gop
A New Approach to Hotel Management Fees
Marcus R. Lee | April 26, 2024
By Marcus R. Lee In the ever-evolving hospitality industry, the question of how to effectively compensate hotel operators remains crucial. While the basic premise of paying managers for their management skills holds true, the prevalent incentive fee structures may no longer adequately align with market realities, particularly for owners. Management Fees Breakdown Hotel management companies earn fees through three main avenues: In the typical hotel management agreement, hotel management companies are typically paid a base fee equal to 2.0% to 4.0% of total operating revenue—3.0% being the most common—plus an incentive, typically an...
A Focus on the Margins: US Hotel Performance in the First Half of 2023
HotStats | August 18, 2023
by Laura Resco, HotStats Director of Hotel Intelligence Americas Hotels in the United States saw general pressure on profit margins in the first half of 2023, with Gross Operating Profit (GOP) margin falling by 1 percentage point compared to the same period in 2022. A closer look at brand-scale performance reveals that the extremes were particularly affected: both the luxury and midscale and economy segments exhibited the greatest year-on-year margin declines, as shown in Figure 1. [caption id="" align="alignnone" width="800"] Figure 1 US GOP as a % of Total Revenue, H1 2021, 2022 and 2023[/caption] A major factor influencing this tr...
Global Hotel Industry Faces Mixed Fortunes Amid Rising Costs and Varied Demand
HotStats | August 3, 2023
The global hotel industry is experiencing mixed fortunes as it navigates the post-pandemic landscape. In the United States, the Gross Operating Profit (GOP) margin has seen a year-on-year (YOY) decline of three percentage points (ppt), primarily due to a three ppt increase in total labor cost margin and a 0.5 ppt rise in utilities cost margin. This has led to a 1% ($1.25) YOY drop in Gross Operating Profit Per Available Room (GOPPAR). Undistributed expenses, including Sales and Administration & General (A&G) expenses, have surged by 12.9% YOY, reversing the savings made in these areas during the pandemic. Specific cost items such a...
Driving GOP During Inflationary Growth and Rising Labor Costs
Susan Furbay | May 25, 2022
By Susan Furbay High staff turnover has always been one of the biggest management challenges faced by owners and operators in the hospitality industry. But now, as the nation is experiencing record levels of inflationary growth, rising wages, and labor shortages, the hospitality industry is encountering extreme difficulty finding workers. So, how are hotel owners and operators managing rising labor costs and inflationary risk to drive their bottom line during these unprecedented times? Aggressive Revenue Management Unlike other real estate classes, such as office and residential buildings, where profitability is tied to multiyear leases,...
