What is GOPPAR?
GOPPAR means gross operating profit per available room. GOPPAR is a popular performance metric because it deals with measuring hotel profits, which provides a strong and clear picture of overall business health.
Hotel revenue managers commonly have key performance metrics around GOPPAR and often an entire revenue team can be involved in its analysis.
Having this information on hand allows you to build a much stronger strategy moving forward, ensuring your hotel is always growing.
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.
So let’s take a closer look at how GOPPAR applies to your hotel.
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How to calculate GOPPAR
GOPPAR is calculated by dividing the gross operating profit (GOP) by the total available rooms (TAR) in the hotel.
The GOPPAR formula looks like:
GOPPAR = GOP / TAR
GOP is the total revenue – total operating expenses. This includes revenue from all sources, such as rooms, food and beverage, and other sources, minus expenses such as labour, utilities, and maintenance.
A GOPPAR calculator is similar to a RevPAR calculator 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 = 36,500 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/36,500 = $96
So this means in the chosen year, each individual room is earning an average 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.
Benefits of using GOPPAR calculations for your hotel
Utilising GOPPAR calculations provides a comprehensive view of your hotel’s financial health. Unlike other metrics, GOPPAR considers both revenue and operational costs, giving you a more holistic understanding of your hotel’s profitability and an instant read (and point of comparison) on how your business is performing.
Typically, GOPPAR is used as a holistic, hotel-wide metric. However, it is possible to calculate GOPPAR for different types of rooms (e.g. standard rooms vs suites), if you can break down operational costs (e.g. maintenance, staffing, etc) and room-type-specific revenue to that level of detail.
If two different room types generate the same revenue, the one with lower operational costs will have a higher GOPPAR, highlighting its greater profitability. Understanding the profitability of individual room types can guide pricing strategies, promotional efforts, investment decisions, and operational adjustments, allowing you to focus your efforts on improving GOPPAR on those aspects of your hotel that will have the most impact.
With GOPPAR, you can benchmark their performance against competitors or industry standards. By comparing your GOPPAR with that of similar establishments, you can gauge where you stand in the market and identify areas for improvement or innovation. Of course, this still requires that you have reliable competitor insights available.
By breaking down profits on a per-room basis, GOPPAR helps identify cost inefficiencies for the hotel as a whole. Recognising which hotel sites are underperforming in terms of profit can guide cost-cutting measures, ensuring resources are allocated more effectively and revenue generation strategies are better targeted.
Improve guest experience
A higher GOPPAR often correlates with a better guest experience – and a lower GOPPAR may indicate that guests aren’t willing to book rooms, buy upgrades, or be enticed by your ancillary services. By focusing on increasing this metric, hotels are indirectly enhancing the services and amenities they offer. A satisfied guest is more likely to return and recommend, driving both revenue and improving your reputation.
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.