GOPPAR: Definition, Calculation, History, and Criticisms

What Is GOPPAR?

GOPPAR, or Gross Operating Profit Per Available Room, is a key performance indicator (KPI) used in the hospitality industry to measure a hotel’s profitability. Unlike traditional metrics such as RevPAR (Revenue Per Available Room), GOPPAR takes into account both revenue and operational costs, providing a more comprehensive view of a hotel’s financial performance.

Formula and Calculation

GOPPAR can be calculated using the following formula:

GOPPAR = (Total Revenue - Total Operating Expenses) / Number of Available Rooms

To calculate GOPPAR:

1. Determine the total revenue from all sources (rooms, F&B, etc.)
2. Subtract all operating expenses
3. Divide the result by the total number of available rooms

What Does GOPPAR Tell You?

GOPPAR provides insights into:

• Overall operational efficiency
• Profitability per room, regardless of occupancy
• Effectiveness of cost control measures
• Comparison of performance across different hotels or periods

Example of GOPPAR

Let’s consider a hotel with the following monthly figures:

• Total Revenue: ₹1,000,000
• Total Operating Expenses: ₹700,000
• Available Rooms: 200

GOPPAR = (₹1,000,000 – ₹700,000) / 200 = ₹1,500

This means the hotel is generating ₹1,500 in gross operating profit per available room.

History of GOPPAR

GOPPAR emerged as hotels sought more comprehensive performance metrics beyond RevPAR. It gained popularity in the early 2000s as the industry recognized the need to consider both revenue and costs in performance evaluation.

Criticisms of GOPPAR

While GOPPAR is widely used, it has some limitations:

1. It doesn’t account for capital expenditures or debt service
2. It may not reflect seasonal variations effectively
3. It can be manipulated by reducing necessary expenses

GOPPAR vs. RevPAR vs. TRevPAR

• RevPAR focuses solely on room revenue
• TRevPAR (Total Revenue Per Available Room) includes all revenue sources but ignores costs
• GOPPAR provides a more complete picture by including both total revenue and operating costs

GOPPAR vs. Net Operating Income

While GOPPAR focuses on gross operating profit, Net Operating Income (NOI) takes into account additional expenses like property taxes and insurance, providing a different perspective on profitability.

How to Use GOPPAR Effectively

1. Benchmark against industry standards
2. Compare performance across periods
3. Use in conjunction with other KPIs for a holistic view
4. Analyze trends to identify areas for improvement

The Bottom Line

GOPPAR is a valuable metric for hoteliers seeking to understand their true operational profitability. While it has limitations, when used in conjunction with other KPIs, it provides crucial insights for strategic decision-making and performance evaluation in the hospitality industry.