Analysing hotel revenue and profitability is a complex job. Hotel revenue managers weigh a variety of metrics, called key performance indicators, or KPIs, to measure how a hotel is performing in a variety of different areas. From the hotel’s average daily rate and occupancy percentage to operating costs and profit fluctuations, successful hoteliers consistently analyse hotel performance. GOPPAR, a derivative of the more familiar RevPAR, is an immensely helpful metric hoteliers can use to gauge a property’s success.
In this in-depth guide, we’re going to break down GOPPAR. We’ll walk you through what it is, why it’s important, how it’s measured, and how hotel revenue managers can utilise GOPPAR to improve hotel performance.
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GOPPAR is the acronym used to refer to a hotel’s gross operating profit per available room. GOPPAR is used to measure how much gross profit the hotel is bringing in based on the number of rooms available for sale each night. A profit-centered performance metric, this KPI should be watched by hoteliers, operations managers, and revenue managers alike.
GOPPAR—a powerful hotel KPI
Unlike RevPAR (revenue per available room), GOPPAR provides a bigger picture of a hotel’s financial success. Where RevPAR measures a hotel’s ability to fill available rooms at a profitable rate, GOPPAR focuses on the overall revenue trajectory of a property in relation to the number of available rooms.
GOPPAR paints a picture of a hotel’s financial success--or lack thereof--in its entirety, as opposed to RevPAR that measures revenue from rooms alone. Hoteliers and hotel managers commonly use GOPPAR to measure how effective their hotel is at balancing profits with operational expenses.
GOPPAR is a complex key performance indicator that can provide hoteliers and revenue managers with a surplus of helpful information. For new hotel revenue managers or hoteliers unfamiliar with GOPPAR, the thought of tracking and analysing such a comprehensive KPI may feel a bit overwhelming. At the end of the day, however, GOPPAR can be calculated by following a simple mathematical formula.
Many hoteliers subscribe to KPI reporting services or use the Hotel Performance Dashboard to track KPIs and ensure their property is priced competitively against other area hotels. Hoteliers that don’t have access to reporting services, or do not subscribe to a competitive set dashboard, can still calculate GOPPAR manually.
The GOPPAR Formula
Prior to using the GOPPAR formula, you need to identify your hotel’s gross operating profit, as this value is an integral part of the large GOPPAR formula.
To determine your hotel’s GOP, subtract the property’s operating expenses from gross hotel revenue.
GOP = HOTEL REVENUE - OPERATING EXPENSES
Calculating hotel GOPPAR is really simple, especially if you understand each component of the formula separately.
GOPPAR = GROSS OPERATING PROFIT / AVAILABLE ROOMS
Operating expenses: sum of all expenses and costs associated with hotel operation (taxes, salaries, purchased goods, utilities, maintenance and so forth)
Gross hotel revenue: all hotel revenue (rooms, F&B, services, etc.)
Watching GOPPAR closely can help you better anticipate potential profit interruptions, create a better budget for your hotel, and identify upcoming revenue upsets that would have otherwise fallen through the cracks.
What affects hotel GOPPAR?
Hotel GOPPAR changes can be caused by a variety of different factors. Hotel expenses, policies and budgets vary greatly from property to the next. What factors are impacting your hotel?
A few of the common factors that affect hotel GOPPAR are:
● Rising product costs
● Room rates
● Travel promotions and hotel rewards.
● Expensive repair needs or renovation requirements
● Demand for area travel
● Marketing ROI and expenses
● Trouble hiring or retaining workers
● Non-room revenue losses or changes
● Rising benefit costs and wage increases
● More market saturation/oversaturation
● Future properties in the pipeline
● Unrealistic corporate, brand, or ownership revenue goals
Work to identify which variables have affected, are currently affecting, or could affect your hotel’s GOPPAR in the future.
Get together with the hotel’s revenue team to analyse past budget details, review hotel rack rates, track KPI patterns, and update future hotel marketing strategies. Team up with department heads to prepare for upcoming expenses, travel demand fluctuations, and labor changes far in advance.
Using GOPPAR to improve hotel revenue and operating strategies
When it comes to determining the success of a hotel, or any other business, so much of the process is subjective.
● Is the business in good physical condition, or is it run down?
● Does your hotel’s online presence appeal to your ideal customer?
● What do your customers think about the hotel, staff, or service?
GOPPAR and other performance metrics, however, provide a concrete measurement of hotel success. Ultimately, KPIs are simply the answers to mathematical equations; to get a different solution, change the variables in the equation.
Analysing both incoming revenue and outgoing operating expenses, GOPPAR demonstrates the difference between high occupancy and true financial success. A hotel that’s sold out every night is not inherently a successful hotel. If operating costs and hotel expenses are outweighing the benefits of high occupancy, it’s time to reevaluate.
Identify opportunities to adjust the values impacting your property’s GOPPAR by using the revenue strategies below:
1. Avoid room revenue tunnel-vision through GOPPAR analysis.
GOPPAR accounts for room revenue, food and beverage revenue, event revenue, and any other hotel revenue that comes in or goes out. RevPAR is an excellent KPI to measure how successful your hotel is at selling its rooms. By comparing all profits against all expenses however, GOPPAR provides a better picture of the hotel’s success and revenue performance as a whole.
2. Let GOPPAR inform your hotel benchmarking strategy.
As with hotel ADR, occupancy and RevPAR analysis, many hoteliers find it helpful to focus on the “big picture” GOPPAR provides, as opposed to minor or more tedious day-to-day fluctuations. Update your benchmarking strategy to include regular careful GOPPAR analysis to identify the success of various revenue strategies. Regularly track GOPPAR index changes to identify unexpected value shifts and measure how your hotel is stacking up against the competition.
3. Determine where your hotel should rank against the competition.
Work with your revenue management or ownership team, if applicable, to determine how your hotel GOPPAR should measure up against the comp set. Service limitations, property age, revenue goals, average room rates, and other factors that can influence KPI ranking will vary from hotel to hotel.
Does your property consistently have a higher GOPPAR than the other hotels in your comp set, putting you in first place, or does your property tend to fall somewhere in the middle?
Identify where your hotel’s GOPPAR should rank amongst competing properties in the area, so you can quickly identify dates when the metric is higher or lower than anticipated. Regular GOPPAR analysis can help ensure your hotel’s revenue generation is in-line with the comp set as well as inform future rate and revenue strategies.
4. Give guests more bang for their buck.
Hoteliers saddled with tight budgets often struggle to provide more value and improve the guest experience at their property without increasing expenses. Tracking GOPPAR can help deliver higher value to guests while assessing how any associated costs are affecting overall numbers.
Whether through room rate increases or more expensive service fees, improving GOPPAR performance often means charging higher prices. Raising prices without giving guests more value for spending more money is a recipe for disaster, but there are ways to improve the guest experience without doling out loads of cash.
56% of travelers have attributed a satisfying hotel stay to unexpected surprises and moments created for them by the staff. Give your guests more by listening, showing empathy, anticipating their needs, and providing unique experiences through the power of personalisation.
5. ID opportunities for growth.
Keep track of the hotel’s GOPPAR index, and look for stark or unexpected fluctuations. Identify major dips or spikes in hotel GOPPAR values, and then look deeper to uncover the cause.
Look closely for patterns that led to undesirable GOPPAR numbers in the past, and craft a plan to overcome similar challenges in the future. Take advantage of high demand travel times and special events to maximise your room rate, add new services or amenities that require purchase, and identify opportunities to cut costs and/or increase profits in every department.
6. Make smarter budget cuts.
Have your hotel operation expenses recently increased? Are supply or labor costs rising in your region? Any recent needs for expensive maintenance or repair work?
Identifying unexpected GOPPAR shifts ahead in advance provides hoteliers with an opportunity to avoid future setbacks by making more informed budget cuts and pinpointing future dates where revenue is not on target.
Frequently Asked Hotel GOPPAR Questions
1. What is the GOPPAR formula?
To measure a hotel’s GOPPAR, divide the gross operating profit, or GOP, of the hotel by the total number of guest rooms available. Before calculating GOPPAR, however, you will need to know the GOP. To determine a hotel’s GOP, subtract all operating expenses (e.g. cost of goods purchased, operating costs, unforeseen expenses) from the total hotel revenue.
2. What is a good GOPPAR?
A high GOPPAR percentage does not necessarily mean that your hotel is completely successful. Of course you love to see high KPI percentages, but experienced hoteliers understand that sudden growths in profit don’t always spell good news.
If an increased year over year GOPPAR index was the result of cutting CPOR, did the CPOR cuts affect guest satisfaction scores? If a hotel increases profits by removing in-room coffee makers, negatively impacting online scores and hotel customer loyalty, is the current profit growth really the most beneficial strategy for the hotel long-term?
3. What do hotels use GOPPAR for?
GOPPAR is a key performance indicator popular amongst hoteliers and hotel revenue managers. This KPI measures a property’s gross operating profit in comparison to the total number of hotel rooms available for booking. GOPPAR can be calculated per night, per week, by day of week, monthly, annually, or for any specific dates of your choosing.
4. What is GOPPAR management?
Managing GOPPAR should be a point of interest for hoteliers running full-service properties. To appropriately manage GOPPAR, hotel managers balance the cost of operating the hotel with the amount of revenue the property brings in. The ultimate goal of GOPPAR management is for the hotel to turn a profit by maintaining equilibrium between expenses and revenue.
5. How do you measure GOPPAR?
Hotel managers can calculate GOPPAR manually or subscribe to paid reporting services. Hotels that subscribe to STR, the global hospitality benchmarking resource, have access to real-time KPI reporting. Review GOPPAR, RevPAR, Occupancy, ADR, competitive indexes and other important metrics via the STR Report or by accessing Cvent’s Business Intelligence Tools.