Get to grips with GOPPAR to make your hotel more profitable
What is GOPPAR?
GOPPAR, or Gross Operating Profit Per Available Room, measures how effectively your hotel turns available rooms into profit.
How GOPPAR differs from other metrics
GOPPAR stands out because it focuses on profit, not just revenue. For example, RevPAR (Revenue Per Available Room) and ADR (Average Daily Rate) only track income but ignore costs. GOPPAR includes these costs, so it shows a fuller picture of how well your hotel is doing financially.
How to Calculate GOPPAR
Here’s a simple way to calculate GOPPAR:
- Calculate Gross Operating Profit (GOP):
- Subtract your total operating expenses from your total revenue.
- Determine available rooms:
- Count the total number of rooms available for sale during the period you’re analysing.
- Apply the formula:
- GOPPAR = Gross Operating Profit / Available Rooms
Example Calculation
Let’s break it down with an example using the GOPPAR formula:
- Revenue Calculation:
- Accommodation: For a hotel with 60 rooms, 365 days, 80% occupancy, and an average room rate of €85, the revenue is:
- 60 rooms × 365 days × 80% occupancy × €85 = €1,500,000
- Restaurant Services: Revenue from the restaurant and bar totals €800,000.
- Other Departments: Revenue from additional services like meetings and a spa totals €200,000.
- Total Revenue: Adding it all up: €1,500,000 (Accommodation) + €800,000 (Restaurant) + €200,000 (Other) = €2,500,000
- Operating Expenses Calculation:
- Accommodation Costs: Typically around 20% of accommodation revenue: 20% of €1,500,000 = €300,000
- Restaurant Costs: Usually about 40% of restaurant revenue: 40% of €800,000 = €320,000
- Other Costs: Total costs for other departments: €60,000
- Total Operating Expenses: Adding these up: €300,000 (Accommodation) + €320,000 (Restaurant) + €60,000 (Other) = €680,000
- Gross Operating Profit (GOP):
- GOP Calculation:
- Total Revenue – Total Operating Expenses: €2,500,000 – €680,000 = €1,820,000
- Calculate GOPPAR:
- Available Rooms Calculation: 60 rooms × 365 days = 21,900 room nights
- GOPPAR Calculation: GOP / Available Rooms = €1,820,000 / 21,900 = €83
So, in this example, the hotel’s GOPPAR is €83, meaning it makes €83 in profit for each available room.
Common mistakes to avoid
- Using inaccurate operational costs: Ensure your cost estimates are precise. For example, if you underestimate costs like cleaning or staffing, your GOPPAR might look better than it really is. If operational costs are actually €120 per room but you only account for €100, your GOPPAR will be misleadingly high.
- Comparing across different markets: Don’t compare GOPPAR from hotels in different locations without considering their cost differences. A luxury hotel in New York City will have a different GOPPAR than a budget hotel in a small town.
- Overlooking seasonal variations: GOPPAR can change with the seasons. For instance, a beachfront resort might have a high GOPPAR in summer and a lower one in winter. Track GOPPAR throughout the year to get an accurate view.
- Not benchmarking: Compare your GOPPAR with similar hotels in your area. If your GOPPAR is €80 but nearby hotels have a GOPPAR of €100, you’ll know there’s room for improvement.
- Using GOPPAR in isolation: Don’t rely solely on GOPPAR. Combine it with other metrics like RevPAR and ADR to get a complete financial picture.
Applications of GOPPAR in the hospitality industry
- Financial performance analysis: Use GOPPAR to track how profitable your hotel is. For example, if you see a drop in GOPPAR during a peak season, it might be due to rising operational costs. Investigate and address any issues.
- Budgeting and forecasting: When planning your budget, use GOPPAR insights. If your GOPPAR suggests slim profit margins, consider cutting unnecessary expenses or adjusting your pricing.
- Spotting areas for improvement: A low GOPPAR can point to inefficiencies. For instance, high labor costs or energy waste might be driving up expenses. Use GOPPAR to identify these issues and make targeted improvements.
Advantages of using GOPPAR
- Better decision-making: GOPPAR helps you make smarter decisions about pricing and services. For example, if you see that improving your breakfast service increases GOPPAR, you might decide to expand that offering.
- Boosted operational efficiency: It highlights where you can save costs without impacting guest experience. If your GOPPAR is lower than expected, it might be time to review and reduce operational expenses like utilities.
- Increased profitability: With a clear view of your financial health, GOPPAR helps you find ways to boost gross operating profit and overall profitability. By focusing on both revenue and costs, you can make your hotel more profitable.
Using guest reviews and feedback to increase your GOPPAR
Guest reviews and feedback provide valuable insights that can enhance your hotel’s profitability. Here’s how you can use it:
- Identify and fix issues: Reviews might highlight problems like slow check-in or poor room cleanliness. For instance, if guests frequently mention long wait times at check-in, improving this process can lead to higher satisfaction and better reviews, boosting your GOPPAR.
💡 Customer Alliance’s Text Analytics automatically tells you which topics are mentioned in a positive or negative way in your reviews. This allows you to easily understand where issues occur, so you can take fast action to improve.
- Enhance revenue opportunities: Positive feedback about specific services, like your breakfast, can guide you in expanding these offerings. If guests love your breakfast, consider extending hours or offering breakfast packages to attract more guests and increase revenue.
- Target specific improvements: Feedback can reveal inefficiencies. For example, if guests complain about room temperatures, upgrading your HVAC systems can improve comfort and reduce maintenance costs, enhancing both guest experience and GOPPAR.
- Foster continuous improvement: Regularly act on guest feedback to stay competitive. Continuously updating amenities or improving service based on reviews helps maintain high satisfaction levels and supports a better GOPPAR.
By using guest feedback to make targeted improvements, you can boost both guest satisfaction and your hotel’s financial performance, leading to a stronger GOPPAR.
Content updated August 2024
Beth is the Content Manager at Customer Alliance. Her background is in copywriting and content writing, with industry expertise in B2B SaaS, marketing and review and feedback management. She is from England but is currently based in northern Germany. When she’s not writing, she loves to cook, watch movies and go on long walks with her dog.