A higher base fee can still leave more cash for the owner. The following is a fictional annual comparison for the same hotel, with identical service scope and operating assumptions. It is not a market fee benchmark.
Assume:
- Total eligible hotel revenue: $6,000,000.
- Earnings before the three operator charges below, but after all other operating and property costs: $1,650,000.
- Both proposals charge a 10% incentive on positive earnings above $1 million after base and central-service charges, but before debt service and reserve deposits.
- Annual debt service: $720,000.
- Annual required reserve deposits: $240,000.
- No additional capital spending outside the reserve, working-capital increase or other cash retention in this simplified example.
| Annual common-case comparison | Operator A | Operator B |
|---|---|---|
| Headline base fee | 2.0% | 3.0% |
| Base fee dollars | $120,000 | $180,000 |
| Central-service charges | $150,000 | $50,000 |
| Earnings before incentive | $1,380,000 | $1,420,000 |
| Incentive fee | $38,000 | $42,000 |
| Total operator charges | $308,000 | $272,000 |
| Earnings after operator charges | $1,342,000 | $1,378,000 |
| Debt service | $720,000 | $720,000 |
| Required reserve deposits | $240,000 | $240,000 |
| Illustrative owner cash before investor income tax | $382,000 | $418,000 |
Operator B leaves $36,000 more annual owner cash in this common case, despite the higher headline fee. The comparison does not establish that B will generate better operating results; that requires separate evidence.
Now assume fictional complete diligence supports these ratings:
| Criterion | Weight | A rating | A points | B rating | B points |
|---|---|---|---|---|---|
| Cash reconciliation | 18 | 3 | 10.8 | 4 | 14.4 |
| Demand and comparables | 12 | 4 | 9.6 | 4 | 9.6 |
| Total fees and alignment | 12 | 2 | 4.8 | 5 | 12.0 |
| Staffing and operations | 10 | 4 | 8.0 | 4 | 8.0 |
| Distribution economics | 10 | 3 | 6.0 | 4 | 8.0 |
| Capital plan | 10 | 3 | 6.0 | 4 | 8.0 |
| Downside liquidity | 10 | 3 | 6.0 | 4 | 8.0 |
| Owner control and exit | 8 | 2 | 3.2 | 4 | 6.4 |
| Team and mobilization | 5 | 4 | 4.0 | 4 | 4.0 |
| Reporting and assurance | 5 | 3 | 3.0 | 5 | 5.0 |
| Total | 100 | 61.4 | 83.4 |
Under the proposed rules, B becomes the priority shortlist candidate, subject to satisfactory gates and final documentation. A needs material revision, including its fee alignment and exit protections, which fail the critical-criterion floor.
The ratings above are invented solely to demonstrate the calculation. In a live exercise, each rating needs its own evidence record; the cash comparison alone cannot justify the other nine ratings.