Summary of Key Points
Two major international hotel giants, Marriott and Hilton, have recently offered discounts to their franchisees. Marriott introduced the “ITR Incentive Program” (which refunds 0.5% of room revenue), while Hilton launched the “RISE Program” (providing dual fee reductions). The reason for these measures is that franchisees, especially the major owners of Marriott properties, are dissatisfied with the brands’ exclusive control over membership systems (such as co-branded credit cards) and the fact that the cost of redeeming points falls entirely on the owners. These policies represent temporary compromises by the brands, but they do not address the core issues of profit distribution. Additionally, the brands are shifting the cost burden by devaluing their loyalty program points, leading to ongoing negotiations between them over how membership profits should be shared.
I. Discount Policies of the Two Giants: Payments Only if Standards Are Met, with the Groups Bearing the Costs
The discounts offered by Marriott and Hilton are not free; they are tied to customer satisfaction, and the costs are covered by the groups themselves (not using funds from the franchisees):
- Marriott’s ITR Incentive Program: This program applies to all franchisees in North America. If a hotel meets the customer satisfaction criteria, it receives a refund of 0.5% of its annual room revenue. For example, a hotel with $10 million in revenue could receive $50,000 per year. This money comes directly from the group’s budget, meaning the group is forgoing profits to reward high-quality franchisees.
- Hilton’s RISE Program: It includes two types of discounts: a reduction in service fees if satisfaction standards are met, and a global decrease in membership base fees, resulting in an average profit increase of 0.75%-1% per hotel (more substantial than Marriott’s offer).
Why do they do this? On one hand, it aims to appease their franchisees; on the other hand, it seeks to attract potential customers from Marriott’s customer base and encourage franchisees to maintain high service standards to protect the brand’s reputation.
II. The Root of Franchisees’ Discontent: Brands “Making Easy Money” from Membership Profits While Passing the Costs onto Owners
International hotels have long operated on a “light-asset model,” where brands provide the brand and membership services and collect franchise fees, system fees, and membership dues without bearing the costs of renovation, staffing, or utilities. The conflict arose with the co-branded credit card business: Marriott partnered with banks to issue cards that allow customers to earn points when making purchases or dining. Banks earned substantial profits from these transactions (estimated at $1 billion in 2026), but the cost of redeeming those points for hotel stays fell on the franchisees. For instance, if a customer uses points to book a stay, the franchisee not only incurs no revenue but also has to provide the room and service for free.
The major owners became increasingly upset with this arrangement. A group of 51 owners owning 1,000 Marriott hotels wrote a letter demanding that the cost of point redemption be at least on par with third-party platforms like Expedia; otherwise, they would consider switching to another brand.
III. Devaluation of Membership Points: Brands’ Secret Strategy to Shift Costs
After the franchisees expressed their dissatisfaction, Marriott quietly raised the requirements for redeeming points. The value of points for hotel stays has decreased by 15%-20% domestically and even more significantly internationally (for example, a night’s stay in a Dubai hotel might cost $443 in cash but 41,000 points, representing a 25%-30% reduction in point value). Hilton has also increased the upper limits for point redemption several times.
Why do brands devalue their points? With more points available, the cost of redemption becomes higher. By reducing the value of points, brands encourage franchisees to use fewer points or spend more points to book stays, thereby shifting some of the cost burden. However, this is unpopular with franchisees, as it means their points are becoming less valuable.
IV. The Balance of the Light-Asset Model Is Being Altered: Owners Gain More Power in Negotiations
In the past, the brands had the final say, but now the major owners (who own many hotels) have more bargaining power:
- The core of the light-asset model is a “win-win” arrangement where brands provide traffic and owners earn from room bookings. However, with brands monopolizing membership profits (through co-branded cards and point sales) and shifting the costs to owners, this balance has been disrupted.
- The future trend suggests that brands will need to share the benefits of the membership system with franchisees (such as through point commissions or profit sharing from co-branded cards). Otherwise, franchisees may switch to other brands.
This conflict is just beginning, and its outcome could significantly impact the franchising model in the hotel industry. After all, no owner wants to contribute resources but receive no benefits in return.
(The entire analysis is written in plain language to make it understandable to a general audience, explaining the complex power dynamics within the hotel industry.)