 by joining Magnuson's platform, Magnuson said. The company charges 5 percent of gross room revenues for the first year and includes membership in the marketing alliance of more than 8,000 hotels and 800,000 rooms across 50 countries with Louvre Hotels Group and Jin Jiang Hotels.
Magnuson acknowledged the UK’s long history of affiliation and association brands. “There are many classic affiliations in the UK—some of them are suffering from inflated fee structures. Our brand accommodates the uniqueness of hotels because they don’t need a standardized fit-out. It’s not so much that owners need another brand, [but that] they need a platform partner to compete against the advance of corporate brands and the impact of Airbnb," he said. "If you have a hotel in the market in the UK you need a strength, you need more than a channel manager and an [online travel agency]. Independent hoteliers in the UK can benefit from this change. All hotels need help. If they are in a franchise they are often suffering under crushing property improvement plans, so now they can divest themselves of this fee structure.
“Customers are rejecting standardization. They are rejecting this marketing. If you can magnify your strength with a platform and make a point for uniqueness at a lower cost, then that is what we are proposing.”
Airbnb and its Ilk
Magnuson’s comments came after the Hotel Alternatives Event 2018, hosted in London by Hotel Analyst, at which BDRC director Tim Sanders told delegates a survey by the marketing group had found that 21 percent to 52 percent of hotel guests in the UK had used Airbnb. “These are drawing demand away from hotels,” Sanders said. “For some guests, brands have lost the local connection. The concept of consistency has become toxic. Airbnb is the fifth most-recognized accommodation brand amongst British business travelers. The comfort of a home was the top reason for using Airbnb, for business and leisure travelers, over cost. This is an area where the industry really needs to get its act together.
Sanders said a sense of adventure also is a factor.
"They don't just want accommodation; they want an experience, personality, authenticity,” he said.
The sector is being forced to appreciate that Airbnb and its ilk are now the competition. Working out how to address issues such as comfort and personality, while also competing with the distribution of the brands, is creating a niche that Magnuson Hotels hopes to fill.
Katherine Doggrell is an editor at Hotel Analyst, the U.K.-based news analysis service for hotel investors.