Independent Hotel or Franchise? How to Choose a Brand Affiliation

The independent hotel vs franchise question comes down to one number: how much extra revenue the brand must bring in to cover what it charges. If the flag cannot beat that number in your market, it is a cost, not an asset.

Pros-and-cons lists are fair, but they leave you where you started. This post turns the choice into a calculation you can run on the back of an envelope, then adds the qualitative checks the calculation cannot see.

What does a brand actually sell?

A brand sells a bundle: distribution, a loyalty programme, sales and marketing machinery, and credibility with lenders and buyers. You pay for it through royalties, system fees, standards compliance and reduced flexibility. That description comes from a 2026 Hospitality Investor feature, which concludes that a flag's worth is how the hotel performs with it, minus how it would perform without it, less the fees.

That sentence is the whole decision. It is also why the answer differs from hotel to hotel. David Orr of Sirius Hotel Group, which runs both a branded and an independent hotel, argues in the same piece that an established independent with strong direct demand and reputation may gain little from a brand.

What do franchise fees really cost?

Expect all-in fees of roughly 8 to 12 per cent of gross room revenue, before renovation demands. A 2025 overview by EHL's hospitality writers lists royalties of 2 to 6 per cent of gross room revenue and marketing and reservation contributions of 1 to 4 per cent, attributing the 8 to 12 per cent total to HVS. Loyalty programme charges come on top, and there is usually an initial fee.

The same overview gives one brand example: Fairfield by Marriott, with a royalty of 5.5 per cent, an advertising fee of 2.5 per cent and a 20-year term. Treat it as one data point. Wyndham's annual report, as cited by Hospitality Investor, shows a royalty of around 5 per cent for direct franchisees plus 2 to 4 per cent in marketing and reservation fees (2025).

Two other costs do not appear in the percentage:

• Renovation obligations. The EHL overview notes periodic brand-mandated renovations and FF&E reserves, which some franchises set at 4 to 5 per cent of revenue, and says capital expenditure over the term can become quite significant.
• Length. Terms typically run 15 to 30 years, so you are marrying the brand, not dating it.

How much uplift must the brand deliver to pay for itself?

A hotel paying around 10 per cent in fees needs roughly 11 to 14 per cent more room revenue just to stand still. The reason is that the fee applies to all revenue, including the revenue you already had, while only the extra revenue is new.

The maths: if the brand lifts revenue by a share u, fees are f of the new total, and a share m of the extra revenue reaches profit before brand fees (the rest goes on cleaning, commissions, laundry and so on), then break-even needs u × m ≥ f × (1 + u).

The table shows the uplift needed. These are illustrative figures built from the fee range above, not market data, and m is an assumption you should replace with your own.

A brand earns its fee only by filling rooms you could not have filled alone.

Now compare with the claimed benefit. The EHL overview cites CBRE as reporting a RevPAR premium of 10 per cent or more over independents in 2024. That figure is second-hand, a general average and not a promise for your street. Set it against the table: at 10 per cent fees, a 10 per cent premium falls short of the 11.1 to 14.3 per cent needed, before renovation costs. It clears the bar only when fees sit near 8 per cent and nearly all the extra revenue reaches profit. The brand can still be worth it, but the margin for error is thinner than the brochure suggests.

Remember, too, that part of the uplift can come from replacing booking commissions with brand-channel bookings. The EHL overview lists online travel agency commissions at 15 to 25 per cent (undated). Include that saving in your model at its true size, and include the brand's own channel costs in the fee line.

When does independence win?

Independence wins when you already generate your own demand and have a reason for guests to choose you by name. Typically that means a hotel with strong repeat guests, a distinctive story, good direct-booking tools and a market where the big brands look the same as each other. Orr describes the market as full of "ubiquitous and perhaps arguably homogenous product", which is exactly the gap a distinctive independent fills.

It also wins when flexibility matters. You can change the design, the rate strategy, the restaurant and the ownership structure without asking a franchisor. And you keep the guest relationship: your data, your emails, your repeat business.

The cost is real. You need your own marketing, a good revenue management routine and the discipline to keep investing in the product without a brand standard forcing you to. If you do not have those, independence becomes slow decline.

When does a brand win?

A brand wins when you cannot build demand quickly yourself, or when finance depends on it. That includes new hotels in secondary markets, properties with weak direct channels and projects where lenders or buyers give credit for a recognised name. The Hospitality Investor feature lists credibility with lenders and buyers as one of the things a flag provides.

Scale of reach matters too. Cited figures, as reported by Hospitality Investor, include roughly 271 million Marriott Bonvoy members at the end of 2025, with Bonvoy accounting for 68 per cent of Marriott room nights that year. If your guests come from the markets those members live in, that reach is valuable. If they do not, it is irrelevant to you.

There is leverage in the other direction too. The same feature reports that where a major brand is missing from a market, investors may negotiate better terms, including development advances. If a brand wants your market, make it compete.

What if you want something in between?

Consider management contracts, soft brands and consortia, but read each as a different trade of control for support. A management contract adds operating expertise and charges a base fee typically around 2 to 4 per cent of revenue plus incentives, according to a 2024 industry analysis. That same article notes performance clauses, often giving the investor termination rights if RevPAR index falls below 85 or 90 per cent of the competitive set for a sustained period. If you sign anything, ask for the same.

For a small first project, our guide on how to start a boutique hotel walks through the operator decision before the design is fixed. Restaurant founders face the same trade in a different form: see franchise or independent for restaurants.

A six-question test before you sign

Answer these in writing, with numbers where you can.

1. What share of your bookings is already direct, and is it growing?
2. What uplift does your model require at the fee level quoted, and what local evidence supports it?
3. What are the renovation obligations, and when do they fall due?
4. What are the exit terms, and what happens if you sell?
5. Which brand performance measures can you check, such as revenue against the competitive set and guest scores?
6. If you stay independent, who will do the marketing and revenue work, and how will you pay for them?

Ask the brand for its draft franchise or licence documents and for the performance of nearby franchised hotels. Ask a hotel lawyer to read the agreement. This is a long commitment and the details sit in the contract. This is general information, not legal or tax advice. Fees, terms and franchise rules differ by country, so check current local rules with a qualified adviser.

Key takeaways

• A flag is worth hotel performance with it, minus performance without it, less fees.
• All-in fees of 8 to 12 per cent of room revenue mean the brand may need to lift revenue by roughly 9 to 18 per cent to break even on fees alone.
• Renovation obligations and long terms, often 15 to 30 years, sit outside the fee percentage.
• Independence suits hotels with strong direct demand and a distinct story. A brand suits weak distribution or finance that depends on a name.
• Model the commission savings from brand channels at their true size, and the brand's channel costs too.
• Read the contract with a specialist, and ask for performance clauses in any management deal.