Revenue management is an obvious priority at every hotel, but it can often be a confusing exercise.
Developing the right hotel revenue strategy will be a challenge at times, particularly considering the fact that there are so many metrics to utilise in your analysis.
Consider these two key performance metrics when investigating the success of your business: RevPAR and GOPPAR. Do you know the difference and how they can help you?
What is GOPPAR?
GOPPAR — or the Gross Operating Profit per Available Room — is one of the most reliable ways to track your success as an independent hotelier. It allows you to evaluate the total performance of the hotel and make adjustments as necessary to increase bookings.
How is GOPPAR calculated?
GOPPAR is calculated by dividing the Gross Operating Profit, or GOP, by the number of available rooms in the hotel.
Why is GOPPAR a key performance metric?
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.
What strategies can your hotel employ with GOPPAR?
GOPPAR should be constantly monitored at your hotel, and the entire revenue management team should be involved in this analysis. 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. Ultimately, this promotes long-term growth at your property.
RevPAR is the metric that measures the revenue generated per available room in the property. It is an easy way to visualise the revenue that is being generated by specific market segments in your destination.
How is RevPAR calculated?
RevPAR is calculated by multiplying the ADR, or average daily rate, by the percent of occupancy at the hotel. Note that the ADR is calculated by dividing the total amount of room revenue generated by the number of rooms at the property.
Why is RevPAR a key performance metric?
RevPAR is a popular performance metric that is used by most hoteliers in the industry. Ultimately, this metric provides a glimpse into the number of rooms that are being sold at a hotel and how much revenue is being generated from those bookings. It allows hoteliers to evaluate one component of their overall revenue management strategy.
What strategies can your hotel employ with RevPAR?
Hoteliers can, and should, use RevPAR to understand the best way to maximise the revenue generated per room. It is often considered one of the most useful metrics in revenue management. However, it should not be the sole metric used by the revenue management team, as it only considers one aspect of maximising revenue at the property. Using RevPAR in combination with GOPPAR allows hoteliers to take a look at the larger picture and create an effective revenue management strategy that works for the individual hotel property.
You can learn more about revenue management by watching this video that SiteMinder created in association with Tnooz – click here to access the tutorial.