With the pandemic still raging and hotel operations still in flux, hoteliers are still left figuring out what to do next. Churning out profit in the age of COVID is a Herculean task, but consulting the right data can be a step in the right direction.
Unfortunately, if you’re relying solely on narrow KPIs such as RevPAR to craft your hotel performance plan, you might as well be building a house of cards. It’s bound to collapse when the slightest breeze picks up.
Looking for a hotel KPI that’s guaranteed to support a stronger hotel performance plan? Try gross operating profit per available room (GOPPAR) on for size. Sure, the top line matters—you can’t turn a profit without revenue—but the bottom line is a true measurement of all hotel revenue and expense. That’s where GOPPAR becomes the gold standard of hotel KPIs.
This rock-solid metric is the secret to revealing opportunities and driving more profit. If you want to lift hotel profits, there are four reasons GOPPAR needs to be on your list of KPIs.
First, What Is GOPPAR?
Gross operating profit per available room (GOPPAR)Â is a hotel KPI that shows you how much profit a property is making on a per-room basis. To calculate GOPPAR, you need to complete two steps:
- Find the hotel’s gross operating profit by subtracting all operating expenses from gross revenue.
- Divide the result by the hotel’s total number of available rooms.
As simple as finding GOPPAR is, it stands out as one of the most reliable hotel KPIs out there. Here’s what makes GOPPAR an essential KPI for hoteliers who want to boost profit:
1. It Reveals Full Value
Simply put, GOPPAR is an excellent financial diagnostic tool. Although its adoption as an indication of financial health has been slower than that of revenue per available room (RevPAR), its ability to reveal true financial value is far superior. This is because RevPAR only reveals how much revenue is coming in through rooms.
It’s not hard to see how that money can burn up along the way to the hotel’s bottom line. After all, if labor or other expenses jump and your RevPAR stays steady, you’re left with a financial downtrend you never would have spotted with a RevPAR-only focus.
However, rises in expenses and dips in revenue will show up in your GOPPAR figures. Essentially, GOPPAR accounts for both the money coming in and the money flowing out of a hotel operation.
Because it highlights profit, GOPPAR paints a clearer picture of a hotel’s financial health. That means investors can make more solid decisions, and hoteliers can see how and when to make the financial moves that will pay off.
2. It Shines Light on Growth Opportunities
The pandemic may have dropped hotels into a profit desert, but growth opportunities are still out there. The hoteliers and investors who can identify them first and most accurately will be miles ahead of the competition.
With GOPPAR lighting the way, hoteliers can spot the departmental moves that are having the biggest impact on the hotel’s bottom line. Because GOPPAR reveals profit, it makes it easier to see what departmental moves or investments are turning into financial gains.
3. It Informs Smarter Reductions
During most market setbacks, decision makers immediately start slashing high-cost items. However, cutting programs across the board without a proactive plan could worsen down markets and slow recovery.
For instance, at first glance, hotels may see the recent drop in food and beverage (F&B) services as a sign it’s time to shut down all F&B operations. That may be the best move in many cases. In other instances, F&B demand may just be shifting toward a grab-and-go model. A tweak in the operation could end up supplying the cash boost the hotel needs to push ahead.
Again, the only way to make these strategic cutbacks with confidence is to root decisions in data. And GOPPAR illuminates where to cut back without losing out on profit.
4. It Anchors Your Whole Hotel Benchmarking Strategy
Perhaps most importantly, GOPPAR fits beautifully into a broader, holistic hotel performance strategy. As a profit-centered KPI, it provides a sturdy anchor to steady your whole hotel benchmarking plan.
When a hotel’s financial performance plan is built on GOPPAR and other profit-centered KPIs, hoteliers have the raw materials to craft a financial fortress that can stand strong in the harshest markets.
Want to learn about more hotel KPIs that can fuel profit across the hotel market? Read our e-book, RevPAR: The Good, the Bad and the Ugly.
