Is the Global Hotel Exchange the great equalizer for hotels in the hotly contested world of online travel agencies? It might not be the end all, be all, but it most definitely is a step in the right direction.
Unveiled during a news conference at last week’s Lodging Conference in Phoenix, the Global Hotel Exchange is the brainstorm of Tom and Melissa Magnuson, who are forward-looking, aggressive marketers trying to provide a less-costly answer for hotels in the online reservation arena.
The company’s news release says the Global Hotel Exchange is a worldwide trading platform introduced to provide transparent “market based pricing” to consumers, while offering global reservation/marketing services at no cost to hotels struggling with economic instability.
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The platform is scheduled to go live in 2012 across Internet, mobile and social networks. The company said it will provide a simple, fast and transparent way to book a room at a fair market price.
Here’s a statement in the Global Hotel Exchange PR piece that must pique the interest of hotel operators: “Hotel owners will receive worldwide marketing at no cost. There are no merchant discounts, commissions or distribution fees of any kind to hotels. Hotels will control their own rates and allocations via security extranet.”
Tom Magnuson said during the news conference that GHE will charge consumers less than US$4 per booking. That transaction cost will be transparent to consumers.
“Our No. 1 priority is to regain control of our margin, price and inventory,” he said.
Magnuson knows of what he speaks. As long-time hotel owners, he and his wife about eight years ago introduced Magnuson Hotels. That group’s website describes the company as “the world's largest independent hotel group representing nearly 2,000 independent hotel properties and resorts across North America and the UK.”
The biggest challenge
Those 2,000 or so hotels will have inventory placed on the Global Hotel Exchange from the start. The Magnusons’ biggest challenge will be to convince other brands—some of which it competed against during the past eight years—to join the GHE platform.
“What we need is support and inventory,” Tom Magnuson said in Phoenix. He added there have been favorable responses from hotel chains but declined to reveal specific names. I believe they will have a lot of interest from brands and hotel companies that are searching for ways to increase their online exposure but trying to get away from what they perceive as out-of-control costs associated with the OTAs currently operating in the hotel space. It might be a limited number of rooms to start, but it seems to me that if the GHE platform offers operators a less expensive way to gain reservations then it is worth a try.
A hotel distribution-channel study set to be released by the American Hotel & Lodging Association, STR (the parent company of HotelNewsNow.com) and the HSMAI Foundation during the next couple of weeks will reveal OTAs make up approximately 10% of the business for the about 24,500 hotels that provided data for the project. It will go into detail about the costs of the various distribution channels in an effort to educate operators about achieving the optimal distribution-channel mix of business. That mix most certainly includes OTAs. The timing of the launch of the Global Hotel Exchange isn’t coincidental—Magnuson referred to the aforementioned study during the press conference and he said he knows online reservations are at the forefront of all operators’ minds.
Marketing and distribution
Magnuson was vague about marketing plans for GHE. During the press conference he said he couldn’t divulge the plan because doing so would give away competitive advantages. It’s safe to assume that GHE won’t be anywhere close to the same league as existing OTAs when it comes to a marketing budget. It’s also pretty clear that GHE will utilize the ever-expanding world of social media as a major distribution vehicle.
“It’s about being where people already are rather than just mass marketing,” Magnuson said.
The company will set up a system of affiliates who will receive promotional codes for discounts that they can pass on to their social circles. When the promotion codes are used, the affiliates will receive a cut of the action. It sounds a bit basic, but it also sounds like it could be a stroke of genius. College kids, PTAs, fraternal organizations and the like could be set up as affiliates to help drive business to hotels listed on the GHE. The news release stated part of the company’s marketing effort will be direct Internet distribution through Google, Rate Tiger, Yahoo, Bing, Facebook, Twitter, EBay, Craigslist, U.S. state and city convention/visitor sites and a worldwide network of social, military, educational, religious and fraternal organizations. The SMERF business could be the hidden gem in the entire plan.
Undoubtedly the company has to prove itself. It has to prove that it has a platform that is reliable, secure and capable of handling everything thrown at it. Time will tell if it’s up to the task, but at least on the surface, the Global Hotel Exchange looks to be at least a viable starting point for hotel operators looking for an inexpensive online portal to potentially drive business to their properties. That’s music to their ears.
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