2021.4.16

How Much Do Hotel Owners Make?

Written by Austin Chegini

pexels andrea piacquadio 3771087

If you’ve ever thought about buying a hotel franchise, but weren’t sure if you’d earn enough to make the investment worth it, you’re in luck! We let you know how much, on average, hotel franchises return in profit each year and the various factors that go into that figure.

How Much Hotel Owners Make Per Year

The widely circulated salary for hotel chain owners is $40,000 - $60,000 USD per year. However, that estimated average amount was taken from a 2009 Business Week article and doesn’t seem to have been updated since then.

Using an inflation calculator, we estimated that in 2021 dollars, owners of a hotel chain can expect to earn, on average, around $49,000 - $74,000 per year. 

To put that into perspective, the American middle class consists of those earning between $48,500 and $145,500 per year. How much you have to earn to be considered “middle class” depends on the size of your family and where you live.

The terms “salary” and “income” are a little misleading, however, since these figures actually refer to the average annual profit from running a hotel in the United States. 

Profit vs. Income

“What’s the difference between profit and salary?” you be wondering.

In order to count your hotel profits as salary, you can’t use that profit for anything but income. If emergency repairs need to be made and are taken from the hotel’s profit, then your salary as the hotel owner was just reduced by the cost of the repairs.

Profits are affected by several factors, including:

  • Business taxes
  • Business loan repayments
  • Necessary items for your hotel (new equipment, repairs)
  • Employee salaries
  • Annual/semi-annual business insurance premiums

You may also have additional annual expenses that need to be taken into account. All of the above items will reduce your income because they’re taken out of your profit. Your income equals whatever’s left from the hotel profits once your business expenses are paid.

Now, let’s take a closer look at the often misunderstood topic of franchise fees and how they affect income next.

Franchise Fees

Often, business owners looking into buying a franchise don’t realize the full cost of franchise fees. Yes, there is the initial, one-time franchise fee for the privilege of using the hotel’s brand name, logo, etc., but you may have additional monthly or annual franchise fees, as well.

For instance, you might be required to pay a monthly marketing fee, depending on your franchise agreement. This fee helps the franchisor, such as Marriott hotels, pay for marketing the brand in national and/or local markets, which directly benefits you. 

You’ll also probably be required to pay a monthly royalty to the franchisor, as well, which could range from 4-12% of your profits, depending on your franchise agreement.

Both of these recurring franchise fees are paid from your profits, further reducing your actual income.

Type of Hotel

Of course, which type of hotel franchise you choose can affect your annual profit, as well. 

You might be surprised at the number of options you have here. There are upscale/luxury franchises, economy hotels, and mid-level hotels.

Luxury hotel franchises include brands like Wyndham and the Ritz-Carlton. These types of hotels typically include restaurants, bars, and more upscale options like room service, in-hotel spas, and conference rooms equipped with the latest technology.  

It’s estimated that the average initial start-up cost for a luxury franchise is around $113,000,000. That’s a lot of money to invest upfront, but you will be able to charge higher room prices, and potentially generate greater profits long-term.

Economy franchises include brands like Super-8, Motel 6, and Econolodge. They offer frills-free rooms and may have cold breakfast options, but don’t typically offer hot breakfast items. On average, the initial start-up costs for an economy franchise are around $2,800,000.

Mid-level franchises include brands such as Hampton Inn, Best Western, and Ramada. These chains typically offer a hot breakfast and may have additional amenities such as a workout room and/or pool area. Average initial start-up costs for a mid-level hotel chain come in at around $20,000,000.

Of course, the more amenities your hotel offers, the more items you’ll need to budget for—such as:

  • Pool maintenance, equipment, and repair
  • Hiring and retaining a bartender
  • Alcohol and food supplies for a restaurant or bar
  • Maintenance of exercise equipment
  • Maintenance of technology used in conference rooms/meeting spaces
  • Additional employees to staff a restaurant, bar, spa, etc.

You’ll need to determine whether the amount you’ll spend to maintain a high-end hotel is offset by the higher room prices you’ll be able to charge.

Age of the Hotel

You’ll also want to look at the age of the physical hotel building that you’re considering investing in. 

It may seem obvious, but if you’re buying a franchise with a new or newer building, you’ll have fewer initial upkeep costs, which means more of your profit gets to stay in your pocket. 

Older hotels will typically require more maintenance and repairs to keep them in optimal shape, which will cut into your annual profit, meaning less take-home pay for you. 

Don’t forget that in addition to maintenance staff, you’ll also need to think about:

  • The difficulty of obtaining original parts for older equipment
  • The possibility of lead or asbestos in older buildings that will need to be remediated at the time repair work is done
  • The ability to replace damaged items with similar fixtures (furniture, carpet, lighting, bedding). You don’t want the new items to look jarringly out of place.
  • Remodeling costs required by the franchisor 

But, an older hotel may come with a less expensive franchise tag than a new build, so you’ll need to consider whether remodeling and higher maintenance and repair costs are offset by the smaller up-front investment. 

Operating Expenses

Finally, it’s important to think about all of your operating expenses, since they’ll factor into the overall profitability of your hotel.

If you fail to plan for these expenses ahead of time, you won’t have an accurate idea of your weekly, monthly, or annual profit, and will have no idea what you’ll be able to count on as income from your business.

If you’re able to craft an accurate budget from the beginning, you’ll have a good idea of how much you can reasonably expect to earn from a successful hotel.

This goes beyond just the supplies you’ll need for the hotel (like linens) but includes the intangibles, such as business insurance, employee salaries, recurring franchise fees, and a high-quality point of sale system.

Epos Now has several secure, robust options specifically tailored to the hotel industry, including the ability to use Google Pay and Apple Pay, as well as accepting Visa, Mastercard, and American Express, to name a few. 

Not only does Epos Now offers great point of sale service, but you can also track your bookings, restaurant sales (if applicable), and even staff performance on one system, streamlining multiple processes and saving you money. 

Plus, Epos Now can make check-in and check-out a quick, easy, and enjoyable process for your guests.

In fact, U.S. News and World Report ranked Epos Now as one of the best point-of-sale systems in the United States.

When it comes right down to it, your customers will remember how easy or difficult it was to pay for their stay, and you don’t want to tarnish your hotel’s reputation by providing customers with a less-than-hospitable payment experience.

Call today to see how Epos Now can help your hotel succeed!

Epos Now Call us now