What’s My Brand?

Summary

Hotel owners today balance financing, name recognition and integrated loyalty and reservation systems against escalating franchise fees, rigid standards and lengthy contracts. Total brand-related fees rise 3.5% from 2023 to 2024, outpacing revenue growth, and brands now require costly technology and sustainability mandates. As costs compress margins, some owners explore unbranded or soft-brand models.

Unlike other businesses, hotel companies don’t consolidate and eliminate excess assets. Instead, major brand families have doubled their portfolios since 2014 - an average of 24 brands each - adding brands at an annual growth rate over the past decade that beats inflation.

With so many flags to choose from, it’s easy to overlook another alternative – no brand at all. The industry is facing a challenging economic environment, and rising costs, compressed margins, and brand proliferation force owners to scrutinize the value proposition of every relationship.

Why Choose an Existing Brand?

The major brands provide benefits to hotel owners. A few of them are:

Financing

Lenders and investors can more easily evaluate and underwrite a project when they view it as part of a successful and predictable brand.  Importantly, lenders look at hotel projects in much the same way as owners; the advantages (and disadvantages) described below are considered by lenders as well as owners.  The fact that a brand can bring “heads in beds,” provide a standard of operation and maintenance, and support a hotel’s operations are key to any investor or lender.

Name Recognition.

Perhaps the most obvious benefit of branding a hotel is name recognition, and brands work to maximize that benefit. Hotel companies work to make sure the traveling public recognizes the flag, and this makes it easier for a potential guest to choose the owner’s hotel over other alternatives. Flags invest in traditional advertising, social media, AI-driven personalization, spokespersons and other techniques are well-honed and effective. Most importantly, a hotel guest that has a positive experience at one property will assume (not always correctly) that the experience will be the same at other properties.

Brand Standards

Brand standards are key to brand recognition, and can be a benefit to owners in other ways. Even as they represent costs of compliance, they help create uniformity and reinforce the traveling public’s interest in specific hotel flags. Brands have expanded standards to include sustainability initiatives, technology integration (such as mobile check-in, keyless entry, and AI-driven guest messaging), and wellness programming, all of which can enhance guest satisfaction and differentiate properties in a crowded market.

Reservation Systems.

In the end, it’s about “heads in beds.” Hotel companies invest in reservation systems that make booking a hotel simple. Today, these systems are enhanced by dynamic pricing algorithms and seamless mobile integration that meet the expectations of tech-savvy travelers.

Loyalty Programs.

While loyalty programs can be a financial burden for hotel owners, they are a significant draw for hotel guests and increase occupancy. Loyalty program membership has grown over the past decade; it’s estimated that major programs have more than 675 million members collectively.

Travelers are enticed by earning awards for travel, and even if the hotel does not recoup the advertised or actual daily rate, other expenditures, such as food and beverage and other onsite services can provide additional financial benefits. In today’s environment, where travelers increasingly make booking decisions based on reviews, AI-generated recommendations, and social media rather than pure brand loyalty, these programs remain one of the strongest tools for driving repeat business to branded properties.

Operational Support

Hotel brands can be a key source of support when things go wrong. They can provide trouble-shooting expertise, and for brand-managed properties, can provide a deep bench of experienced hotel workers.

The COVID-19 pandemic demonstrated this value, as brands helped hotels adapt to unprecedented operational challenges. More recently, in an era of rising labor costs, supply-chain disruption, insurance volatility, and policy pressures, the operational and advocacy support of a major brand family can be meaningful.

Why not Brand?

While there are clearly benefits to the major brands, they can also present challenges and costs, some of which go hand in hand with the benefits. In today’s economic environment, these challenges are particularly acute: gross operating profit margins are declining across all property types, revenue growth has flattened, and expenses are outpacing revenue growth. Wages, insurance premiums, utilities, and brand-related expenses continue to climb, compressing possibility.  So what is the value proposition of not branding:

Fees

It’s not just the franchise or management fee. Brands impose a dizzying array of fees on owners. These can include food and beverage fees, marketing fees, reservation fees, information technology fees, guest satisfaction fees, training fees, loyalty programs, centralized payments, fees for mandatory property improvement plans, transfer fees, and so on.

While the monthly base royalty fee for a franchise might be 5%, 6% or more of gross revenues, the actual fees paid to the brand can be much higher. A CBRE analysis of 4,200 U.S. hotels showed total franchise-related fees increased by 3.5% from 2023 to 2024 – outpacing the rooms revenue gain during the same period. Guest loyalty program and reservation/marketing assessments also rose during the period. With overall lodging demand growing slowly, owners are scrutinizing the value of these franchise relationships more closely than ever.

Brand Standards

Brand standards provide guidance but also incur costs.  Hotel companies prize a uniform product are unwilling to adjust their brand requirements, even when the circumstances make it hard to justify the standards.

Some brand standards were developed for a guest that might not exist today. For example, complimentary breakfast programs in select-service and upper-midscale brands have expanded in quality and variety, increasing food, labor, and waste costs without generating incremental room rate revenue. And in the fight to lead, brands have introduced mandatory technology tools such as mobile check-in and AI-driven guest messaging, all of which carry implementation costs for owners that can be steep. Technology works when it increases productivity and reduces costs; if labor models remain unchanged, new technology mandates simply add expense.

Long-Term Commitments

Almost all hotel companies rely on long-term, no-cut agreements, often lasting 20 years or more. While this makes sense to the hotel companies, it can be a burden to owners, especially if a flag loses favor, is no longer competitive in the market, or imposes standards that are challenging to meet at a reasonable cost.

Competition

When a hotel company offers multiple flags, those flags may become competitors for the same customer or demographic. Owners usually expect that they will be the exclusive operator of a given brand in an area. Exclusivity provisions are increasingly limited and virtually never cover other brands, even if they pose real competition. While hotel companies have a specific idea of the guests their brands are intended to attract, when a hotel owner sees five, six or more hotels, all under the same hotel company reservation system, in the same market, the owner might begin to wonder if the neighborhood is getting too crowded.

What’s the right decision?

A hotel owner needs to consider some crucial points in deciding on a brand, and whether or not to affiliate with a brand. The decision is more nuanced than ever, given that soft brands have emerged as a viable middle ground – allowing independent hotels to tap into reservation systems and loyalty programs of larger brand families while retaining, on the surface, their unique identity. Any owner considering independence has hard choices to make:

• Do I have the resources to operate a hotel without a brand? Can I create an identity for the hotel, execute its construction or refurbishment, and operate at a competitive level?
• How will I attract guests? If the hotel has an obvious clientele – a major attraction, a university hospital, or another factor that will draw in guests, a vibrant reservation system might not be necessary.
• Will I be able to obtain funding? Lenders and investors are often more comfortable with an existing brand because it has a track record, while an unbranded hotel may have a more challenging time attracting funds.
• Do I have hotel professionals on my team? What will happen if I don’t have a bench to support me?  Hotels are complex operations requiring expertise in revenue management, technology, labor relations, and guest experience.

The Bottom Line

The hotel industry in 2026 operates in a market shaped by AI adoption, sustainability mandates, changing traveler behaviors, and significant economic headwinds. The competitive gap is not a question of whether the hotel company has invested in technology or has not; it’s whether technology has been leveraged into a guest-forward experience.

Originally published by Hotel Online

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.