Why Hotel Owners Are Walking Away From the Big Brands

Franchise agreements in hospitality, as Skift puts it, “tend to favor the house.” A generation of those agreements is now expiring — and hotel owners are walking away from the table.

What Happened

A wave of multi-decade hotel franchise contracts signed in the 2000s and early 2010s are reaching expiration in 2026. According to Skift’s reporting, some owners are choosing not to renew, opting instead to “deflag” — remove the brand entirely and operate as independent properties.

The math behind the decision: franchise fees average 8.6% of room revenue for economy hotels, rising to 12.4% for full-service properties. That’s a significant overhead burden on top of renovation requirements, operational standards compliance, and distribution fees that come with major brand affiliation.

Why Owners Are Leaving Now

The economics have shifted against the franchise model in ways that compound over time. Online distribution has reduced the advantage brands once provided through centralized reservation systems — travelers increasingly book on OTAs or direct search results that surface independent properties alongside branded ones.

At the same time, the OTA travel market holds significant capital that hasn’t freely returned to owners — a dynamic Skift has separately covered as one of hospitality’s persistent structural tensions. Independent properties can price differently, reduce distribution costs, and capture margin that franchise fees extract.

The trend toward “deflagging” has parallels in how soft brand franchises have grown as a middle ground — collections like Marriott’s Autograph Collection and Hilton’s Curio allow properties to retain independent identity while accessing brand distribution. These programs grew 19% over the prior decade as owners sought the marketing benefit without full brand compliance.

What It Signals for Travelers

For travelers who optimize around loyalty programs, deflagging creates a gap. An independent hotel may not earn points in your preferred program, may not accept elite benefits, and may not carry the brand’s service standards. The upside is more distinctive properties with differentiated character — the tradeoff that independent hospitality has always offered.

For travelers who primarily book on price and reviews, the brand label matters less than it once did. The Marriott and Hilton flags are weaker quality signals on booking platforms than a property’s own review profile, and independent hotels increasingly know it.

The wave of deflagging doesn’t represent the end of major hotel brands — the brands that own management companies, not just franchise systems, are more durable. But it does suggest the franchise model’s hold on hospitality real estate owners is looser than it’s been in decades, which shapes the inventory you’ll find in the market going forward.

Source: Skift

Content created with AI assistance and reviewed for accuracy.