Gross Operating Profit Per Available Room: How to calculate GOPPAR and improve performance at your hotel

Unlike RevPAR, which measures revenue performance, GOPPAR dives deeper by considering operational expenses alongside revenue, offering a clearer picture of financial success.

It's not uncommon for hotels with impressive RevPAR figures to struggle with profitability. High occupancy rates and premium pricing might create strong revenue streams, but without effective cost control, profits can quickly erode.

Operational inefficiencies, such as overstaffing or poorly managed food and beverage costs, are common culprits that can eat into margins.

GOPPAR helps uncover these challenges by highlighting the balance - or imbalance - between revenue and expenses. By tracking this metric, hoteliers can identify areas for improvement, streamline operations, and ultimately boost overall profitability.

In this blog, we’ll delve into GOPPAR and explore practical ways to use it to enhance your bottom line and achieve long-term financial success.

What is GOPPAR?

GOPPAR – or gross operating profit per available room – is an essential hotel industry metric that measures total revenue minus operational and marketing expenses per room.

This figure is as useful to accountants as it is to revenue managers, and in a healthy property, they’ll work together to generate as high a GOPPAR as possible.

Its importance cannot be overstated: you can't be reliant solely on room revenues to generate profit. Hotel rooms are as much vehicles to draw in guests who will spend money on other goods and services at your property, and analyzing your GOPPAR demonstrates how successful your efforts are.

Gross operating profit (GOP) is important too, of course, but if you don’t divide that figure by the number of rooms in your property, you can’t meaningfully benchmark it against other properties in the hospitality industry, as hotel size varies wildly.

But don’t forget the other side of the equation: what you spend. Because GOPPAR takes into account all operating expenses, you gain a clearer understanding of how efficiently you’re managing your resources.

By analyzing GOPPAR, hoteliers can identify areas where costs may be too high, assess the impact of various revenue streams, and make more informed decisions about pricing, staffing and operational efficiency.

Since GOPPAR reflects the actual profit generated per room, it’s especially useful for tracking overall financial performance, setting realistic goals, and aligning strategies with profitability objectives.

This insight ultimately helps hoteliers enhance both operational effectiveness and financial health, especially in competitive or challenging market conditions.

GOPPAR vs RevPAR

How do GOPPAR and RevPAR compare to each other?

Let’s start with a quick refresher on RevPAR, or revenue per available room.

A straightforward formula to calculate RevPAR is to divide the total room revenue for the night by the total number of rooms available in your hotel:

RevPAR = Total room revenue / Total number of rooms available for sale.

For example, a hotel with ten rooms, and each night you bring in an average income of $2000. With a quick calculation of $2000 ÷ 10, your RevPAR stands at $200.

You can also calculate it by multiplying average daily rate (ADR) by occupancy.

RevPAR is often viewed as the ‘North Star’ of revenue management. It serves as a reliable gauge of your hotel performance, demonstrating your ability to optimize both occupancy and room rates. It offers a succinct, reliable, and actionable metric for evaluating financial performance.

Clearly there’s a relationship between GOPPAR and RevPAR, and it’s approximately linear. But the percentage difference between the two can be very different when comparing hotels, given variations in overhead costs and in guests’ spending habits beyond paying for their room, the latter of which your promotional efforts to upsell can influence.

GOPPAR and RevPAR are sometimes confused for the obvious reason that both KPIs relate to revenue and are used to assess a hotel’s financial performance on a per-room basis.

But, as we’ve discussed, while RevPAR focuses solely on room revenue per available room, GOPPAR includes operating expenses, reflecting actual profitability per room.

This distinction in scope – revenue versus profit – is subtle but critical.

GOPPAR vs ADR

We now move to average daily rate – or ADR – and its relationship with a hotel’s GOPPAR.

ADR is a measure of the average rate paid for rooms at your hotel. One of the most important performance metrics both to consider and by which a revenue manager is judged, it’s calculated by dividing (gross) room revenue by the number of rooms sold.

Note that this figure only factors in hotel rooms that are actually sold. For an arguably more meaningful figure, you’d need to factor in occupancy to derive RevPAR, which we discuss above.

So how does it compare to GOPPAR?

The simplest but most accurate analysis is that it’s very similar to the relationship we explore between GOPPAR and RevPAR. But, unlike RevPAR, ADR doesn’t factor in occupancy, the relationship between ADR and GOPPAR isn’t as linear.

The lesson is: don’t assume strength in one metric automatically equates to strength in another, and examine all of your metrics with care.

How to calculate GOPPAR

We touch on how to calculate GOPPAR above but let’s spell it out. Here’s the formula:

GOPPAR = gross operating profit ÷ total available rooms

This is where gross operating profit (GOP) = total revenue – operating expenses.

As an example, let's say a hotel’s topline figures look like this for a given period:

• Total revenue = $200,000 (from rooms, food and beverage, etc.)

• Operating expenses = $120,000

• Total available rooms = 100

Let’s calculate GOP from the formula above:

GOP = $200,000 – $120,000 = $80,000

Now let’s feed this into the formula above it for calculating GOPPAR:

GOPPAR = $80,000 ÷ 100 = $800

As you can see, it’s not complicated mathematics, but you need to be sure of your figures to get meaningful metrics, which you can then use to sense-check the effectiveness of your strategy.

What does a good GOPPAR look like? Well, the actual figure depends on all the many factors that room rates depend on.

But, for benchmarking purposes, you might expect the profit per room apportioned to ancillary revenues to be in the region of 20 to 40%. This can, of course, vary in either direction, though, based on your commercial strategy, promotional focus and operational costs, without being a sign of failure.

3 Ways GOPPAR helps hotels understand and improve their performance

As we’ve discussed, GOPPAR doesn’t exist in isolation. It’s inextricably linked to numerous other metrics and can be used to gain insights into your hotel and improve its performance.

Let’s explore three core areas of focus on which it can help shed light: revenue management strategies; benchmarking; and understanding your guests.

We’ll review each in turn.

1. Assessing revenue management strategies

GOPPAR helps you assess your revenue management strategies by showing how well revenue converts into profit after covering operating expenses. Unlike metrics that only track revenue, GOPPAR provides insight into operational efficiency, allowing you to see if your strategies effectively drive profitability.

A high GOPPAR indicates strong revenue and effective cost control, meaning your hotel maximizes profit from its income. Conversely, a low GOPPAR suggests that high expenses are eroding profitability, even if revenue appears strong.

This may signal that adjustments are needed in pricing, staffing or resource allocation to improve the overall efficiency of your revenue management efforts.

2. Benchmarking against competitors

GOPPAR allows you to see how your profitability compares to competitors by factoring in both revenue and the cost of hotel operations. With this insight, you can better understand if you’re not only generating revenue but also managing expenses effectively relative to other hotels.

Depending on your overall commercial strategy, a high GOPPAR compared to competitors will usually suggest strong performance, as it indicates that your hotel is efficiently turning revenue into profit.

On the other hand, a low GOPPAR could possibly – but doesn’t always – reveal that, even if revenue is on par, higher expenses are limiting profitability, signaling a need for operational improvements to stay competitive.

3. Monitoring the guest experience

GOPPAR can provide strong indirect insight into guest satisfaction by showing how well revenue and costs are managed in relation to the guest experience.

High GOPPAR is likely to reflect positive guest experiences that drive demand and support premium pricing, enhancing profitability and dovetail with your reputation management strategy.

A high GOPPAR often indicates that guests are satisfied enough to pay rates that cover both quality services and operational costs effectively, whereas, a low GOPPAR might suggest that either guest experience is lacking – resulting in lower revenue – or that costs are too high to maintain competitive service standards, impacting overall satisfaction and loyalty.

Boost GOPPAR with an effective pricing strategy

At the core of boosting GOPPAR lies a well-executed pricing strategy, and leveraging a rate shopping tool is the starting point for modern hoteliers.

A rate shopper provides real-time insights into competitor pricing, market demand, and booking trends, enabling you to make data-driven decisions that optimize your pricing strategy.

By analyzing competitor rates and market conditions, you can position your pricing competitively while maximizing profitability. It empowers you to identify opportunities to capitalize on demand and adjust rates proactively to avoid underpricing or overpricing, which can negatively impact GOPPAR.

This approach focuses on sustainable profit growth, which is the ultimate goal of any GOPPAR improvement effort. Click here to learn more about integrating a rate shopping tool into your pricing strategy.