U.S. lodging demand increased at an average annual rate of just .7 percent in 2023 and 2024, after two years of double-digit growth coming out of the pandemic in 2020. In the May 2025 edition of Hotel Horizons, CBRE reduced its forecast for lodging demand growth in 2025 to .9 percent. With lodging demand growing at less than 1 percent, hotel owners and operators are scrutinizing the value of their franchise relationship since it is the primary stimulus of demand for most U.S. hotels.
Hotel owners pay multiple fees to the franchise company to provide a variety of services, including technology, revenue management, training, and quality assurance. CBRE’s Trends in the Hotel Industry survey captures three additional franchise-related fees on a discrete basis that relate directly to the generation of demand and revenue for a hotel:
- Royalty payments
- Marketing assessments and reservation fees
- Guest loyalty program fees
For this analysis, the sum of these three components comprises “total franchise-related fees.” CBRE analyzed the payments made by 4,200 U.S. hotels in 2023 and 2024 to provide owners and operators with information on recent trends in the cost of these three franchise-related fees. In 2024, these 4,200 hotels averaged 218 rooms in size and achieved 70.2 percent occupancy with a $214.89 average daily rate.
2024 Annual Changes
From 2023 to 2024, the hotels in our sample averaged a room’s revenue gain of 2.7 percent, while total operating revenue increased by 3 percent. Concurrently, total franchise-related fees increased by 3.5 percent. Since franchise fees are frequently charged as a percentage of revenue, these relative growth rates concern franchisees.
Driving the outsized increase in franchise-related fees were the guest loyalty program costs (3.9 percent) and reservation/marketing assessments (3.8 percent). Since a portion of these fees is based on the revenue generated by loyalty program guests and reservations made through the franchise system, it can be inferred that both the brand reservation and guest loyalty programs drove more revenue in 2024 than they did in 2023. This also indicates a general increase in guest loyal travelers, which correlates with the continuing consolidation in the industry as the major franchise companies increase their portfolio of brands with strategic acquisitions. The royalty fee, which indirectly generates demand, increased by just 2.7 percent during the year.
It is not surprising that the greatest increases in franchise fees were observed within the higher-priced chain scales, given the correlation between changes in revenue and changes in franchise-related fees. In 2024, hotels that operated in the luxury, upper-upscale, and upscale chain scale categories enjoyed the greatest increases in revenue, while properties in the upper-midscale, midscale, and economy categories saw their revenue decline or increase less than .5 percent. Accordingly, franchise fee growth was greatest at luxury (6.4 percent) and upper-upscale (5 percent) properties. It is also worth noting that many of the upper-upscale and luxury brands also collect fees on food and beverage revenues,