REVPAR… GOPPAR… something is missing!

Written by Patrick Landman @ Xotels.

In the early days we all measured the performance of our hotel based on occupancy. and ADR Then the revenue management phenomenon hit our industry and we all shifted to REVPAR. Nowadays the keyword is GOPPAR. We want to see how every booking affects our GOP. But something is missing…

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. 

And don’t get me wrong, I am one of the biggest fans of GOPPAR as REVPAR does not give us enough insight as KPI (key performance indicator). However we need to fully understand what the GOPPAR represents.

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.

Unfortunately PMS systems are not configured to pull this data automatically. For now it is a tedious manual task that we are performing in hotels we work with. As un industry we have to challenge our system and software providers to enhance their systems and develop them according to our requirements of 2010. We would need to be able to add to agency and account profile the % commission. To the source codes like GDS we should be able to add transaction fees or % commissions as well.

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.
For more information on how we think and what we do click here: revenue management.

 

Cheers,

 

Patrick - Xotels

 

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