What is deflagging?
Deflagging is the process of parting ways with a big brand and operating as an independent hotel. The motivations behind this can vary. For some the driver is economic; for others, it may be in response to a shift in business strategy; and for some hoteliers, it’s a desire for more flexibility.
According to data from STR (Smith Travel Research), roughly 70% of hotel rooms in the United States are part of a brand or chain. While some properties are owned by the brand itself, the great majority are hotels that are under franchise or management agreements.
Deflagging can open new avenues for creativity, autonomy, and higher profit margins. In this article, we’ll look at why deflagging is on the rise, how it can offer a path to revenue optimization, and what steps you can take to make it a success for your property.
Why hotel deflagging is on the rise
Rising franchise costs
At first glance, having a recognizable brand name associated with your property can seem like the perfect option. You may benefit from the brand’s loyalty program, marketing support, and its global reservations system. But all of those also come with a price tag, often in the form of royalty fees which can be 4-6% of gross revenue.
Deflagging allows you to free up budget that you can spend in other ways – ways that you choose. Maybe you want to renovate your lobby to reflect the uniqueness of your local area, or funnel funds into a marketing campaign that speaks directly to your target audience. By cutting out franchise fees, you get greater control over how, where and when you invest your money.
Gaining operational autonomy
Being part of a big brand can mean working within a long chain of command. Tweaking room layouts, introducing a new event concept to bring in more guests – and more revenue, or last-minute adjustments to room rates in response to unexpected demand can sometimes involve multiple layers of approvals. Let’s say a big concert is coming into town, other hotels may be able to boost their rates and fill their rooms while you’re leaving money on the table because corporate guidelines don’t always let you modify your rates quickly – or at all.
On the flip side, operating as an independent hotel means you’re in complete control of your pricing and operational decisions. If you want to adjust your rates 10 times a day or use an AI-powered revenue management system like Atomize, you can. If you need to pivot your pricing strategy on short notice, it’s in your hands. If you decide to transform the underutilized breakfast area into a co-working space during off-peak hours, no one’s stopping you. This operational agility often translates directly into higher profitability, because you can respond in real time to market demands.
Embracing the demand for memorable experiences
Travel isn’t what it used to be. Sightseeing isn’t what drives visitors. According to a survey by McKinsey, 52% of Gen Zers say that when they travel, they splurge on experiences. After all, there’s a reason that the hashtag “Never stop exploring” has been used on nearly 30 million posts on Instagram.
And that experience starts with their hotel selection. Many travelers choose accommodations that showcase local flavors, culture and authenticity. This is often not an option with branded properties, which may mandate standardized décor and amenities across their different markets.
By being an independent property, you’re free to infuse your property with as much of the local vibe as you’d like. Maybe you’re located in a coastal town with a rich maritime history. Instead of following generic brand guidelines, you could design your guest rooms with nautical touches, collaborate with local fisheries for fresh seafood dishes, and partner with a nearby maritime museum to create unique guest packages.
These special touches go a long way in attracting travelers looking for something beyond a cookie-cutter stay.
The impact of deflagging on revenue
We’ve laid out some of the reasons that many hoteliers, especially in the United States and parts of Europe, are re-considering their relationships with big brands and going out on their own. Now let’s take a closer look at the real-world scenarios and impact this can have on revenue and profit.
Eliminating franchise fees and reclaiming revenue
The most direct benefit – and one of the primary reasons hoteliers decide to deflag – is reclaiming the revenue that previously went to franchise fees.
Imagine you’re generating $2 million annually and paying a 5% royalty fee. That’s $100,000 per year that could stay in your pocket. Suddenly, you have a significant budget to upgrade rooms, improve staff training, or boost your marketing efforts, all of which can elevate your guests’ experiences and, ultimately, your revenue.
Flexible revenue management
Hotel revenue management is a delicate art, hinging on balancing supply, demand and competition. Under a franchise, you’re often bound by systemwide guidelines or corporate strategies that may not be well-suited to your specific location. As an independent property, you can set and adjust your own Average Daily Rate (ADR), implement special packages on short notice, and test dynamic pricing models that respond quickly to market conditions.
If you want to make a last-minute decision to offer a special Valentine’s Day romance package that includes a bottle of wine and dinner or adjust prices when a storm cancels flights in and out of town, it’s all up to you – no approval from headquarters needed.
Additionally, as an independent hotel, you can select the RMS and PMS vendor that works best for you, one that makes it easier to track booking data, forecast occupancy, and refine pricing strategies in real time. This data and valuable insights can lead to more informed – and even AI-assisted – decisions that boost occupancy rates, increase ADR, and improve profit margins.
New revenue streams
When you’re free from standardized brand protocols, you can tailor your services to your property’s strengths – and generate more revenue from it. Say your hotel is in a region known for its vineyards. You could offer exclusive wine tours, host vineyard-to-table tastings, make it easy for guests to add a bottle of local wine to their stay, or partner with local sommeliers to create weekend getaway packages. These unique experiences become selling points that differentiate you from nearby competitors.
Beyond that, many independent hotels find fresh ways to monetize underutilized spaces. Do you have a parking garage with extra spaces right in the center of town? You can give locals the opportunity to rent a space for a few hours or with a monthly subscription, unlocking revenue that’s been untapped due to constraints from the brand.
A conference room that remains empty most days of the month could be repurposed into a co-working area, a pop-up art gallery, or a yoga studio, depending on local market demand. By diversifying your revenue sources, you’re no longer reliant on room sales alone.
How to successfully deflag your hotel
1. Conduct a thorough cost-benefit analysis
Cutting ties with your franchisor may not be for everyone. It’s important to think carefully and weigh the pros and cons.
- For starters, take a close look at your finances. Determine how much you’re paying in franchise fees, loyalty program assessments, and brand-standard mandates.
- Then, research the estimated costs of running your own marketing campaigns and upgrading or integrating new technology.
Compare the numbers to get a realistic picture of your potential return on investment.
2. Strengthen your tech stack
Moving to an independent operating model means you’ll need robust and modern systems to handle reservations, pricing, guest data, and other critical tasks. Thankfully, today’s hospitality tech ecosystem is extensive and user-friendly. Platforms like Mews provide comprehensive PMS solutions with embedded payments, booking engine, revenue management system, event management system, and reporting all in one place.
You’ll also be hiring and training staff so you’ll want something that’s easy to use and that uses automation so your staff can work efficiently and have time to focus on guests.
Be sure to think big picture and long-term. Ensure any tools you choose can integrate easily with other applications and without a lot of extra costs. After all, one of the reasons for this change is to grow your revenue, so you don’t want to find yourself with a vendor that has hidden and costly fees.
3. Develop a direct booking strategy
Online Travel Agencies (OTAs) can be valuable for visibility, especially in the early stages of your hotel’s operations. However, paying up to 25% in commissions to OTAs like Booking.com and Expedia can make a serious dent in your profits. If you can eliminate your dependence on them and give guests an easy – and beneficial way – to book directly with you, you can keep much more revenue in house. You can do this by:
- Optimizing your website for SEO and user experience, making it easy for guests to find and book with you directly.
- Offering perks for direct bookings, like discounted rates, free parking, or other special and unique incentives.
- Using email marketing to nurture guest relationships and boost loyalty after their first stay; sending personalized offers to those who have stayed with you in the past or signed up for your mailing list is a great way to lower cost of acquisition and increase repeat visits.
Experts say OTAs could also be displaced by banking institutions and AI. In our 2025 Trends in Hospitality report, we reported that “In the future, we could see hotels working with banks to offer discounted rates in return for rich customer data that is more valuable than what they’re getting from OTA bookings today. This could also decrease the need for any intermediary in the booking process.”
4. Redefine your brand identity
If you’re leaving behind a widely recognized name, crafting a compelling identity that can stand on its own and attract your target guests is essential.
This isn’t just about designing a new logo; it’s about telling the story of your property. What makes your location and your property special? How do you cater to the specific needs or interests of your guests? What makes you unique?
Share these narratives across your marketing channels, from your website to social media. If possible, weave local partnerships into your brand. Collaborations with area businesses, artists, or chefs can help you build a reputation as the place to stay for an authentic experience.
Make sure that the technology you use also lets you reflect your brand style in every guest touch point – from your website to your booking engine to your marketing emails and even your self-serve kiosks in the lobby.
5. Invest in marketing
Once you’re independent, your marketing efforts will need to pick up the work previously handled by the brand. This may sound daunting but try to consider it an exciting opportunity to get creative.
Consider these marketing tactics:
- Targeted digital campaigns: Use platforms like Google Ads or Facebook to reach travelers interested in your region or type of accommodation.
- Social media storytelling: Show off behind-the-scenes looks at your property, local events, or meet-the-team features to give potential guests a sense of your hotel’s personality. With so many social media channels that have millions upon millions of users, the opportunities to reach future guests are plentiful.
- Local Partnerships: Team up with tour operators, wineries, outdoor guides, museums, travel bloggers and vloggers, or other influencers to create packages that highlight the best your area has to offer.
Community engagement can also be a game-changer. Host events that draw locals to your hotel – a farmers’ market in the courtyard, a post-work networking event, an art exhibit in the lobby, or a charity fundraiser in your event space. These gatherings foster goodwill and help you become part of the local fabric, which can pay off in positive reviews and word-of-mouth recommendations.
Ready to become an independent hotel?
Deflagging your hotel doesn’t just mean changing the sign outside; it’s about redefining your entire approach to hospitality. By saying goodbye to rising franchise fees and rigid brand standards, you open the door to operational autonomy, a more individual brand identity, and new revenue streams. It may not be easy but the payoff – both financially and in guest satisfaction – can be significant.
Ready to see how you can boost your revenue? Book a demo and discover how the right technology and guidance can help you thrive in this new era of hospitality.
Looking for more ways to diversify your revenue and earn more profit? Download our guide: How to Diversify Hotel Revenue.
