The value of big names is coming under greater scrutiny.

Hotel owners have long paid a premium for brand affiliation, assuming that the strength of a global name and a wide-reaching loyalty engine would justify the fees. However, across the EMEA region, that assumption is being put to the test.

As franchise costs climb and loyalty programmes seem to carry less weight with travellers, more investors are starting to question whether being tied to a brand boosts profit margins – or quietly erodes them.

Loyalty programmes were once powerful tools for driving repeat business. Large brand systems promoted their member bases as reliable sources of direct bookings, particularly during slower periods. Since 2019, the biggest global schemes have grown membership by more than a third. But size has not translated into impact.

More than half of European loyalty members now say the programmes deliver less value than before. Just 44% report that loyalty strongly influences where they stay. In EMEA markets, where brand recognition has historically been less central to consumer choice than in North America, these shifts are more significant.

Owners, meanwhile, continue to fund loyalty programmes through fees that often range from 2% to 3% of room revenue, even when bookings might have occurred without brand influence.

Room Revenue

This disconnect is growing. At many full-service hotels, loyalty contributions now account for more than a quarter of all franchise-related fees. Yet, according to recent operator benchmarking, the share of revenue directly traceable to loyalty bookings has plateaued.

Total franchise costs now absorb a larger share of gross room revenue. For many branded hotels, royalties, marketing, reservation, and loyalty fees collectively consume 9% to 1 1% of top-line income. Data from 2023 indicates that these fees have been increasing by 3% to 5% annually, outpacing room revenue growth.

Investor-side analysis suggests brand premiums vary significantly

The impact on profitability is clear. Independently operated hotels, free from these fees, often achieve gross operating margins 200-300 basis points higher than similar branded assets. In markets where average daily rates (ADRs) are modest and seasonality is high, such as Southern Europe, brand affiliation can significantly suppress EBITDA.

Though brands often point to stronger average daily rates as proof of value, investor-side analysis suggests brand premiums vary significantly. In high-barrier urban markets or leisure destinations, well-managed independent hotels often match or outperform their branded counterparts.

Across the EMEA region, an increasing number of hotel owners are opting for soft brand affiliations and white-label operators. These models enable hotels to access global booking channels and loyalty programmes, with fewer rules to follow, more autonomy over day-to-day operations, and often lower fees. It points to a shift in the industry, where owners can tap into the advantages of brand visibility and reach, without being weighed down by the usual costs and restrictions.

In Europe, more than 60% of hotel rooms still operate without a brand, according to industry data – a stark difference from North America, where fewer than 30% are unbranded. That gap isn’t by chance. It reflects a conscious decision by owners who value flexibility.

A 2024 CBRE survey found that only 6% of European hotel investors planned to stick with a traditional brand for their next deal. In contrast, more than 40% said they preferred soft brands or white-label set-ups – a sign that more owners are leaning toward flexibility and independence.

Some soft brand contracts now offer fees tied only to centrally delivered bookings, rather than charging royalties across all room revenue. This aligns cost with contribution and reflects owner demand for accountability.

When brands still work

Despite rising scepticism, brand affiliation remains valuable in the right contexts. Hotels dependent on corporate and group business may benefit from brand exposure and access to negotiated travel contracts. In less developed or emerging markets, brand names still offer reassurance to travellers, supporting rate premiums and occupancy.

Brands may also provide a buffer in downturns. During the Covid-19 pandemic, for example, some branded properties benefited from centralised marketing and operational guidance that independent hotels lacked. In cyclical markets or in crisis conditions, that scale can protect occupancy.

Still, these advantages are no longer taken for granted. Investors are modelling the full cost of affiliation, including property investment plans (PIPs) and operational constraints, and weighing it against provable revenue lift. Where the data does not justify the fees, alternatives are gaining ground.

Brand affiliation is no longer a default strategy. Across EMEA, owners are applying sharper scrutiny to the value of loyalty schemes and the broader economics of franchising. In many cases, models that offer distribution power with fewer constraints, such as soft brands or independent operations, are emerging as better-aligned paths to returns.

Where the data does not justify the fees, alternatives are gaining ground

A flag can still enhance performance, but only if it delivers clear, incremental profit. For investors, it’s no longer just about whether a brand is recognisable – it’s about whether it adds more to the bottom line than it takes away. In a competitive market, keeping that focus on real financial impact is what leads to more informed decisions.

Editorial by Christina Reti for Green Street News
Published on Green Street News – 1 Dec 2025