Measuring hotel performance – RevPAR versus GOPPAR
RevPAR is perhaps the most popular Key Performance Indicator in the hospitality industry. The acronym stands for Revenue per available room and it measures the revenue generated by the lodging activities (exclusivelly) on a per room basis.
Its utility is undoubtful, covering many aspects that are relevant when assessing hotel performance, as revenue is generated by overall hotel attractivity. There are two accepted methods for calculating RevPAR:
1. Multiplying the $ Average daily room rate (ADR) to % Rooms occupancy. The average daily room rate is calculated by dividing the total rooms revenue to the number of rooms.
2. Dividing the $ Net daily rooms revenue (after discount and sales taxes and net of breakfast or other meals) by the # Rooms available.
GOPPAR, however does not take into consideration revenue exclusivelly, but also costs – GOPPAR stands for Gross operating profit per available room. It is calculated by dividing the gross operating profit (meaning revenue less departamental and operational expenses) to the number of rooms available on a per day basis.
It is clear that RevPAR deals with revenue and GOPPAR deals with profit. Therefore, it is argued that while RevPAR can reflect local/regional/national attractivity of the hospitality structures and trends in this respect, at a company level it can only help assessing the top line. GOPPAR, however, impacts the bottom line.
Moreover, while reflecting both costs and revenue and not revenue only, GOPPAR can be more suited for comparison between hotels of various dimensions and numbers of stars. Also, it has a more significant internal focus with insight on efficiency and costs control.
Thus, GOPPAR can enable a more accurate hotel performance appraisal, from both an external and internal point of view; yet, RevPAR is considered to be more used and popular, data availabiliy and comparability being more at hand in this context.
Further arguments can be brought in favor of both indicators of performance, while possibilities for new metrics can also be discussed.
Example of a debt service breakeven analysis (Younes and Kett, 2003)
Additional details about these two performance indicators are available on smartKPIs.com:
For further information and statistics on RevPAR and GOPPAR values, from various markets and periods of time, you can access resources such as:
- An Investment Driven Breakeven Analysis for Hotels, by Elie Younes and Russell Kett, October 17, 2003