Hotel Franchises: Owning & Investing Considerations

Hotel franchises have become a dominant force in today’s hospitality landscape. Hotel franchising has become the preferred model for global hospitality brands pursuing asset-light strategies to grow quickly without owning property, with the percentage of global franchise rooms rising to 63% in 2022.

Franchising allows hotel owners and investors to operate independently under a well-known brand. The appeal of the model is understandable in a market where predictable demand offered by loyalty programs and operational support matter more than ever.

Perhaps due to global hotel companies becoming increasingly competitive in franchisee acquisition, franchise systems are evolving, with the promise of value added going beyond name recognition. They provide cutting-edge tools, training, and commercial and operational infrastructure that help hotel owners run successful businesses.

This article explains how hotel franchising works and what to consider when deciding if franchising is the right path.

What is a Hotel Franchise?

A hotel franchise is a business model in which a property owner (the franchisee) operates under the brand of a larger hotel group (the franchisor). The franchisee benefits from the brand’s established systems and customer base, and in exchange, pays a combination of upfront and recurring franchising fees.

Unlike a management contract, where the brand operates the property, a franchise agreement allows the owner to retain control oer the hotel’s operations. This means overseeing areas such as staffing and budgeting while adhering to agreed brand standards.

Franchise agreements typically last between 15-30 years, meaning the relationship is long-term and requires clear alignment in expectations and strategic direction. In return, franchisees gain access to a wide range of services and commercial advantages, from marketing support and staff training to negotiated supplier rates.

Franchisors may also provide support in the form of brand technology platforms, such as revenue management tools and data, to help owners set optimal room rates and manage demand to improve occupancy and profitability over time.

Furthermore, when joining large franchise ecosystems, franchisees may access customers through established loyalty programs that can be very powerful drivers of direct and repeat bookings.

What are Hotel Franchise Brands?

Leading hotel companies like Marriott, Hilton, Wyndham, and Accor have all adopted multi-brand strategies, which means that they own dozens of distinct hotel brands that target specific market niches, ranging from budget-friendly to luxury.

Marriott alone hosts a portfolio of more than 30 hotel brand options, and choosing the right one requires an understanding of the specificities of the target market.

The reason behind the companies’ ever-expanding brand portfolios is that they want to cater to as many asset classes and investor profiles as possible. Owning the hotel properties is not part of the strategy of franchise-focused hotel properties, meaning that their growth comes from expanding the franchise network with more contracts.

Hotel Franchising Fees: Costs of Becoming a Hotel Franchisee

Hotel franchisees pay a set of fees to be able to establish a franchised property and to continue to benefit from the brand over the duration of the agreement.

The financial structure typically includes:

• Initial franchise fee (a one-time entry cost)
• Ongoing royalty fees (usually 2-6% of gross room revenue)
• Marketing and reservation system contributions (often 1-4% of gross room revenue)
• Loyalty program fees (charged on qualifying revenues)

According to HVS, the total franchise fees can range from 8-12% of the hotel’s gross revenue. Typically, the higher the scale of the hotel, the higher the associated expenses.

While the franchising costs reduce margins, they are often offset by the higher performance of the hotel due to the affiliation with a well-known brand.

Owners should also budget for FF&E (furniture, fixtures, and equipment) reserves and periodic renovations mandated by the brand. While some franchises impose a set reserve (often 4–5% of revenue), others allow more flexibility.

Over a 15- to 30-year franchise agreement, these capital expenditure requirements can become quite significant.

What sets the most profitable hotel franchises apart is not necessarily the lowest fee structure, but a combination of strong brand equity, meaning the value and trust a brand has built over time, and the resulting ability to attract more clients.

Smart hotel owners treat franchising fees not just as a cost but as a strategic investment from which they expect measurable returns.

Pros and Cons of Owning a Hotel Franchise

Hotel franchising has become one of the most popular business models in hospitality because it has advantages for both investors and hotel brands. However, there are also some trade-offs that should be weighed carefully before deciding to invest in a hotel franchise business.

The Power of Loyalty Programs in Hotel Franchising

Access to loyalty programs is one of the most significant advantages of hotel franchising. The largest hotel franchise companies like Marriott, Hilton, and Accor provide franchisees with global name recognition and a bunch of loyal customers ready to collect points from their stay.

For example, Marriott Bonvoy and Hilton Honors boast over 200 million members each. These rewards programs help with getting direct bookings, which is crucial for improving margins in a market where online travel agencies (OTAs) can command commissions of 15-25%.

Franchise Systems Offer Built-In Operational Support

Operational support and franchise infrastructure are other key benefits. In addition to marketing tools and procurement advantages, agreements often include detailed brand manuals that can, depending on the brand, include instructions for almost any situation imaginable.

When the operational procedures are standardized to a high extent, it helps hotel chains maintain consistency across markets and lowers the barrier of entry into hotel ownership for new franchisees. The many fees associated to getting said support can erode profitability

Brand Recognition: A Double-Edged Sword

Lighting up the sign of a recognizable brand above the entrance of your hotel is undoubtedly a major advantage of hotel franchising, but it also carries inherent risks. If the brand suffers reputational damage, for instance, through a public scandal, it can directly affect all affiliated properties, leading to guest mistrust and reduced bookings simply by association.

Benefiting from a well-known name also means sharing vulnerability with the brand. As a hotel owner, this means exposure to risks that are outside of your control, where what happens on the other side of the franchise network can have an impact on your property. This is why it is essential to evaluate not only the current reputation of a hotel brand when choosing one, but also how consistent its public relations have been.

Align Franchise Ownership with Your Business Goals

Owning a hotel franchise can come with worthwhile support, but it is also a long-term commitment to a brand that inevitably shapes how the business can be run. It is important to make sure that the terms of the franchise agreement align with your expected return on investment and your own management ethos.

Franchise vs. Independent Hotel: What is Right for You?

Choosing between developing an independent hotel brand and owning a hotel franchise is a strategic decision that depends on your goals and the extent to which you want to control the aspects of your business. All hotel ownership models have their respective advantages, but they are very different in action.

Franchise Advantages Over Independent Hotels

Owning a hotel franchise allows you to benefit from globally recognized branding and almost built-in customer loyalty, as well as comprehensive operational support. The level of commercial infrastructure offered by hotel franchise companies is hard to replicate independently.

Furthermore, hotel franchises have a special advantage over independent properties in less mature hospitality markets and standardized locations like airports and business parks, due to their predictability. This directly translates to RevPAR premiums of 10% or more over independent hotels in comparable locations.

Benefits and Drawbacks of Independent Hotel Ownership

That said, owning an independent hotel allows for a level of creative freedom that is inaccessible in traditional franchise agreements. For guests who value uniqueness and authenticity, independent hotels may be more compelling choices for their stay as opposed to the standardized experience offered by franchise hotels.

Independent hoteliers maintain full control over the concept and operations of the property, and they are not subject to contractually binding brand standards. This makes room for the possibility to reinvent and adapt in changing market situations.

However, without the backing of a larger company, independent hotels may be more vulnerable in times of crisis compared to their branded counterparts, who can benefit from the embedded booking power of a loyal customer base.

Soft-Brand Hotel Franchises: A Strategic Hybrid Option

Today, soft brands have emerged as a “third option” between franchising and total independence. Due to investor demand for flexible franchising models, the growth of soft brands has outpaced that of both traditional branded and independent hotels.

Soft brands have less strict criteria for affiliation, meaning that independent hotels can retain much of their unique identity and still benefit from belonging to a franchise network.

Examples of soft brands include the Autograph Collection by Marriott, which includes unique upscale and luxury hotels, and the lifestyle-focused Tapestry Collection by Hilton.

Which Model is Right for You?

Ultimately, the decision comes down to your goals as a hotel investor or owner. If you want structured support and do not want to build a brand from scratch, a hotel franchise may be the right path. But if you have a distinct concept in mind and want full operational freedom to execute your vision, the flexibility of building an independent brand could be suitable.

How to Become a Hotel Franchise Business Owner: Choosing the Right Hotel Franchise

Becoming a hotel franchise business owner starts with selecting the right brand and understanding the structure of the agreement you are buying into.

Hotel franchising is not a one-size-fits-all model, which is also why there is a vast array of brands to choose from

The first step is conducting due diligence on hotel franchise companies and their brand solutions. When evaluating a franchise opportunity, consider the following:

• Brand fit and positioning in market context: What is your target market and customer? When choosing the brand, owners should not only look at the reputation of the parent company but also the performance of the specific brand tier in the target market. For instance, select-service hotels such as Marriott’s Residence have shown stronger profitability in suburban and secondary markets.
• Operational support: What kind of training, marketing, procurement, and technology infrastructure does the franchisor provide? Is it recurring over the time of the agreement, or will you be left to your own devices after an initial orientation period?
• Fee structure: Understand the full cost of affiliation. Fees typically include initial franchise rights, ongoing royalties, marketing contributions, and tech system charges, adding up to 8–12% of revenue in many cases. Note that most, if not all, points in a franchise agreement are negotiable
• Flexibility and autonomy: How much control will you retain over budget, staffing, and guest experience?

Every brand operates under a unique set of standards and expectations and caters to different customer segments. To get maximum returns, you must choose the franchise with the market context in mind.

Top Hotel Franchise Companies

What are your options as an aspiring franchisee? Understanding the major players in the industry is a useful starting point. The field is dominated by a handful of companies, and they each have their own approach:

Marriott International

• Brand portfolio: Over 30 brands from budget (Fairfield) to ultra-luxury (The Ritz-Carlton, St. Regis)
• Known for: Global scale, strong brand equity, and Marriott Bonvoy rewards program with 237M members (2025)
• Pros:
  • Wide range of brand tiers to match asset type and market
  • Industry-leading loyalty program that drives direct bookings
  • Consistent global standards and support.

• Cons:
  • High franchise fees and CapEx requirements
  • Competitive pipeline in urban markets may dilute differentiation

Hilton Worldwide

• Brand Portfolio: 24 brands ranging from economy (Hampton by Hilton) to luxury (Waldorf Astoria, Conrad)
• Known for: Operational support, tech-forward systems, and Hilton Honors reward program with 215M members (2025)
• Pros:
  • Owner-friendly tools and strong tech infrastructure
  • Efficient operating model across service levels
  • High RevPAR performance in key markets

• Cons:
  • Some segments are saturated in urban markets, especially in the U.S.
  • Loyalty program fees can add up for smaller properties

Wyndham Hotels & Resorts

• Brand portfolio: 24 brands focused on economy and midscale (Days Inn, Ramada, La Quinta)
• Known for: Being the largest franchisor by property count and low entry costs
• Pros:
  • Lower upfront and ongoing costs relative to premium brands
  • Ideal for conversions and smaller properties
  • Favored by owners who want to enter secondary (such as mid-sized cities or suburban areas) and drive-to (destinations within easy driving distance of large population centers) markets.
  • Wyndham Rewards with 110M members (2024) ranked as the world’s most generous rewards program.

• Cons:
  • Less brand presence in upscale segments

Choice Hotels International

• Brand portfolio: 22 brands focused on economy and midscale segments, with brands such as Comfort Inn and Radisson.
• Known for: flexible franchising terms, focus on limited-service hotels, and strong market share in the U.S.
• Pros:
  • Simple brand standards that can be considered ideal for a first-time franchisee
  • Strong domestic distribution in the U.S. and conversion-friendly
  • Competitive pricing structure for limited-service hotels 

• Cons:
  • Less support for full-service concepts
  • Smaller international footprint compared to Hilton or Accor

Accor

• Brand portfolio: Over 40 brands, including Ibis, Novotel, Sofitel, and Raffles, covering everything from budget (Ibis), midscale (Novotel) to ultra-luxury (Raffles).
• Known for: Having a strong presence in Europe, Asia-Pacific, and the Middle East, with diverse brand options from extended stay to soft brands.
• Pros:
  • Diverse brand selection across segments and regions
  • Strong focus on soft-brand affiliations and lifestyle hotels
  • Loyalty program Accor ALL hosts 100M members (2025)

• Cons:
  • Support infrastructure varies by market
  • Less visibility in North America

These groups differ in fee structures and brand standards, but all offer scale and customer access that can add value when paired with the right hotel asset.

Example of a Hotel Franchise Fee Structure: Marriott Franchise Owner Benefits

To give a real-life example of the investment required to launch a hotel franchise, here’s a breakdown of what it typically costs to open a Fairfield by Marriott, which is one of Marriott International’s select-service, midscale brands. It targets business and leisure travelers who seek reliable and comfortable accommodations at a competitive price point.

Typical Fairfield by Marriott Franchise Costs and Terms:

• Initial Franchise Fee: $75,000
• Initial Investment Range: $11.6 million – $32.8 million (depending on location, land cost, and property size)
• Royalty Fee: 5.5% of gross room revenue
• Ad Royalty Fee: 2.5% of gross room revenue
• Term of Agreement: 20 years

As mentioned before, Marriott franchise owner benefits include getting to participate in the strong brand equity and customer trust under the Marriott umbrella, the massive loyalty program, ongoing operational support, including training and quality assurance, and much more.

Fairfield by Marriott is a solid example of an entry point into one of the most powerful hotel franchise systems.

Best Practices and Common Pitfalls in Hotel Franchising

Owning a hotel franchise can be highly rewarding when approached with thorough research and clarity. The due diligence that is conducted early on should go beyond checking name recognition and encompass the evaluation of the depth and quality of operational support and distribution systems.

Hotel franchise owners should also plan for ongoing competitor analysis, comparing the property’s performance not only to competitors but also internal brand KPIs – a major added bonus for hotel franchise business owners evaluating their property’s performance.

Common pitfalls for franchisees are often related to either underestimating the cost and complexity of complying with brand standards or overestimating how “hands-off” the model is. Misalignment between the franchisor and franchisee on points such as autonomy and expected returns can lead to friction that can negatively affect the hotel’s performance.

A successful franchise relationship is not passive but demands active engagement from the owner, for instance, regarding continuous alignment with the brand promise.

Is Hotel Franchising Right for You?

Franchising is not a perfect shortcut to hotel ownership, but it is a popular model for a reason. Getting to participate in a tried-and-true brand and business as a hotel franchise business owner may seem like a no-brainer.

However, success requires alignment, and owners should look for brands that reflect their business goals and values in the long term. When done well, hotel franchising can be a profitable model for all the parties involved.

Emma NÄPÄNKANGAS – M.Sc. Student in Hospitality Management at EHL and Hospitality Strategy writer. Connect with Emma on LinkedIn.

This article originally appeared on EHL Insights.