One thing I’ve noticed after writing this newsletter is that themes surface slowly, then all at once. A conversation starts in conference hallways, pops up over coffee, and then suddenly it’s everywhere. Lately, that conversation has been about the economics of the owner-brand relationship.
First, it was growing frustration over ever-larger PIPs. Then came questions about rising franchise fees. Now Marriott owners are publicly asking for a larger share of the profits generated by Bonvoy’s co-branded credit cards, arguing that while they help fund the loyalty program, the economics have become increasingly one-sided.
There is also brand proliferation. Owners used to worry about another hotel flying the same flag nearby. Now they worry about the brand family launching a cousin, sibling, or “totally different” concept down the street. Technically not the same brand. Practically, still another competitor in the same loyalty ecosystem. Cute trick.
To be clear, this isn’t an anti-brand story. Brands still provide tremendous value through loyalty, distribution, financing credibility, technology, and consumer trust. But owners are looking more closely at the math.
Imagine selling a $100 room. Roughly $15 may immediately go toward franchise-related fees. If that booking came through an OTA, another $18 could disappear in commission. Add a few dollars for credit card processing, and before the owner has paid a housekeeper, turned on the lights, covered insurance, property taxes, debt service, or started saving for the next PIP, that $100 room is already closer to a $65 room.
That’s why this conversation matters. Hotel owners don’t pay their bills with RevPAR. They pay them with profit.
Sloan Dean recently pointed out a stat that pretty much sums up the tension: since Hilton spun off its owned hotel real estate into Park Hotels & Resorts, a lodging REIT, in 2017, Hilton’s stock is up nearly fivefold while Park is down roughly 22%. One is an asset-light brand and fee machine. The other owns actual hotels; which means actual roofs, actual payroll, and actual capital needs. Wall Street seems to have decided which side of that trade it prefers.
According to CBRE, franchise-related fees grew faster than hotel revenues last year, with loyalty and reservation fees seeing the biggest increases. That’s exactly why this conversation is gaining momentum. Skift has also reported that many brand agreements signed 20 or 30 years ago are coming up for renewal, prompting more owners to reconsider the relationship.
Going independent isn’t a silver bullet either. Owners can lose loyalty demand, face more challenging financing, and often see lenders place a lower value on independent hotels. The grass isn’t always greener.
HHH Explainer: Hotel Brand Economics 101
| Term | What it Means |
| Franchise Agreement | The contract allows a hotel to operate under a brand, typically for 10 to 20 years. |
| Royalty Fee | The core percentage of room revenue paid to the brand. |
| PIP (Property Improvement Plan) | Required renovations to maintain brand standards, often costing millions. |
| Loyalty Fee | The hotel’s contribution to programs like Marriott Bonvoy or Hilton Honors. |
| Reservation & Marketing Fees | Funds brand reservation systems, sales, and marketing efforts. |
| Brand Standards | The operational and design requirements every branded hotel must follow. |
| Deflagging | Leaving one brand to become independent or join another flag. |
| RevPAR vs. GOP | RevPAR measures revenue. GOP (Gross Operating Profit) measures what’s left after operating expenses. Owners ultimately live and die by profit, not just revenue. |
