Hilton Cuts Franchisee Fees by up to 100 Basis Points to Ease Margin Pressure

Hilton is reducing franchisee program fees by 75 to 100 basis points to alleviate margin pressures caused by high inflation and rising operating costs. The financial relief includes a 30-basis-point global loyalty fee cut implemented in January and a new performance-based discount program called RISE for properties in the United States and Canada.

Why is Hilton discounting fees for its franchisees?

Hilton is cutting these fees to help hotel owners defend their profit margins against higher expenses and stubborn inflation. During the company’s second-quarter earnings call, President and CEO Chris Nassetta pointed out that owners are facing high costs in insurance, energy, and labor, while U.S. room-rate growth softened and turned negative last year, Skift reported.

Nassetta referenced the pre-COVID operating environment to provide context for the current margin compression. Looking back at 2017, 2018, and 2019, the industry experienced low top-line growth paired with higher expense growth, according to Hotels Magazine. While the disparity was not as wide as it became post-COVID, margins were already going backwards during that period, making it a difficult operating environment for owners.

Following the pandemic, franchisees rode a burst of rate growth that outran elevated inflation, but that trend reversed over the past two years. The resulting hangover features negative top-line growth paired with expenses growing at a higher clip, ultimately subsuming large pieces of revenue. Nassetta, who previously served as CEO of hotel REIT Host Hotels & Resorts, stated that Hilton leadership has spent a huge amount of time discussing these challenges with the ownership community.

How does the new RISE discount program work?

The RISE program provides program fee discounts to hotels that deliver an excellent guest experience. Hilton implemented this initiative specifically for properties in the United States and Canada, tying financial relief directly to guest satisfaction scores.

Roughly half the system in the U.S. is currently getting the full benefit of these initiatives, according to Hotels Magazine. The combined value of the RISE program discounts and the earlier 30-basis-point global loyalty fee cut amounts to 75 to 100 basis points of program fees. Skift noted that Hilton funded these cuts largely through internal efficiencies, including the use of artificial intelligence.

Nassetta stated that these owner profitability initiatives are enabled and accelerated by Hilton's proprietary technology platform, which allows the company to innovate faster, scale more effectively, and deliver greater value across its network.

Are royalty and management fees also dropping?

Royalty fees that flow directly to Hilton's earnings remain completely unchanged. While the company is providing relief on program and loyalty fees, Skift reported that management and franchise fees actually rose 6.4 percent year over year during the second quarter.

The fee reductions are strictly targeted at program costs rather than the core franchise and management revenue streams that drive Hilton's corporate earnings. Despite this, Nassetta argued that the macroeconomic cycle is turning in favor of owners, pointing to accelerating nonresidential fixed investment, which he says tracks hotel growth.

What is Hilton changing about property improvement plans?

Hilton is taking a more flexible and bespoke approach to property improvement plans (PIPs) and renovations to balance owner investment with guest expectations. During the pandemic, the industry deferred heavy investments due to the pernicious nature of COVID, and hotel companies have since tried clawing that capital expenditure back.

Now, Hilton wants to set up a system where owners who provide a good experience for customers get "through the gate" without having to spend heavily on CapEx and soft-good improvements, according to Hotels Magazine. This approach relieves owners from strict, capital-intensive brand standards as long as their property performance and guest satisfaction metrics remain high.

How are Hilton's overall financial and development metrics performing?

Hilton reported a net income of $482 million for the second quarter of 2026, driven by strong development and a broadening recovery. System-wide comparable RevPAR increased 3.9 percent compared to the same period in 2025. Skift reported that the recovery is expanding beyond luxury properties, with non-luxury brands swinging from about negative 2 percent to positive 4 to 6 percent RevPAR.

Small- and medium-business travel is up approximately 7 percent, outpacing large corporate accounts. Because of these results, Hilton raised its full-year 2026 RevPAR forecast to an increase between 3 percent and 3.5 percent on a comparable and currency-neutral basis compared to 2025.

However, Skift noted that the fourth quarter is expected to soften. The company anticipates tougher comparisons absent World Cup tailwinds and amid difficult holiday and midterm-election comparisons.

Which new properties and brands are driving pipeline growth?

Room openings were up 50 percent from the first quarter of 2026, with 24,100 rooms added to the system in the second quarter. Hotels Magazine highlighted several notable openings, including the Conrad Athens The Ilisian, which marked the debut of the brand in Greece, and the Slohh by Roach Bengaluru, Curio Collection by Hilton, marking the brand's debut in India.

Hilton also opened the first three Apartment Collection by Hilton properties in Salt Lake City, Austin, and Atlanta, following the brand’s launch earlier this year. In the luxury segment, 35 percent of total signings in the quarter were in luxury and lifestyle.

The biggest announcement during the second quarter was the signing of the Waldorf Astoria Miami Beach. Hilton partnered with the Reuben Brothers on this development, whom Nassetta called big believers in the Waldorf Astoria brand. The brothers also own the Waldorf Astoria Admiralty Arch in London, which is scheduled to open later this year.