Gross Operating Profit per Available Room (GOPPAR)

Definition

GOPPAR is a financial metric used in the hotel and hospitality industry to measure the profitability of a hotel property on a per-room basis. It is calculated by taking the gross operating profit and dividing it by the total number of available rooms, providing insights into how well a hotel is managing its operational costs relative to its available inventory. This metric helps hoteliers evaluate overall performance, compare properties, and make informed business decisions.

5 Must Know Facts For Your Next Test

1. GOPPAR is particularly useful for benchmarking performance across different hotels within the same market segment, helping owners and operators identify strengths and weaknesses.
2. This metric considers both revenue generation and cost management, giving a more comprehensive view of profitability than revenue-based measures alone.
3. GOPPAR can fluctuate based on various factors such as seasonality, economic conditions, and competition in the hospitality market.
4. By focusing on GOPPAR, hoteliers can implement targeted strategies to improve profitability, such as reducing operating costs or optimizing room rates.
5. In addition to financial analysis, GOPPAR can be used as part of a broader performance management strategy that includes guest satisfaction and employee engagement metrics.

Review Questions

• How does GOPPAR provide a comprehensive view of hotel profitability compared to other metrics like RevPAR?
  • GOPPAR offers a broader perspective on hotel profitability by factoring in gross operating profit instead of just revenue. While RevPAR focuses solely on revenue generated from room sales per available room, GOPPAR accounts for both revenue and operational efficiency. This allows hoteliers to assess not just how much money is coming in but also how effectively they are managing their expenses relative to that income.
• Evaluate how changes in occupancy rates can impact GOPPAR and what this means for hotel management strategies.
  • Occupancy rates have a direct impact on GOPPAR since higher occupancy usually leads to increased revenue from room sales. However, if operating expenses rise disproportionately with occupancy increases, it could negatively affect GOPPAR. Therefore, hotel management must strategically balance pricing and marketing efforts to optimize occupancy while keeping operating costs in check to maintain healthy GOPPAR levels.
• Synthesize the significance of monitoring GOPPAR alongside guest satisfaction scores for holistic hotel performance management.
  • Monitoring GOPPAR alongside guest satisfaction scores creates a more holistic approach to hotel performance management. While GOPPAR provides insights into financial health and operational efficiency, guest satisfaction scores reflect the quality of service and experience provided to guests. By integrating both metrics, hotel managers can not only strive for profitability but also ensure that guest experiences are prioritized. This dual focus can lead to long-term sustainability in the competitive hospitality market, where satisfied guests often translate into repeat business and positive referrals.

Related terms

Revenue per Available Room (RevPAR): RevPAR is another key performance indicator in the hospitality industry, measuring a hotel’s revenue generated per available room, used to assess the effectiveness of a hotel's pricing strategy.

Occupancy Rate: Occupancy rate is the percentage of available rooms that are occupied over a specific period, reflecting demand and the hotel's ability to attract guests.

Operating Expenses: Operating expenses are the costs associated with running a hotel property, including maintenance, utilities, payroll, and other day-to-day operational costs.