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What is GOPPAR?
GOPPAR stands for Gross Operating Profit per Available Room. It’s a metric hoteliers use to measure how much profit each available room generates, which helps you understand the financial health of your property beyond just occupancy and rates. While metrics like RevPAR (Revenue per Available Room) focus on revenue, GOPPAR goes a step further by factoring in operating costs, giving you a clearer picture of overall profitability.
Definition and Importance of GOPPAR in Hotel Revenue Management
Simply put, GOPPAR shows how much of your revenue translates into actual profit after covering operational expenses. For a hotelier, this is golden information because it tells you whether your hotel’s revenue-generating efforts are worth it once costs are considered. In a time where operating costs can skyrocket—from staffing to utilities—GOPPAR becomes an essential measure to keep a close eye on.
How GOPPAR Differs from RevPAR and ADR
Here’s where things get interesting. RevPAR and ADR (Average Daily Rate) are focused on topline revenue: what you’re charging per room or per available room. GOPPAR, however, doesn’t just look at revenue; it factors in expenses like payroll, utilities, and other operational costs. In other words, while RevPAR might look great, it doesn’t always mean your hotel is actually profitable. GOPPAR fills in that gap by focusing on the net effect of revenue and costs.
Why GOPPAR is the Go-To Metric for Hotel Profitability
GOPPAR is like a litmus test for your hotel’s efficiency. It reveals how well you’re controlling costs while generating revenue. For example, if your RevPAR is high but your GOPPAR is low, it might signal you’re generating good revenue but bleeding profit through high expenses. By focusing on GOPPAR, you get a more holistic view of your hotel’s financial health.
GOPPAR vs. RevPAR vs. ADR: Which Metric Matters Most?
Each of these metrics has its place, but GOPPAR gives a fuller picture of your hotel’s profitability. If you’re only looking at RevPAR, you’re essentially ignoring the cost side of the business. GOPPAR complements RevPAR and ADR by including the reality of expenses, making it the metric to rely on when evaluating profitability. In many ways, it’s like checking the bank account balance after paying all the bills—not just admiring the paycheck.
How to Calculate GOPPAR (Step-by-Step Guide)
The formula for GOPPAR is simple: GOPPAR = Gross Operating Profit (GOP) / Available Rooms
- Gross Operating Profit (GOP) Calculation: GOP is the profit your hotel generates after deducting operating expenses. This means subtracting costs like wages, maintenance, utilities, and other day-to-day expenses from your total revenue.
- Available Room Count Explained: Available rooms refer to the total number of rooms in your hotel that are ready for guests over a specific period—usually daily or monthly. Remember, this doesn’t include rooms out of service due to maintenance or renovations.
Sample GOPPAR Calculation for Hoteliers
Imagine your hotel made a gross operating profit of $50,000 in a month, and you had 100 rooms available for the full month. Your GOPPAR would be: GOPPAR = $50,000 / 100 rooms = $500 per room
This means each available room contributed $500 to your hotel’s operating profit that month—a helpful metric for tracking profitability trends over time.
Tools and Software to Calculate GOPPAR Accurately
There are several hotel management systems that can calculate GOPPAR and other key metrics automatically, like Mews, Opera, and Cloudbeds. Most of these systems also integrate with accounting tools to provide real-time profitability insights, helping you make informed decisions without manually crunching numbers.
- Manual vs. Automated GOPPAR Calculation: Pros and Cons: Calculating GOPPAR manually can give you a deeper understanding of your operational costs, but it’s time-consuming and prone to errors. Automated tools save time and reduce errors, but they may not be worth the investment for smaller hotels or those just starting out.
Why GOPPAR Matters in Hotel Financial Analysis
GOPPAR provides insights beyond revenue, highlighting if your operational costs are eating into profits. For instance, a high GOPPAR indicates that your hotel is not just generating revenue but is efficient in managing costs. On the flip side, a declining GOPPAR could suggest rising costs or ineffective cost management strategies.
Common Mistakes Hoteliers Make When Analyzing GOPPAR
Some hoteliers focus on increasing revenue without paying attention to rising operational costs, which can skew GOPPAR negatively. Another common mistake is ignoring GOPPAR when occupancy is high, assuming revenue means profit. However, even with high occupancy, a hotel with unchecked costs could have a low GOPPAR.
GOPPAR as a Predictor of Operational Success
When you monitor GOPPAR consistently, it can act as a predictor of success by showing you how efficient your operations are. For example, a steady increase in GOPPAR over time often means you’re controlling costs well, while a sudden dip might be a red flag to investigate where you’re overspending.
Factors Influencing GOPPAR: Maximizing Your Profits
Operational efficiency is key to boosting GOPPAR. This means scrutinizing every line item on your expense sheet—from staffing and training to energy consumption. Let’s say your hotel’s utility bill is unusually high. Simple tweaks, like installing energy-efficient lighting or automated temperature controls, can reduce costs and improve GOPPAR.
Revenue Generation Tactics to Improve GOPPAR
Besides cutting costs, revenue generation tactics can give GOPPAR a boost. Upselling—offering guests additional services like room upgrades or packages—can increase revenue without significant added costs, directly enhancing GOPPAR.
Occupancy and GOPPAR: Finding the Balance
While high occupancy generally contributes positively to GOPPAR, there’s a balance to maintain. If you’re filling rooms at discounted rates that don’t cover operating costs, you’re not benefiting your GOPPAR. It’s about finding that sweet spot where rates and occupancy support profitability.
GOPPAR vs. Other Metrics: Choosing the Right KPIs for Your Hotel
Comparing GOPPAR, RevPAR, and ADR
RevPAR, ADR, and GOPPAR each serve different purposes. RevPAR is great for tracking revenue trends, ADR for setting pricing strategies, but GOPPAR provides insight into profitability. If your goal is operational efficiency and profitability, GOPPAR should be a primary focus.
When to Use GOPPAR vs. RevPAR in Decision Making
RevPAR can help gauge demand, while GOPPAR should guide decisions on cost management. If you see RevPAR rising but GOPPAR stagnant or declining, it’s a sign you’re generating revenue but not retaining it due to high expenses. GOPPAR is most effective when used alongside other metrics. Pairing GOPPAR with TRevPAR (Total Revenue per Available Room) and ADR can give a fuller picture of both revenue and profitability.
Practical Tips for Improving GOPPAR
- Efficient Staff Management: Cross-training staff to handle multiple roles during low occupancy can reduce labor costs without impacting service quality.
- Reducing Utility Costs in Hotels: Investing in energy-efficient appliances or monitoring systems can cut down on long-term utility expenses, directly boosting GOPPAR.
- Implementing Dynamic Pricing Strategies: Adjusting room rates based on demand can help maximize revenue. For instance, charging higher rates during peak seasons and adjusting down in low seasons ensures you’re not leaving money on the table.
- Effective Marketing Tactics to Increase Room Demand: Targeted marketing campaigns to attract high-paying guests, such as business travelers or long-stay guests, can increase ADR and, subsequently, GOPPAR.
Frequently Asked Questions (FAQs) About GOPPAR
What is a Good GOPPAR for Hotels?
A "good" GOPPAR depends on the market, location, and size of your hotel. However, if you see consistent growth in GOPPAR month-over-month, you’re likely on the right track.
How Often Should I Calculate GOPPAR?
It’s recommended to calculate GOPPAR monthly. Regular analysis helps catch any dips in profitability early so you can make adjustments.
Can GOPPAR Be Used for Budget Planning?
Absolutely. GOPPAR provides insights into cost structures and revenue sources, which can help forecast profits and plan budgets more accurately.
Is GOPPAR Useful for Small Hotels?
Yes, GOPPAR can be useful for small hotels. While smaller properties may not have the complex cost structures of larger hotels, GOPPAR still provides valuable insight into the relationship between revenue and operational costs.
The End Note.
When it comes to hotel metrics, GOPPAR stands out because it doesn’t just stop at revenue. It considers the costs behind running a profitable property, making it a vital tool for hoteliers who want to see the full picture. By consistently monitoring and working to improve your GOPPAR, you’re setting your hotel up not only for higher revenues but for sustainable profitability.
