On a flight last week back from London to Barcelona I have been pondering on the fact that we are moving from REVPAR or revenue on our profit and loss statement all the way down to GOP or gross operating profit to fast. Mind you the first articles on GOPPAR I find online date back from 2003. But we are missing a few steps here which are crucial to fully understand our GOPPAR.
So lets a take a step back and run through the definition of REVPAR and GOPPAR.
REVPAR = (Rooms) Revenue / (per) Available Rooms, or, ADR (average daily rate) x Occupancy % (shortcut…)
GOPPAR = GOP (gross operating profit) / (per) Availabe Rooms
Surprisingly enough I did find the definition of REVPAR on Wikipedia, but not the one of GOPPAR. So I took the liberty of writing a basic definition… Please add your points of view here as well, when you have some time on your hands…
Back to my point now. The difference between GOPPAR and REVPAR are the all operational costs of the hotel. The problem is if we lump all of them together we don’t fully understand the results from our pricing, contracting and distribution strategies.
We propose to implement another KPI. NREVPAR, or Net Rooms Revenue per Available Room.
NREV = Rooms Revenue -/- Distribution Cost, Transaction Fee & Travel Agency Commissions
NREVPAR = Net Room Revenue / Available Rooms
It is one step before GOPPAR on which you can measure very well the performance of the hotel and your revenue manager.
Now again here we would not like to look at it as a total, but we propose to measure NREV per market segment in the hotel. Or rather we would like to start looking at NADR, Net Average Daily Rate per market segment and even account or distribution channel.
Imagine you can see the NET Revenue and NET ADR of every corporate booking, made directly or through the GDS. And get NETREV for group business, online travel agencies, merchant models, tour operators and wholesalers.
Finally we would be able to compare apples to apples and do a proper displacement calculation based on NADR and NREVPAR contribution.
I hope to see more hotels working both with GOPPAR and NREVPAR this year. It will help us to better understand our business, make wiser decisions and in the end achieve higher profit margins.
Patrick Landman @ Xotels
P.S. for more hotel KPI, go to our Revenue Management Glossary