Magnuson Worldwide’s alliance with Louvre Hotels Group is the second recent initiative from the hotel industry to expand customer choice and encourage direct spend.

Magnuson Worldwide and Louvre Hotels Group are the latest hotel companies to realize that strength lies in numbers when it comes to distribution platforms and linking branded and independent product.

On 29 June, the two companies signed an agreement to place their combined inventory on a shared distribution platform starting this September.

It is an idea with similarities to AccorHotels’ recent decision to open its distribution platform of some 3,800 properties to approximately 6,200 invited independents (AccorHotels’ officials mentioned they wanted a round number of 10,000 properties for the expanded platform) around the world. Both the Magnuson/Louvre and AccorHotels’ initiatives give customers more choice and act as a counter to the rising strength of online travel agencies, sources said.

“Our geographies are so different, which is attractive. The agreement is a great way in a nimble alliance to consolidate a lot of effort, achieve global scale, and use our resources and tech to reciprocally sell one another in noncompeting territories,” Magnuson’s CEO Thomas Magnuson told Hotel News Now.

Magnuson Worldwide works with more than 1,000 independent properties, mostly in the United States, which use its sales and marketing or distribution systems, but it also has 150 branded hotels under its own flags—Magnuson, Magnuson Grand and M Star.

Louvre Hotels Group has more than 1,133 properties (93,000-plus keys) in 48 countries over six brands and global sales in 2014 of €1.6 billion ($1.77 billion). Jin Jiang International recently acquired Louvre, and the two inventories combined comprise 2,800-plus hotels and 345,000-plus keys. Properties under Louvre’s umbrella consist of owned and managed (28%), management contract (26%) and franchised (46%). It has six brands, including Campanile, Golden Tulip and Kyriad.

“Our product and consumer base are very similar, largely 3- and 4-star. Yes, (Louvre’s parent company) Jin Jiang International does have some higher-end hotels, but mostly Magnuson and Louvre share the same ethos, service model and customer type. Customers referred from Magnuson will not be disappointed with Louvre, and vice versa,” Magnuson said.

The alliance between the companies involves hotels in approximately 50 countries.

Pierre-Frédéric Roulot, president and CEO of Louvre Hotels Group, also sees the worth of the companies’ strategic alliance.

“When we looked at the market and (hotel) companies in the U.S., we saw Magnuson as the key partner, firstly because of the size of Magnuson hotels, which is comparable to ours and in the same segments. (Magnuson’s) is a U.S.-centric company; we are Europe-centric,” Roulot told HNN.

Magnuson said the present point is the perfect time for the initiative.

“The economy is continuing to look better, freeing up consumer confidence to travel. We’re in a space and time right now where things are flying,” Magnuson said, adding that industry fundamentals will allow additions to his own three brands.

In swings Jin Jiang

Magnuson said the two partners had been working on the initiative before Chinese company Jin Jiang International agreed to acquire Louvre in November 2014.

Vivian Zhou, Jin Jiang’s deputy director of investment and development, confirmed that and said Magnuson and Louvre gave Jin Jiang the courtesy of rubber stamping the deal after it had purchased Louvre.

“We saw it as a great idea. The two companies are highly complementary but geography varied,” Zhou said, “and there is not a significant amount of investment initially.”

Zhou said that while Jin Jiang’s main focus is to continue expansion in China, its focus for the Magnuson-Louvre alliance is to increase travel by its European guests to North America but not to be involved in the day-to-day management of Louvre or the new alliance.

“There could be a possibility to test the waters with Louvre in North America, but that is not on the books at the moment,” Zhou said, adding that Jin Jiang continues to look at opportunities in Europe. At present, Jin Jiang only has properties in China.

Offering more

Having robust and varied distribution platforms involving independents is important, Jin Jiang’s Zhou said.

“One of the reasons us with Louvre and Magnuson, and AccorHotels with its decision, are joining hands together is to have a proper conversation with OTAs, which we have seen are very successful. (Information technology) is very important to any company, but we cannot follow the business models of the OTAs, or even Airbnb. We must follow our own product to get a successful business, and we need to have a good product,” Zhou said.

“Increasing direct spend is the target, but that is by no means easy against the strong power of the OTAs. We need to do it step by step, and what Accor has been doing is the right direction,” Zhou said.

“My personal view is that it is important to have these platforms, but we and Accor, and others, cannot be the sole owners of those platforms. If you do, your investors will challenge you. Yes, favor your own hotels, but overall the platform should be relatively independent,” Zhou added.

“The distribution platform will accelerate development for all the respective companies. If I can bring you business from China and 48 other countries, that is a significant development benefit and reciprocal,” Zhou said.

Roulot agreed.

“The OTA gives the customer a worldwide offer. I do not have enough (capital expenditure) to invest in that many hotels, so we wanted to do something similar to what we did in China with Jin Jiang four years ago,” Roulot said.

In 2011, Louvre and Jin Jiang, while separate companies, signed an agreement to share reservations systems and to market both brand names on each of 15 Campanile hotels in France and 15 Jin Jiang properties in China.

“That was the right strategy for us in China, and we wanted one in the U.S., similar to what the airlines do with their worldwide alliances, to work with the loyal customer who goes to the Web and wants the offer. We did not have the offer. Now we do,” Roulot said.

“We discovered the right mechanism in China, where it is a different way of doing business. Jin Jiang has a very strong loyalty program, with 16 million members, and when you ask them any question, the answer is a number. It is very impressive,” Roulot added.

“I am not in a war against OTAs. They do a good job, and it is a job we cannot do. … We have no sales force in the U.S., but if a French person books via an OTA, I did not do a good job. And when I ask customers why (they booked via an OTA), they said it was because we did not have a big enough geographical selection,” Roulot added.