TLabs Showcase on travel startups featuring UK and US-based Global Hotel Exchange (GHX), a new worldwide trading platform for hotels to distribute and market inventory.
Who and what are you (including personnel and backgrounds)?
What we are: Global Hotel Exchange. GHX is a new worldwide trading platform introduced to provide transparent “market based pricing” to consumers, while offering global reservation/marketing service at no cost to hotels struggling with economic instability.
Going live in March 2012 across internet, mobile and social networks, Global Hotel Exchange is a consumer booking platform that will provide ‘market based pricing,’ a simple, fast and transparent way to book a room at a fair market price.
Who we are: GHX is an independent corporation headed by founder and CEO Thomas Magnuson. Detailed background.
What financial support did you have to launch the business?
GHX has been funded internally. Facebook’s evident IPO is one of the dynamic changes and events upcoming, which will open many opportunities.
One can clearly see that this is a time when new forms of democratised industry structure are rising up and taking hold rapidly.
We may not make much money, but that’s not our motive. Magnuson Hotels and Global Hotel Exchange is reforming as Magnuson Worldwide to ensure that this idea goes as far as the market will allow.
What problem are you trying to solve?
In the US alone, over $20 billion a year in franchise and OTA fees are paid, leaving less and less for owners. As a result of contracted funding, declines spiral in employment, property condition and owner profits.
Finally, a record number of hotel foreclosures loom, as there are no funds available for the bankers. The only way hotel owners will survive will be from reducing costs, there is no other way.
Describe the business, core products and services?
Transparent, simple, fast OTA alternative offering market based pricing for consumers, free bookings for hotel owners.
Consumers searching for specific cities, points of interest, dates and star ratings can book from a list of matching hotels with each hotels’ rate next to a market-specific 52-week low/high rate range for that particular search.
Market based pricing provides simplicity to the consumer. Its benchmark pricing answers the question “…what is today’s rate compared to the last year?” allowing for groundbreaking transparency in hotel pricing while delivering consumer trust in a fair price.
In contrast to expensive OTAs, 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. Global Hotel Exchange charges a small service fee to consumers for each booking, which underwrites the marketing and technology necessary to sell rooms at no cost to hoteliers.
For hotel owners struggling with declining occupancy, falling rates and the instability of worldwide economic conditions, Global Hotel Exchange introduces a hotel industry growth platform designed to give back control of pricing and margins immediately.
Market based pricing brings back fair market value to the hotel owner, combating the increasing blur of hyper-promotions and discounts that are eroding hotel operator profits. Easily accessed historic rate range will help owners with forecasting.
Who are your key customers and users at launch?
GHX will be going live in March 2012 simultaneously in over 30 countries. It will feature some of the most iconic hotels in the world as well as small independents. In addition to nearly 30,000 hotels of all calibre and type, GHX will also carry all of the top brands.
Did you have customers validate your idea before investors?
Yes, we did. Feedback from within our own group of hotels, as well as random questionnaires and inquiries with guests inside and outside our organization, indicated points of pain at either end of the B2B and B2C spectrum.
This data, combined with data readily available industry wide, showed a significant opportunity for us. As for investors, our venture was and is self-funded.
What is the business AND revenue model, strategy for profitability?
It is all about finding and serving a good purpose. When this happens, the means will follow.
That being said, our strategies and monetization ideas are one of the proprietary aspects of Global Hotel Exchange. Our ideas on these and other issues are an even bigger part of our disruptive innovation than technologies are.
SWOT analysis – strengths, weaknesses, opportunities and threats?
Strengths:
- Leading, low-cost IT, easy to use for hotels and consumers.
Weaknesses:
- Our competition could roll out the same product (but they won’t). There are no real weaknesses, given our expectations and the realities of GHX as a platform. We cannot reveal more at this time.
Opportunities:
- Serving overwhelmed and jaded consumers with a simple, fast and transparent service.
Threats:
- Well you can guess what these are!
Who advised you your idea isn’t going to be successful and why didn’t you listen to them?
The only ones who say this will not be successful are those invested in systems than can be passed by. As for advice, we took our own success mechanisms and levelled them at online travel market dynamics.
Essentially, GHX is a GDS and marketing extension of what Magnuson Hotels was and is for independent hotels. We are just executing tried and true strategies into another sphere.
What is your success metric 12 months from now?
If owners and consumers are happy, then we will be all good.
By this we mean, complete hotel and guest satisfaction with our service. In the larger sphere, providing something every hotel in the world can and will use, as well as a channel any traveller can trust and save with.
We do not see any down side in everyone using GHX.
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About Kevin May
This appears to be very hotel-friendly, but very consumer unfriendly. Unless you can convince hotels to drop their rates for you only (which would defeat the whole purpose of the product — to help hotels raise revenue), how are you going to get consumers to use the tool?
a) Your rates are going to be on par with OTAs or the hotel web-site
b) You are charging an extra fee, which we know people HATE and every other site has done away with
c) Even best-in-class hotel search engine products have a really hard time attracting critical mass users, there’s a lot of competition for the audience.
Am I missing something? Would love to hear thoughts on this.
I agree with Evan in that charging a fee to users is terribly risky in the current environment, especially when users have many other sites to choose from and hotel pricing is competitive across comp sets and channels.
The consumer marketing and UEX had better be spectacular to compete with the myriad other channels out there and overcome users’ certain negative reaction to the booking fee.
And hotels have to use an extranet to load rates and availability? How 2003. I would argue that your first partnerships should be with some of the channel management tool providers. The no-fee distribution model sounds good conceptually, but once a potentially burdensome manual process kicks in, hotels may opt out, reducing available inventory and rendering the model unsustainable.
It’s a bold move in such a market, and I’ll be watching with interest to see how this works out.
I also agree with the risk of charging users. But many users do not know that they actually pay 10-20% to “usual” booking portals/ OTAs anyway. So you might need to educate users.
And, as Evan wrote in a) most OTAs have “best price guarantee”, which means a hotel cannot offer its rooms for a lesser price elsewhere (oftentimes even not on their own websites!). But the on-par/ best price guarantee is something that may fall, e.g. for HRS in Germany… Will be interesting to see how GHX will do.
the best price guarantee will not fall for HRS and makes a lot of sense for hotels in conjunction with parity if used properly…
what the antitrust office is concerned about is the most-favorite treatment clause that HRS implemented which theoretically requires hoteliers to give last-room availability at the best rate through any channel.
A very bold statement. Kudos for that to GHX!
Hate to appear negative but I do have to support Evan and Valyn:
Charging a fee to a consumer would only work if GHX’s rates are MUCH lower that everyone else’s. PCLN gets away with that, for example – but their rates are often 1/2 of the BAR, so the value is still there.
But sorry – the only reason hotels will be willing to display MUCH lower rates via a TRANSPARENT channel is if it OUTSELLS all OTAs they are working with at the moment so that hotels can break free from the OTAs. While there is a possibility GHX has a few branding/marketing aces up their sleeves which we are not aware of, the chances that it will outsell Expedias of the world at the outset are pretty slim.
But hey, in 1998 nobody believed the world needs yet another search engine
We shall see 
Consumers paying a booking fee? – Fail
Is @Valyn right? You want hotels to use an Extranet? – Fail
You say “We may not make much money, but that’s not our motive” – really? Then why start a business? What is your motive? Are you a non-profit?
Sorry – maybe we’re missing something(s) here other than a nice UI and great value proposition to hotel partners?
Hi all…
I asked GHX to come back and answer some of these specific points.
Perhaps disappointingly, it has declined.
An official says this is because the business “will be launching very soon and that will hopefully address some of the questions/comments made by people”.
A possible consumer-funded model is where the consumer is paying a regular suscription fee (ex: $5/month) in order to get access to a private platform with preferential rates.
As far as the private rates are really below market, consumers can perceive immediate savings from the first booking on.
Beyond a breakeven point, the platform gets recurring revenues.
Hotels can sell at net rates higher than through other channels, yet lower than OTA public rates.
There are other limits with this model, and it all holds on the promise that preferred rates are really lower than market, but so-called “private” clubs seem to be working quite well these days.