For stays booked to be paid in money, the hotel tends not to cancel existing reservations, although of course you lose points, qualifying nights credits, and any elite benefits (although I know of a few cases where the hotel offered the benefits even though this was not required). This assumes that the hotel will not close for renovation, etc. during the transition period. If the reservation is refundable, you should be sure to check the new price as it might be lower. If the reservation is nonrefundable, you should be nevertheless able to cancel it for free as the hotel will have materially changed, possibly to your detriment, but the hotel might argue about this; it might be easier to contact the chain to cancel as soon as the deflagging/reflagging is announced, before the chain loses access to your reservation.

For stays booked with points (etc.), it's likely that the hotel will cancel the reservation as there will be no way (they say!) for the chain to pay the property for your award stay. Sometimes the chain will move you to another property for the same price in points. You should call your customer service number for the chain and try to negotiate after first investigating what the options might be.

There's no reason not to make a backup refundable reservation if you're concerned; these can usually be cancelled easily on line with an emailed proof of timely cancellation. Note, however, that duplicate reservations might violate the T&C of a hotel loyalty program, so don't do this repeatedly. You might want the backup reservation to involve a different hotel chain/family, although it can be a bit more difficult to make and cancel reservations at independent hotels.

You might also want to consider that the hotel might be disrupted by the deflagging/reflagging, with front desk suffering to use the new reservation system, lots of new employees and managers, and different service standards. Do you want to stay during a possibly chaotic period?