Ownership structure, a source of firm heterogeneity, can change competitive environments and market structures; the impact on the hospitality industry is unknown. This study investigates the impact of hotel ownership structure changes on the magnitude of localized competition of different quality segment hotels. Two-level mixed-effect analyses reveal that hotel ownership structure change from chain-affiliated to independent increases the number of neighboring economy hotels, whereas the change from independent to chain-affiliated increases the number of neighboring upper-upscale hotels. Ownership structure changes in the same market can be a key driver of market dynamics, suggesting that hotels should colocate with caution.