Gross Operating Profit Per Available Room (GOPPAR)

Understanding GOPPAR: A Key Metric for Hotel Profitability

In the world of hotel revenue management, few metrics are as crucial as GOPPAR—Gross Operating Profit Per Available Room. As a hotelier, you’re likely familiar with common metrics like RevPAR (Revenue Per Available Room) and ADR (Average Daily Rate), both of which focus on revenue. But GOPPAR goes a step further by bringing expenses into the equation, providing a much clearer picture of profitability.

GOPPAR doesn’t just tell you how much revenue each available room is bringing in; it shows you how much profit remains after deducting operating costs. This makes it an invaluable metric for understanding the true financial health of your hotel. Let’s break down what GOPPAR is, why it’s so useful, and how you can work to improve it.

What is GOPPAR?

GOPPAR, or Gross Operating Profit Per Available Room, is calculated by dividing the gross operating profit (GOP) by the total number of available rooms. Here’s the formula:

GOPPAR = GOP / Total Available Rooms

To calculate GOPPAR, you first need to determine your hotel’s gross operating profit, which is your revenue minus all operating expenses (excluding non-operating expenses like taxes and interest). Once you have this figure, divide it by the number of available rooms to find the profit generated per room.

Unlike RevPAR, which focuses only on revenue, GOPPAR gives you a more holistic view by considering the cost of running the hotel. This is essential for understanding how effectively your hotel is managing its resources to generate profit.

Why is GOPPAR Important?

GOPPAR is a powerful tool because it combines two critical aspects of hotel management: revenue generation and cost control. While revenue metrics like RevPAR and ADR tell you how much money is coming in, they don’t reveal how much profit you’re actually keeping. GOPPAR fills this gap, offering insight into how efficiently a hotel is converting revenue into profit.

1. Reflects True Profitability

By factoring in operating costs, GOPPAR provides a much clearer picture of your hotel’s profitability. For example, two hotels might have identical RevPAR figures, but if one has higher operating costs, its GOPPAR will be lower. This makes GOPPAR a more accurate measure of a hotel’s financial health, as it shows the net profit from each available room.

2. Helps with Cost Management

GOPPAR also serves as a valuable tool for cost management. If your GOPPAR is lower than expected, it could indicate that your expenses are too high relative to your revenue. This allows you to identify areas where costs could be cut or optimized without necessarily needing to boost revenue.

3. Aligns with Long-Term Profit Goals

Unlike metrics that focus only on revenue, GOPPAR aligns with your hotel’s long-term profit goals. By tracking GOPPAR, you’re able to ensure that your pricing, occupancy, and cost-control strategies are all working toward maximizing profitability. This holistic approach is especially important in challenging economic conditions, where cost control can make the difference between profitability and loss.

How to Improve GOPPAR

Improving GOPPAR involves not just increasing revenue but managing costs more effectively. Here are some strategies you can apply to enhance your hotel’s GOPPAR:

1. Optimize Room Rates with Demand-Based Pricing

Revenue management strategies, such as demand-based pricing, can help boost room rates during high-demand periods, maximizing revenue without sacrificing occupancy. By adjusting your rates to match market demand, you can increase both revenue and profit per available room.

2. Streamline Operating Costs

To improve GOPPAR, look for opportunities to streamline your operating costs. This could mean negotiating better rates with suppliers, reducing energy consumption, or adjusting staffing based on occupancy levels. Even small savings on operating expenses can have a significant impact on your GOPPAR.

3. Increase Ancillary Revenue

Revenue from additional services, such as dining, spa treatments, or event hosting, can significantly impact your hotel’s profitability. By promoting these services and upselling them to guests, you’re able to increase overall revenue and boost GOPPAR without increasing room rates.

4. Use Technology to Enhance Efficiency

Implementing technology solutions, such as automated check-in, energy management systems, and revenue management software, can help reduce labor and operational costs. These tools not only improve guest satisfaction but also reduce expenses, which directly contributes to higher GOPPAR.

5. Monitor and Adjust Regularly

GOPPAR isn’t a metric to be checked once and forgotten. It requires regular monitoring and adjustment. Track your GOPPAR alongside other key performance indicators, like RevPAR and ADR, to understand how changes in revenue or costs impact your profitability. Make data-driven decisions to refine your approach and continuously improve your hotel’s financial performance.

Key Takeaways: GOPPAR as a Vital Metric for Hotel Profitability

GOPPAR offers a comprehensive view of your hotel’s profitability by combining revenue and cost management into a single, powerful metric. It tells you not just how much money each room is bringing in, but how much of that money remains as profit after covering operating expenses. In this way, GOPPAR provides a more accurate picture of financial health than revenue-focused metrics alone.

By focusing on both revenue growth and cost control, hotels can improve their GOPPAR and ultimately drive sustainable profitability. Whether you’re using demand-based pricing, optimizing operating costs, or exploring ways to increase ancillary revenue, improving GOPPAR should be a key goal in your revenue management strategy.

In summary, if you want a true understanding of your hotel’s financial performance, don’t stop at RevPAR or ADR—look at GOPPAR. It’s the metric that brings it all together, giving you the clarity needed to make informed, profit-driven decisions.