What Is a “Flag” Hotel and Is It the Right Choice for Your Market?

If you are building, buying, or repositioning a hotel, you will hear people talk about whether the property is going to be “flagged” and what brand it will carry.

In simple terms, a flag hotel is a hotel that operates under a brand name through a franchise agreement. That decision affects your costs, your design, your operations, and your long term flexibility as an owner.

For some markets, a flag makes sense. For others, it may not be necessary and can even work against profitability.

This article explains what a flag hotel really means, what owners are signing up for, and what other operating options are available.

What Does “Flag” Mean in Hospitality?

A flag hotel is usually a franchise hotel.

You own the building and the business, but you license a brand name and agree to follow that brand’s operating standards. In exchange, you get access to their reservation systems, loyalty programs, and national marketing platforms.

When a hotel is flagged, it typically means:

• You use the brand name and trademarks

• You follow their design and service standards

• You use their booking and loyalty systems

• You pay ongoing franchise and marketing fees

You are still the owner, and the brand does not run your hotel day to day. The brand sets the rules and collects fees. Operations are handled by you or by a management company you hire.

What Does a Flag Actually Cost?

This is where many owners start to rethink things after the contract is signed.

Most franchise agreements include:

• An upfront franchise fee

• Ongoing royalty fees tied to room revenue

• Marketing and loyalty program fees

• Required technology platforms

• Mandatory renovation schedules

Those renovation requirements are often called Property Improvement Plans, or PIPs. They can involve guest rooms, bathrooms, lobbies, furniture, and technology, even if the hotel is still performing well.

Hotel advisory firms like HVS consistently point out that renovation cycles and brand requirements are major long term cost drivers for hotel owners.

These costs continue whether the market is strong or slow.

Why Do Owners Still Choose Flag Hotels?

With all those costs, brands can still make sense in certain situations.

Owners often choose flags because:

• Loyalty programs can help drive bookings in some markets

• Lenders may prefer branded projects

• National marketing systems can help with early ramp up

• Brand standards can reduce some startup uncertainty

In dense urban markets, airport locations, and heavy corporate travel corridors, brand affiliation can play a meaningful role in booking behavior.

In those cases, the added cost may be justified.

When a Flag May Not Be Necessary

In many Midwest and regional markets, guests are not choosing hotels based on loyalty programs. They are choosing based on:

• Location and accessibility

• Amenities and group space

• Value and overall experience

In these markets, some owners find that:

• Franchise fees reduce margins without driving enough demand

• Design standards increase construction costs

• Renovation schedules force capital spending earlier than needed

• Contract terms limit flexibility if market conditions change

Research from Cornell’s hospitality program shows that market demand drivers matter more to performance than brand alone.

That is why many independent and regional brand hotels perform well in secondary and tertiary markets across the Midwest.

Important Distinction: Brand and Management Are Not the Same Thing

This is one of the biggest misunderstandings in hotel ownership.

A brand does not manage your hotel.

Even in flagged hotels:

• The brand sets standards and provides booking platforms

• A management company runs daily operations, staffing, and revenue strategy

So whether a hotel is flagged or independent, owners still need to choose an operating partner who is responsible for:

• Hiring and managing staff

• Controlling expenses

• Setting pricing strategies

• Driving group and local sales

In most cases, management quality has a bigger impact on performance than the name on the sign.

Hotel Management for Both Flagged and Independent Properties

Some owners assume that management companies only work with independent hotels or only with branded hotels. In reality, many management companies operate across both models.

Embergrove Hospitality Group provides full-service hotel management for both flagged and independent properties, with operations rooted in Midwest markets. This allows owners to work with an operating partner who understands regional travel patterns, labor realities, and group driven demand, regardless of whether the hotel carries a national brand.

Management services typically include:

• Day to day operations and staffing

• Revenue management and pricing strategy

• Sales support and group business development

• Financial reporting and performance oversight

If you are evaluating management partners for an existing hotel or a new development, you can learn more about Embergrove’s
hotel management services.

A Different Option: Develop With a Regional Brand

Some owners want brand consistency without national franchise structures.

In those cases, regional brands can offer a middle ground between full independence and national franchise systems.

Through Embergrove Hospitality Group, owners can also develop and operate under the Stoney Creek Hotel brand, a hospitality concept designed for Midwest travel markets, group demand, and leisure stays.

This option provides:

• A recognizable hospitality concept

• Consistent guest experience standards

• Full service management from opening forward

without relying on national franchise agreements.

If you want to explore that path, you can learn more about how to
build a Stoney Creek Hotel.

How Owners Should Think About Flag Versus Non Flag Decisions

There is no universal answer that fits every project.

A flag may make sense if:

• Brand loyalty strongly influences booking behavior in your market

• Financing requires national brand affiliation

• You want standardized systems across multiple properties

A non flag or regional brand model may make more sense if:

• Guests choose based on amenities and experience

• You want more control over renovation timing and costs

• Your market is driven by regional travel and group business

What matters most is whether the operating model aligns with how guests actually behave in your market and how you plan to hold or exit the asset.

What to Evaluate Before Signing Any Agreement

Before committing to a franchise or management structure, owners should take time to evaluate:

• Market demand and competitive supply

• Construction and renovation budgets

• Long term fee structures

• Contract flexibility and exit terms

• Operating partner experience in similar markets

These decisions affect performance for years, not just at opening.

Next Steps for Owners and Developers

If you are:

• Comparing flagged and non flagged hotel models

• Planning a new hotel development

• Considering a brand conversion or repositioning

there are multiple operating paths depending on your goals and market conditions.

You can review Embergrove’s hotel management services here.

or explore opportunities to build a Stoney Creek Hotel.

Both start with an early conversation about market fit, development timing, and long term operating strategy.