Hotels Are Moving to Focus More on Profit Than Top-Line Revenue - Revinate

Hotels Are Moving to Focus More on Profit Than Top-Line Revenue

Hoteliers are starting to talk more about profit, in addition to revenue, recognizing that increased revenue won’t move the needle if expenses are also growing. The picture is quite diverse and varies by region. Paris saw a Dec 2018 GOPPAR decline of 60.9% while Vienna saw an increase of 27.5%. However, broadly speaking hotels occupancy and rates have been growing in the last couple of years but the cost has been increasing faster due to rising labor and distribution cost. The UK is another example where an increase in RevPAR hasn’t kept up with the cost of operation. As HotStats recently noted, “A slight increase in RevPAR in February was not enough to push hotels into the black, as the UK suffered a second consecutive month of profit decline, according to the latest data tracking full-service hotels from HotStats.”

As a result, we’re starting to see more and more mention of GOPPAR (Gross Operating Profit Per Available Room) in addition to the traditional REVPAR (Revenue Per Available Room).

GOPPAR is certainly not a new term for hoteliers. A 2008 opinion piece by Olivier Harnish, now the CEO of Amaar Hospitality Group, outlined the pros and cons of GOPPAR and RevPAR, ultimately suggesting that hoteliers use both depending on who they are reporting to, saying, “There are strong reasons to monitor both figures with equal emphasis. REVPAR should be used to benchmark a hotel with the outside world… GOPPAR should be used to benchmark properties within a single hotel company… Combining both perspectives gives an excellent basis to analyze a hotel’s performance through time as well as relative to its competition and its sister properties.”

Five years later, a 2013 ehotelier blog talked about the two metrics, saying, “Indeed, practitioners and academics have expressed the danger of an over-reliance on RevPAR as it only measures total room revenue generation while it ignores revenues achieved in other areas of the hotel such as Food and Beverage outlets, in-room product and service sales, gift shops, the property’s operational costs, and other factors that may directly affect the profits shown on the hotel’s income statement. Thus, they advocated the new concept of GOPPAR / ProfPAR, which reflects the total underlying operating profit of a hotel.”

More than a decade later, GOPPAR seems to be taking hold and we’re seeing more and more industry and company reports include the metric. GOPPAR is regularly used by HotStats, which provides profit and loss benchmarking service to hoteliers, and comes up often in presentations by companies like Duetto and revenue strategists. We expect this trend to continue as operating costs see no sign of decreasing over time. Likely, the increased costs will force an increased priority on measuring profit over top-line revenue. 

Because we help hoteliers drive (very profitable) direct bookings and upsell revenue (also very profitable) through pre-stay emails, we selfishly love the fact that the revenue we help contribute is taking center stage. If you are looking to drive profitability, we can help you drive direct bookings and reach your guests before the stay, when they’re most likely to spend, to drive ancillary revenue. Reach out to learn more. We would love to help.