Before you sign: What a soft brand pays you for a free night

When a loyalty member stays on points, the chain pays the hotel for the room. Two of the largest chains' 2026 agreements don't say how much, and owners of nearly 1,000 hotels asked this summer for more.

by Markus Busch

A night booked on loyalty points is free for the guest and occupied for the hotel. She saved the points over a dozen business trips. The hotel still changes the bed, cleans the room and may serve the breakfast. Somebody has to pay for it.

The chain does. When a member redeems points, the loyalty program reimburses the hotel. That payment is one of the most important numbers in a soft brand deal, because at hotels where members fill most of the rooms, a share of those rooms will be free nights. It is also the one number an owner cannot find in the contract.

The rate is set outside the contract

Hilton's 2026 disclosure for Curio Collection says a hotel must set aside "a certain percentage of rooms inventory" for free night redemptions by Hilton Honors members, as the program specifies. The hotel is then reimbursed "on the same basis as other similarly situated participating hotels," again as the program specifies. The document gives no formula and no rate.

Marriott's 2026 disclosure for Autograph Collection describes what a points stay triggers in two words: "a limited reimbursement." Marriott also reserves the right to change the program, its costs, "the redemption reimbursement amounts, and the calculation factors at any time."

So the owner signs a contract of ten years or more in which the payment for a growing share of her rooms is set by a program the chain runs and can change.

Close to cost when there is space, close to the rate when full

How the payment works has mostly reached the public through leaks. In 2023, One Mile at a Time reported, drawing on a Marriott memo first published by View from the Wing, that Marriott paid hotels a little above the cost of servicing a room when they were not full, and close to their average rate when they were. The memo described a move to a single percentage per hotel, set each year according to the hotel's tier and how many redemptions it takes.

That is a reported description of one chain's system at one point in time, not a disclosed term. But the logic is easy to follow, and it matters for how an owner reads her own year. On a night the hotel would have sold out anyway, a points guest is paid close to what a paying guest would have brought. On a night with empty rooms, she is paid closer to the cost of the clean sheets.

Owners of nearly 1,000 hotels asked for more

This summer, the payment became a public dispute. In June, a group of 51 Marriott franchise owners, together running nearly 1,000 hotels, wrote to Marriott's chief executive and its chairman, as the Wall Street Journal reported and Asian Hospitality summarized. They said owners are "absorbing an increasing share of the program's costs." At a minimum, they asked to be paid for loyalty stays on par with what they receive from OTAs such as Expedia.

Marriott said it takes the concerns seriously. It pointed to higher compensation for loyalty stays on busy nights, and said it would, for the first time, share some financial details of the program with owners.

These are not owners of independent hotels thinking about a flag. They are owners who signed years ago and have lived with the arrangement. Their benchmark is telling. They measured the program's payment against the OTA, the channel a soft brand is often sold as the alternative to.

Paid stays carry a loyalty charge too

The free night is one side of the program. The other is what the hotel pays when a member stays and pays.

Hilton charges 4% of the eligible folio for every stay on which a guest earns Honors points. The fee is waived when the guest joins the program at the hotel. Marriott charges 4.2% of the revenue from guests earning points, reduced to 4.0% through December 2027, plus 1% of revenue for some group and catering events.

Both programs also come with obligations the hotel funds itself. Marriott's disclosure says the hotel may have to offer discounts, services, amenities and points to certain member tiers "at your expense," and lists the cost of buying extra points for guests at $2.75 to $5.50 per 1,000. Hilton's says the hotel pays for certain member amenities. The upgrade, the late check-out and the welcome gift are part of what the member is promised, and the hotel delivers them.

These charges are disclosed and can be priced before signing. They belong in the fee count, which the last piece in this series adds up.

What a points night is worth depends on the night

None of this makes the free night bad business. It makes it a different business on different nights.

For a hotel with soft spots, a points guest on a quiet Tuesday fills a room that would otherwise stay empty, may spend money in the restaurant and the bar, and may come back paying. Even a reimbursement close to cost is better than nothing on that night. This is part of what the loyalty program sells to an independent hotel, and it is real.

For a hotel that sells out most weekends, a points guest on a Saturday takes the room of a guest who would have paid full rate. Whether that costs the hotel anything depends entirely on how the program pays on full nights. That is exactly the formula the contract does not contain.

So the useful document is not the franchise agreement. It is the program's reimbursement policy for the specific hotel, its tier and its expected redemptions, and how the payment changes when the hotel is full. An owner can ask the development team for it in writing before signing. It is the one number in the deal the chain sets after the signature, and it is the number Marriott's own owners asked to see.

Read also: Before you sign: What it costs to leave a soft brand

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