From RevPAR to GOPPAR: Key Performance Indicators for Hotels

Today, hotel administrators must evaluate numerous performance indicators to guarantee success. The focus is often on RevPAR, or “Revenue Per Available Room,” because it shows room profitability. Nevertheless, GOPPAR (Gross Operating Profit Per Available Room) is another vital metric.

GOPPAR illustrates a hotel’s overall profitability and its ability to effectively manage both inflows and outflows of funds. This makes it an essential tool for hotel managers.

Understanding GOPPAR

GOPPAR accounts for both revenue and costs, unlike RevPAR and TrevPAR (Total Revenue Per Available Room). This provides a more complete picture of a hotel’s financial health. RevPAR shows how well a hotel generates room revenue. In contrast, GOPPAR assesses how well the hotel manages both revenue and expenses.

RevPAR can naturally increase with a good revenue management strategy. However, true profitability hinges on effectively managing costs. Costs might include rising supplier prices, expenses for renovations, or increased rent. By focusing on both revenue and costs, GOPPAR helps hotel managers make more informed decisions about their operations.

GOPPAR in Practice

Hotels offer more than lodging. They have restaurants, bars, spas, and meeting spaces. To see overall profitability clearly, include the revenue and costs of these services.

To calculate GOPPAR, first determine your operating profit. This includes revenue from rooms and other services minus the costs of these operations. Then, divide this figure by the number of available rooms. Here’s a simplified example:

Hotel Details:

• Number of rooms: 60
• Marketing period: 365 days
• Number of rooms available yearly: 21,900

Revenue:

• Accommodation (average sale price €80-€90/night, 80% occupancy): €1,500,000
• Restaurant services (breakfast, room service, bar): €800,000
• Other departments (MICE, spa, fitness): €200,000
• Total revenue: €2,500,000

Costs:

• Accommodation (20% of revenue): €300,000
• Restaurant services (40% of revenue): €320,000
• Other departments: €60,000
• Total costs: €680,000

Gross Operating Profit (GOP):

• €1,820,000

GOPPAR:

• €83 (GOP divided by the number of available rooms)

Significance of Regular Profitability Assessment

Profitability assessments are done regularly to find strengths and weaknesses. If your restaurant is making less profit, the cause should be checked. Is it due to investment in kitchen facilities? Or is it a drop in the number of guests? Understanding the root causes of changes in profitability helps you make better decisions.

For your rooms, you might find that revenue has increased relative to costs. This could be the result of a good pricing strategy and effective management of rooms sold through OTAs (Online Travel Agencies). By regularly evaluating GOPPAR, you can track these changes and adjust your strategies accordingly.

Analyzing Your Online Reputation

Your online reputation can also impact your GOPPAR. Positive reviews can lead to higher prices and improved performance indicators. Regularly check reviews to see if investments, like hotel renovations, are positively impacting your reputation. A good reputation often translates to better occupancy rates and higher prices, both of which contribute to an improved GOPPAR.

Analyzing reviews can also provide insights that numbers alone cannot. For example, if occupancy rates drop, reviews might reveal the reasons. Bad quality linen or lack of a hot breakfast buffet could be to blame. These insights help you address issues affecting profitability.

Other Performance Metrics

Several other metrics can help measure your hotel’s performance:

ADR (Average Daily Rate) 

This metric measures the average revenue earned per occupied room and helps understand pricing effectiveness.

RevPOR (Revenue Per Occupied Room)

This metric provides insights into the revenue generated per occupied room, considering all services used by guests.

Analyze these metrics alongside GOPPAR to maximize your hotel’s efficiency. Depending on your hotel’s size, available rooms, services offered, and operational costs, take the time to review this data thoroughly. Each metric provides valuable information that can help you improve different aspects of your hotel’s operations.

Improving GOPPAR Through Feedback

Client reviews can provide insights that numbers alone cannot. If occupancy rates drop, for instance, it could be because of bad linens or the absence of a hot breakfast buffet, according to studies. The best way to discover development opportunities and implement changes that boost visitor satisfaction and profitability is to regularly monitor and evaluate customer feedback.

All performance indicators are interconnected. Analyzing them properly will help you better understand your competitive advantages and identify areas for improvement. By focusing on GOPPAR and other key performance measures, you can ensure that your hotel remains profitable and competitive in the constantly shifting hospitality market.

Conclusion 

Although RevPAR is a great indicator, GOPPAR offers a more all-around assessment of the profitability of your property. Regular evaluation of your GOPPAR, online reputation analysis, and client comments can help you make wise decisions enhancing the performance and profitability of your hotel.