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What is GOPPAR?
The Gross Operating Profit Per Available Room is a metric used to determine the correlation between a hotel's revenue and expenses.
In the past, independent hotels relied on three main metrics to gauge their performance: average daily rate (ADR), occupancy, and revenue per available room (RevPAR).
However, due to the constraints of these metrics, more owners and operators are now placing greater emphasis on a fourth metric, Gross Operating Profit per Available Room (GOPPAR).
Example: GOPPAR focuses on the number of rooms your hotel offers rather than the number of rooms that have been sold.
Moreover, it considers the overall gross operating profit, not just the revenue earned from room sales. As such, GOPPAR provides a reliable measure of your hotel's efficiency.
You must track GOPPAR to see how well your hotel or resort is doing. Divide your total operating profit by the number of available rooms each day. Below, we'll show you how.
How do you calculate your hotel's GOPPAR?
To calculate GOPPAR for a hotel, divide the gross operating profit (GOP) by the number of available rooms. This is similar to RevPAR but removes fees and expenses from the revenue figure before the calculation.
GOPPAR = GOP divided by the total number of available room nights.
Let's say you have a hotel with 10 rooms, and you want to calculate GOPPAR for January.
To start, we'll multiply the number of rooms by the number of days in the month: 10 rooms x 31 days = 310 total available room nights.
Next, we'll calculate the Gross Operating Profit (GOP), which is the difference between gross operating revenue and gross operating costs.
Assuming your GOP is R3,200, we can move on to calculating the GOPPAR. To do this, we'll divide the GOP by the total available room nights: R3,200 ÷ 310 = R10.32 for January.
How do I improve my hotel's GOPPAR?
There are multiple strategies and other metrics that hotel owners and operators use to boost their properties' GOPPAR. Here are five practical ways.
How to Increase Your Hotel’s GOPPAR in 5 Ways
Strategy 1: Increase the average room rate
Increasing the average room rate through dynamic pricing and offering premium rooms is an effective strategy to improve GOPPAR in a hotel.
Strategy 2: Increase occupancy rates
If you want to enhance GOPPAR, boosting occupancy rates is crucial. This will lead to increased revenue and, ultimately, higher profits. Effective marketing and special discounts and promotions can attract potential guests and encourage them to book their stay at the hotel.
Strategy 3: Focus on quality
Investing in better furnishings, higher quality amenities, and improving customer service can boost GOPPAR. The higher the quality of your hotel, the higher your average room rate.
Strategy 4: Reduce expenses
Improving GOPPAR requires reducing expenses by streamlining operations and cutting unnecessary services and staff.
Strategy 5: Increase ancillary revenue
Offering attractive packages and promotions for room service, spa services, and other add-ons can increase ancillary revenue and improve GOPPAR. Our latest brochure shows you can offer and upsell products and services for extra revenue.
Understanding the importance of GOPPAR and related hospitality KPI's
When evaluating a hotel's performance compared to similar hotels of the same size and location, one of the most significant metrics to consider is ADR or Average Daily Rate. ADR helps hotel management determine the average price paid per room on a particular day and track trends over a more extended period. It's essential to note that only available rooms for sale should be included in the calculations. This means that staff rooms and complimentary rooms allocated to guests should be kept from being factored in.
Another significant key performance indicator for revenue management is REVPAR or Revenue Per Available Room. Although it may seem similar at first glance to ADR, its use is somewhat different, as it can help tell you how successful you have been at filling the rooms in your hotel. When calculating your revenue per available room, the main thing to consider is that only revenue generated by selling hotel rooms should be included. This means you should not factor in other revenue streams, such as revenue from your restaurant or drinks sold at the bar.
Key Takeaways about GOPPAR
Understanding GOPPAR and why revenue managers must interpret it can make all the difference in your hotel. With this knowledge, hotels can optimise their profitability, identify areas to allocate resources and manage their staff effectively. By harnessing the power of data analysis, hotels can provide exceptional customer service, run a successful operation, and guarantee guest satisfaction.
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