Breaking Free: Transitioning from a Franchise to an Independent Hotel

Deflagging Your Hotel: A Path to Independence

While major hotel chains such as Marriott, Hilton, and Wyndham boast about their growing portfolios, an increasing number of hotel owners are quietly opting out of the franchise game. The process of severing ties with a global brand to operate independently—known as deflagging—has gained traction in recent years as owners reconsider the costs, lack of control, and evolving traveler preferences.

But why are hotels breaking away, and what does this transition entail?

What Does It Mean to Deflag a Hotel?

Deflagging refers to a hotel’s decision to terminate its franchise agreement with a global brand and function independently. Franchise agreements, while beneficial in some respects, can become burdensome due to steep fees, rigid branding rules, and market saturation. For owners seeking more autonomy, deflagging presents an opportunity to rebrand, establish direct relationships with customers, and introduce tailored guest experiences.

Why Are Hotels Choosing Independence?

Hotel owners typically choose to deflag for several compelling reasons:

1. Excessive Franchise Fees: Brand affiliations come with a cost. Franchise fees—typically a percentage of room revenue—can range from 8.6% for economy hotels to 12.4% for luxury properties. These fees, along with additional marketing and loyalty program costs, can severely cut into profits, especially if the brand doesn’t generate enough guest traffic.
2. Market Saturation: In areas dense with branded hotels, standing out becomes harder. Travelers may find themselves confused by the sheer number of chain options, leading some properties to perform below potential. An independent identity can set a hotel apart in competitive markets.
3. Lack of Operational Freedom: Franchise contracts often restrict creative freedom, dictating everything from design to guest service protocols. As a result, owners may feel their vision is constrained by corporate guidelines that prioritize uniformity over innovation.
4. Changes in Brand Standards: Some hotel brands have adjusted their service standards in recent years, cutting back on traditional offerings like daily housekeeping and room service. Not all owners agree with these changes, preferring to uphold a higher level of guest service than the brand currently supports.
5. Evolving Traveler Preferences: A growing number of travelers—especially younger generations—seek unique, personalized experiences. Independent hotels can offer more local flavor and tailored services that branded properties might not provide, allowing for more creativity in marketing and guest engagement.

The Deflagging Process: What to Expect

If you’re considering deflagging, the first step is understanding your franchise agreement. Many contracts last between 15 to 30 years, and exiting early can result in substantial penalties. Once you’ve reviewed the agreement, it’s time to plan for life after the brand.

Key Steps to Deflagging:

1. Rebranding: You’ll need to develop a new brand identity, which might include changing the hotel’s name, signage, and visual elements. This step also includes creating a new website, adjusting your marketing strategy, and engaging with online travel agencies (OTAs).
2. Operational Overhaul: Without the brand’s standard operating procedures (SOPs) and proprietary technology, you’ll need to implement your own systems. A robust Property Management System (PMS), integrated with a Channel Manager and Booking Engine, will help you manage reservations, pricing, and guest communication effectively.
3. Staff Training: Your team will need to adapt to new SOPs that align with your independent vision. Customer service, housekeeping, and other departments may require new training to ensure a smooth transition.
4. Market Positioning: As an independent property, you’ll have more flexibility to attract niche markets and offer customized services. Consider updating your marketing strategy to emphasize local experiences and unique amenities that differentiate your hotel from the competition.
5. Budget for Upgrades: Deflagging often requires renovations and rebranding costs, from new interior designs to upgraded technologies. Make sure to budget for these changes and prioritize them in line with guest expectations.

Technology: The Backbone of Independent Hotels

Technology plays a pivotal role in a hotel’s transition to independence. When operating as a franchise, many hotels use the brand’s tech systems, which can be outdated or incompatible with newer software. Independence allows you to select technology that best suits your hotel’s needs, from cloud-based PMS solutions to mobile check-ins and digital door locks.

With more streamlined technology, independent hotels can optimize revenue management, improve guest satisfaction, and reduce operational costs. By integrating systems like accounting software, housekeeping apps, and marketing tools, you can maintain efficiency without the brand’s support.

Case Study: Heartland Hotel & Suites

The Heartland Hotel & Suites in Rock Valley, Iowa, successfully deflagged from its franchise due to high fees and limited brand support. While reconnecting with OTAs and boosting advertising posed challenges, the hotel saw a significant drop in operating costs post-deflagging. With the savings from franchise fees, they reinvested in modern cloud-based management systems, streamlining operations and enhancing guest experiences.

Moving Forward as an Independent Hotel

For hoteliers, deflagging represents an opportunity to redefine their property’s brand, control operational decisions, and appeal to a more personalized market. While the journey may be challenging, especially in the initial stages, the rewards—both financial and creative—can be substantial.

Breaking away from a franchise allows owners to innovate, adapt to changing traveler preferences, and create a guest experience that is truly unique. The key to success lies in careful planning, choosing the right technology, and having a clear strategy for positioning your property in the market.

Deflagging is not just a way out of a franchise—it’s a path to true hotel independence and creativity.