I imagine the sort of people who's primary requirement for project management software is that it costs less than $20 per month to host 10 projects are not going to make the best customers with the highest retention in the long run.
Income yes, but profit no. Hosting is not free. You can, of course, work towards minimizing hosting costs, but time spent on that may cut into other priorities.
Of course, as mentioned above, saving time not having to support customer installations could (easily?) offset hosting costs.
The fact that it can be purchased and installed is the differentiating factor and may target a market audience that's largely ignored.
While there is usually the potential for higher sales with a SaaS approach, that doesn't mean it's always the correct fit when entering a market.