What is GOPPAR? How can it benefit your hotel?
What is GOPPAR?
Gross operating profit per available room is a hospitality industry metric that measures the relationship between your revenue and expenses, providing a better picture of your hotel’s financial health. By taking into account your number of available rooms, GOPPAR provides a true reflection of your performance on a rooms available basis.
As the importance grows around understanding your revenue management strategy’s influence on profit, so does GOPPAR’s importance in the competitive hotel landscape. Understanding revenue is absolutely necessary, but profit of course goes further in measuring your hotel’s overall success.
As with most industry acronyms/metrics, calculating GOPPAR might seem confusing, but it’s actually quite simple. To make it even easier, we have created a case study video to put GOPPAR calculation into practice.
GOPPAR = Gross operating profit (GOP) / Total number of available room nights
GOP = total revenue – (total departmental expenses + total undistributed expenses)
Total departmental expenses =
Rooms expense + Food and Beverage expenses + other operated department expenses
Total undistributed expenses =
Administrative & General + Information & Telecommunication Systems + Sales and Marketing + Utilities + Property Operations and Maintenance
How to use GOPPAR?
Analyzing GOPPAR highlights how effectively you are running your business by measuring your property’s bottom line. While you might over perform in your top-line indicators, there could be areas in which you have too many expenses and fall below par.
Off-season periods are the perfect example, because GOPPAR can help you understand how well you manage with less demand. Are your expenses higher than needed? Do you employ too much staff at certain times? Labor is critical to profitability, and your GOPPAR will indicate if you are managing it well.
Context is king, of course, and it is important to use the GOPPAR index, which benchmarks your performance against the competition. With a better grasp on how your revenue and expense balance compares, you can identify strengths, weaknesses and opportunities to make your hotel or particular departments more profitable.