A manager-run, 40-room Hospitality International hotel may produce roughly $377,000 to $670,000 in estimated pre-tax owner earnings per year under the scenarios modeled here. An owner who personally replaces a paid lodging manager could have an estimated owner-operator benefit of about $456,000 to $749,000, but the added amount compensates the owner for labor and is not passive business profit.
This range is an independent analytical scenario, not a financial performance representation by Hospitality International, Inc. It combines facts from the 2026 Franchise Disclosure Document with separately identified U.S. hotel benchmarks and editorial sensitivity assumptions. Actual results can differ materially by market, brand format, occupancy, room rate, labor, property costs, reservation mix, financing, owner involvement, and execution.
The current FDD supplies the operating structure and fee schedule but no Item 19 revenue or earnings data, so the estimate depends materially on broad government and industry benchmarks.
How much may a 40-room Hospitality International owner earn?
The independent estimate is approximately $377,000 to $670,000 in manager-run pre-tax owner earnings per year, with a central scenario of about $515,000. These are modeled 2025–2026 economics for a mature, 40-room U.S. limited-service hotel—not official results for any Scottish Inns, Downtowner Inns, Passport Inn, Red Carpet Inn, or Master Hosts property.
The scenario definition is cash-like residual value after the benchmark’s reported hotel expenses and normal manager compensation, before personal income taxes and before financing principal payments. No owner salary is deducted. Capital expenditures are excluded. Depreciation and interest are not added back because the Census expense aggregate does not permit a property-level reconciliation of those items; the result therefore is not EBITDA, net income, or a franchisor-reported cash-flow measure.
Each column combines a revenue sensitivity with a residual-margin sensitivity; the labels are analytical scenarios, not probabilities.
Interpretation: occupancy and average daily rate drive the largest revenue swing; margin changes then amplify the effect on the residual available to the owner.
Sources: 2026 FDD, Item 7, pp. 6–9; CoStar/STR 2025 U.S. hotel performance; U.S. Census Bureau 2022 Service Annual Survey tables. Calculations use full-precision inputs and are rounded to the nearest $1,000 for display.
The $1.17 million to $1.75 million modeled room-revenue range is only a top-line input. Payroll, housekeeping, utilities, repairs, insurance, property taxes, reservation costs, royalty and marketing fees, and other hotel expenses stand between room revenue and any owner benefit.
What does the 2026 FDD actually measure?
The official answer is that the 2026 FDD does not measure owner earnings, hotel sales, operating profit, EBITDA, or net income. Item 19 states that Hospitality International makes no representation about future franchisee financial performance or past performance of company-owned or franchised outlets; Item 20 also reports zero company-owned outlets for 2023 through 2025.
That means there is no same-brand average, median, quartile, mature-outlet cohort, or percentage-achieving threshold to publish. The Federal Trade Commission explains that a franchisor is not required to make a financial performance representation, but any sales or earnings claim it does make generally belongs in Item 19. Buyers should therefore treat unsupported oral income claims as a verification issue, consistent with the FTC’s Item 19 guidance for franchise buyers.
- Official FDD fact
- Hospitality International’s 2026 Item 19 contains no financial performance representation. It is not evidence that an owner earns $0; it is evidence that the franchisor has not published a standardized performance claim in the FDD.
- Structural FDD facts used
- The offer covers traditional lodging facilities, Item 7 illustrates 40-room converted and new hotels, Item 6 states recurring fees, Item 15 permits a hired on-premises supervisor, and Item 20 reports the outlet population and changes.
- External benchmark
- CoStar/STR supplies the national RevPAR anchor; Census supplies a broad hotel-and-motel revenue/expense proxy; BLS supplies a lodging-manager wage reference.
- Explicit uncertainty
- No source proves that a Hospitality International franchise has the national RevPAR, expense ratio, or manager wage used in this model. Market and format comparability remain unresolved.
Item 20 reports 201 franchised outlets at the start of 2025, three openings, 13 terminations, and 191 systemwide outlets at year-end. One listed outlet is in Canada, which is excluded from this U.S. earnings analysis. Outlet counts describe system movement; they do not reveal the sales or profitability of surviving, closed, transferred, or newly opened hotels.
How was the estimated earnings range calculated?
The estimate multiplies modeled annual room revenue by a broad hotel-industry residual ratio. It is a derived scenario for a 40-room U.S. limited-service property, using 2025 national RevPAR and 2022 Census employer-firm data—not a reproduction of any Hospitality International outlet’s records.
- Base revenue: 40 rooms × 365 available nights × $100.02 RevPAR = $1,460,292 of modeled annual room revenue.
- Revenue sensitivity: Conservative, Base, and Upside use 80%, 100%, and 120% of the national RevPAR anchor: $80.02, $100.02, and $120.02 after rounding. The spread is editorial, not FDD-reported.
- Central residual ratio: ($221.036 billion of 2022 Census hotel-and-motel employer-firm revenue − $143.115 billion of reported expenses) ÷ $221.036 billion = 35.3%.
- Margin sensitivity: 32.3%, 35.3%, and 38.3%, or three percentage points below, at, and above the central benchmark. These are analytical sensitivities, not probability estimates.
- Earnings formula: modeled room revenue × scenario residual ratio. Full-precision inputs produce approximately $376,786, $514,791, and $670,320 before rounding.
- Fee treatment: the Census ratio is treated as an all-in industry expense proxy, so the FDD’s recurring fees are not subtracted again. A property-level pro forma must verify whether its expense benchmark already captures the exact Hospitality International fee schedule.
The Census benchmark is matched to the closest official lodging category, NAICS 721110, Hotels (except Casino Hotels) and Motels. Even so, it aggregates employer firms of different sizes, service levels, ownership structures, geographies, and capital profiles. The Census Service Annual Survey methodology also emphasizes sampling and nonsampling uncertainty. This is why the evidence confidence is Limited.
How does active owner involvement change the result?
An active owner who replaces a paid lodging manager may add about $78,740 of labor value to each scenario, raising estimated owner-operator benefit to roughly $456,000–$749,000. This is an estimated 2025 labor substitution for a 40-room U.S. property; it is not additional passive profit and does not include employer payroll taxes or benefits.
Item 15 of the 2026 FDD says an individual franchisee does not have to participate personally in direct operations, although direct supervision is recommended. A hired on-premises supervisor is permitted and must complete Hospitality International’s training program within one year. That supports separate manager-run and owner-operated analyses rather than assuming every franchisee works full time at the property.
The teal span is the $78,740 national mean lodging-manager wage added as owner labor value.
Interpretation: owner involvement changes who receives the value of management work; it does not automatically improve hotel demand, pricing, or underlying operating performance.
Source: 2026 FDD, Item 15, pp. 22–23, and the BLS May 2025 national wage data for lodging managers. The $78,740 value is the U.S. mean annual wage, not a Hospitality International compensation figure.
Replacing a manager can increase owner benefit only when the owner genuinely performs the management function. The labor component should be compared with the owner’s hours, required skills, opportunity cost, and the need for coverage when the owner is unavailable.
Which Hospitality International formats fit this 40-room estimate?
The estimate fits Downtowner Inns most directly and is directionally closer to Scottish Inns and Passport Inn than to Red Carpet Inn or Master Hosts. This is an estimated U.S. limited-service model; official brand descriptions show materially different average room counts and service levels that should not be merged into one earnings claim.
| Official brand format | Average rooms | Service profile | Use of this model |
|---|---|---|---|
| Downtowner Inns | 40 | Generally limited-service, city-center, economy to upper-economy. | Closest room-count and service-format match. |
| Scottish Inns | 42 | Economy and midscale limited-service. | Close directional fit, subject to local rate and occupancy. |
| Passport Inn | 35 | Typically limited-service, budget or economy; some resort locations. | Close format, but resize available rooms and market assumptions. |
| Red Carpet Inn | 68 | Limited- and full-service, economy to mid-level. | Do not apply the 40-room result without a separate pro forma. |
| Master Hosts | 140 | Full-service, mid- to upper-middle, often resort or destination. | Not comparable to the modeled limited-service property. |
Room counts and format descriptions come from the official Hospitality International brand portfolio. The 2026 FDD also requires a free continental breakfast at Red Carpet Inn and Master Hosts properties unless an on-premises restaurant serves breakfast, which can change food, labor, and operating-cost structure.
How do the disclosed franchise fees affect owner earnings?
For the FDD’s 40-room example, the standard fixed recurring franchise charges total $19,620 per year before variable reservation costs, travel-agent commissions, special assessments, and other property expenses. This is an official-fee calculation from the 2026 schedule, not an estimate of total annual brand-related cost for every owner.
| 2026 FDD fee component | Stated basis | 40-room annual amount |
|---|---|---|
| Royalty portion | $25 per room per month | $12,000 |
| Marketing portion | $15 per room per month | $7,200 |
| Education and meeting fee | $35 per property per month | $420 |
| Maximum special assessments | Up to $25 per room, no more than twice per calendar year | Up to $2,000 |
Item 6, pp. 4–6, also discloses reservation charges based on booking source plus a service fee, a minimum 10% commission for travel-agent reservations, operating costs for 20 complimentary room nights annually, and a possible $275 monthly non-compliance fee. Flat fees may be CPI-adjusted, and the monthly franchise fee may be negotiated case by case. The $19,620 figure therefore is a standard fixed-fee baseline, not a ceiling.
What should a buyer verify before relying on this range?
The buyer should verify property-specific occupancy, ADR, payroll, occupancy costs, capital needs, reservation mix, and debt terms before treating any scenario as usable. The range is uncertain for a U.S. 40-room limited-service property because the 2026 FDD provides no same-brand revenue or profit distribution.
- Ask for written Item 19 substantiation: confirm that no later amendment or current FDD adds a financial performance representation, and obtain actual records if purchasing an existing hotel.
- Interview comparable franchisees: prioritize owners with the same brand, room count, service level, market type, property age, and owner-role model. Ask separately about room revenue, payroll, repairs, insurance, property taxes, utilities, reservation fees, and distributions.
- Build a property-level RevPAR case: use local competitive-set occupancy and ADR rather than the $100.02 national 2025 benchmark. Economy and select-service performance may differ sharply from the all-hotel average.
- Reconcile every expense: identify whether management wages, owner compensation, interest, depreciation, replacement reserves, required renovations, and capital expenditures are included or excluded.
- Model financing separately: Item 7 says neither the franchisor nor an affiliate finances the initial investment. Debt principal is excluded from this article’s earnings range, and personal income taxes are never estimated.
- Test the correct brand format: do not scale a 40-room limited-service result linearly to a 68-room Red Carpet Inn or 140-room full-service Master Hosts property.
- Review Item 20 movement: discuss the 2025 openings, terminations, transfers, and former-franchisee contacts. The FDD notes that some current and former franchisees have signed provisions restricting open discussion.
What is the strongest defensible earnings range?
The strongest defensible published range is $377,000–$670,000 in estimated manager-run pre-tax owner earnings for an illustrative 40-room U.S. limited-service hotel, or $456,000–$749,000 in estimated owner-operator benefit when the owner replaces a lodging manager. It is a Limited-confidence, structural FDD-anchored scenario—not an official Hospitality International Item 19 result.
The largest earnings driver is property-level RevPAR, because occupancy and average daily rate determine how much revenue a fixed room inventory can generate. The largest unresolved uncertainty is the lack of same-brand revenue and expense data for comparable mature franchised outlets. A buyer should resolve that gap through the current Item 19, written substantiation for any earnings claim, actual records for an existing hotel, and structured interviews with comparable current and former franchisees.
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