GOPPAR is a necessary performance indicator to track on a regular basis at your hotel if you want a good idea of your bottom line. Just like other metrics such as RevPAR or TrevPAR, GOPPAR allows you to look at key revenue insights and make smarter business decisions based on data.
So let’s take a closer look at how GOPPAR applies to your hotel.
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What is GOPPAR?
GOPPAR stands for gross operating profit per available room. Hotel revenue managers commonly have key performance metrics around GOPPAR and often an entire revenue team can be involved in its analysis.
GOPPAR is a popular performance metric because it deals with measuring hotel profits, which provides a strong and clear picture of overall business health.
Having this information on hand allows you to build a much stronger strategy moving forward, ensuring your hotel is always growing.
How to calculate GOPPAR
GOPPAR is calculated by dividing the gross operating profit (GOP) by the number of available rooms in the hotel.
This is similar to RevPAR except it eliminates fees and expenses from the revenue figure first.
For example if you want to measure it for the period of a year:
- 100 rooms x 365 days in a year = 36500 available rooms in the year
- Total hotel revenue, including room revenue, food and beverage etc = $6 million
- Expenses including supplies and salaries etc = $2.5 million
- GOP = $3.5 million
- GOPPAR = $3.5 million/36500 = $96
So this means in the chosen year, each individual room is earning a profit of $96.
Why should you use the GOPPAR formula at your hotel?
GOPPAR is a beneficial metric to consider because it not only provides you with an insight of the revenue that you are generating per room, but also the costs that are associated with generating this revenue. It is one of the most effective ways to analyse the bottom line of hotel performance and develop plans to improve it.
Regular monitoring gives you an opportunity to make minor adjustments to your revenue management strategy along the way, such as figuring out how you can cut costs without a detrimental effect on service.
For example, while you might be excelling in high level indicators such as your average daily rate, there could be other areas in which you have too many expenses. Staffing is one area that can impact profitability – in the low season, do you need as many staff hours as normal? Perhaps there’s a chance to save money and increase profit.
GOPPAR vs. RevPAR
While GOPPAR and RevPAR (revenue per available room) are both measured using available rooms, there are some big differences.
RevPAR gives you a broad view of how well your property is operating, by uncovering how much revenue each room is generating.
GOPPAR goes further, making it possible to understand what factors are impacting overall profitability – since it takes into account expenses from labour, food and beverages, amenities, and more.
Both are useful and it’s still good news if you are increasing your property’s RevPAR, but GOPPAR should certainly be considered before any major strategic decisions are made.