What Is The Formula Used To Calculate Goppar

A professional tool for hoteliers to measure profitability. GOPPAR (Gross Operating Profit Per Available Room) is a key performance indicator (KPI) that reveals the true financial health of your property by accounting for both revenue and operational costs.

What is GOPPAR?

GOPPAR, or Gross Operating Profit Per Available Room, is a critical key performance indicator (KPI) in the hotel industry. Unlike other metrics that focus solely on revenue (like RevPAR), what is the formula used to calculate goppar provides a more holistic view of a hotel’s financial performance by incorporating the costs associated with generating revenue. It measures the profit generated by each available room, regardless of whether it was occupied, making it an excellent measure of overall profitability.

Essentially, what is the formula used to calculate goppar answers the question: “After covering our day-to-day operational costs, how much profit are we making from each of our rooms?” This insight is invaluable for hotel owners, general managers, and revenue managers who are focused on maximizing bottom-line results, not just top-line revenue.

Who Should Use GOPPAR?

GOPPAR is particularly useful for full-service hotels, resorts, and any property with significant non-room revenue streams (like restaurants, spas, or conference facilities). While RevPAR is excellent for tracking rooms revenue, it ignores the profitability of other departments. What is the formula used to calculate goppar captures the performance of the entire operation, making it a superior metric for strategic financial management.

Common Misconceptions

A common misconception is that a high RevPAR automatically means a hotel is successful. However, a hotel could have a high RevPAR by heavily discounting rooms to drive occupancy, while incurring high costs that erode profitability. What is the formula used to calculate goppar cuts through this by focusing on profit, providing a clearer picture of financial health. Another point of confusion is the difference between GOP (Gross Operating Profit) and GOPPAR. GOP is the total profit figure, while GOPPAR standardizes this figure on a per-room basis, allowing for effective benchmarking against other properties or historical periods.

GOPPAR Formula and Mathematical Explanation

The formula for what is the formula used to calculate goppar is straightforward, but it relies on accurate accounting of revenues and expenses. The calculation is a two-step process: first, determine the Gross Operating Profit (GOP), and then divide it by the total number of available room nights over a period.

Step-by-Step Derivation

1. Calculate Gross Operating Profit (GOP):

   GOP is the difference between the hotel’s total revenue and its total operating expenses.
   
   GOP = Total Revenue - Total Operating Expenses

2. Calculate Total Available Room Nights:

   This is the total number of rooms in the hotel multiplied by the number of days in the period being analyzed.
   
   Total Available Room Nights = Total Available Rooms * Number of Days

3. Calculate GOPPAR:

   Divide the GOP by the Total Available Room Nights.
   
   GOPPAR = GOP / Total Available Room Nights

GOPPAR Formula Variables

Variable	Meaning	Unit	Typical Range
Total Revenue	All income generated by the hotel, including rooms, F&B, spa, etc.	Currency ($)	Varies widely
Operating Expenses	Costs to run the hotel (labor, utilities, marketing, supplies). Excludes rent, taxes, depreciation.	Currency ($)	Varies widely
Total Available Rooms	The total number of rooms available for sale.	Count	10 – 1000+
Period Days	The number of days in the analysis period (e.g., 30, 90, 365).	Count	1 – 365

Practical Examples of GOPPAR Calculation

Example 1: Boutique Hotel (Monthly)

A 50-room boutique hotel is analyzing its performance for June (30 days).

• Total Revenue: $250,000
• Operating Expenses: $150,000
• Total Available Rooms: 50
• Period Days: 30

Calculation:

1. GOP = $250,000 – $150,000 = $100,000
2. Total Available Room Nights = 50 rooms * 30 days = 1,500
3. what is the formula used to calculate goppar = $100,000 / 1,500 = $66.67

Interpretation: The hotel generated $66.67 in pure operating profit for each of its 50 rooms, every day during the month of June.

Example 2: Large Convention Hotel (Annual)

A 500-room convention hotel reviews its annual performance.

• Total Revenue: $30,000,000
• Operating Expenses: $18,000,000
• Total Available Rooms: 500
• Period Days: 365

Calculation:

1. GOP = $30,000,000 – $18,000,000 = $12,000,000
2. Total Available Room Nights = 500 rooms * 365 days = 182,500
3. what is the formula used to calculate goppar = $12,000,000 / 182,500 = $65.75

Interpretation: Despite a much larger scale, the convention hotel’s daily profit per room is similar to the boutique hotel’s, highlighting how what is the formula used to calculate goppar can be used for benchmarking across different property types.

How to Use This GOPPAR Calculator

Our interactive calculator helps you instantly determine your property’s GOPPAR. Follow these simple steps:

1. Enter Total Revenue: Input your hotel’s total revenue from all departments for the chosen period.
2. Enter Total Operating Expenses: Input all departmental and undistributed operating costs for the same period.
3. Enter Total Available Rooms: Provide the total number of physical rooms at your property.
4. Enter Number of Days: Specify the number of days in your analysis period (e.g., 30 for a month).

How to Read the Results

• GOPPAR (Primary Result): This is your main KPI, showing the profit per available room. A higher GOPPAR is always better.
• Gross Operating Profit (GOP): This intermediate value shows your hotel’s total profit before accounting for fixed costs like rent and taxes.
• Total Available Room Nights: This shows the total inventory you had available to sell during the period.
• RevPAR: We’ve included Revenue Per Available Room for comparison. Notice how GOPPAR gives a more complete picture of profitability than RevPAR vs GOPPAR alone.

Key Factors That Affect GOPPAR Results

Understanding and managing the factors that influence what is the formula used to calculate goppar is the key to improving it. Here are six critical areas:

1. Room Rates (ADR) and Occupancy

Higher Average Daily Rate (ADR) and occupancy directly boost total revenue. However, achieving this through deep discounting can increase operational costs (housekeeping, utilities) and hurt GOPPAR. The goal is to find the optimal balance.

2. Ancillary Revenue Streams

Profit from food and beverage (F&B), spa, parking, and events significantly impacts GOPPAR. A hotel with strong ancillary revenue can have a much higher GOPPAR than a rooms-only property, even with the same RevPAR.

3. Labor Costs

Staffing is often a hotel’s largest operating expense. Efficient scheduling, cross-training, and utilizing technology can reduce labor costs and directly improve what is the formula used to calculate goppar without sacrificing service quality. See our guide on managing hotel labor costs for more.

4. Cost of Goods Sold (COGS) & Utilities

The cost of food, beverages, and guest supplies, along with energy and water consumption, are major expenses. Effective procurement, inventory management, and sustainability initiatives can yield significant savings and boost GOPPAR.

5. Marketing and Distribution Costs

While necessary to drive revenue, the cost of distribution (e.g., OTA commissions) and marketing campaigns eats into profits. A strategy focused on direct bookings can significantly improve what is the formula used to calculate goppar.

6. Maintenance and Capital Expenditures

While not always included in day-to-day operating expenses, deferred maintenance can lead to higher emergency repair costs and negatively impact the guest experience, indirectly hurting future revenue and GOPPAR.

Frequently Asked Questions (FAQ) about what is the formula used to calculate goppar

1. What is a “good” GOPPAR?

There is no single answer, as a “good” what is the formula used to calculate goppar varies dramatically by hotel type, location, and market conditions. Luxury hotels in major cities may have GOPPARs over $150, while limited-service hotels in suburban areas might aim for $40-$50. The best approach is to benchmark against your own historical performance and your competitive set.

2. How is GOPPAR different from RevPAR?

RevPAR (Revenue Per Available Room) only considers rooms revenue. GOPPAR considers all revenue streams (rooms, F&B, spa, etc.) and subtracts all operating expenses. Therefore, GOPPAR is a measure of profit, while RevPAR is a measure of revenue. Explore our RevPAR calculator to compare.

3. Why is GOPPAR more important than occupancy?

High occupancy achieved through low rates can be unprofitable. GOPPAR focuses on profit, not just filling rooms. It’s better to have 80% occupancy at a high profit margin than 100% occupancy at a loss. GOPPAR helps you make smarter pricing and promotion decisions.

4. Can GOPPAR be negative?

Yes. If a hotel’s operating expenses are greater than its total revenue for a period, the Gross Operating Profit (GOP) will be negative, resulting in a negative GOPPAR. This typically only happens during severe downturns, major renovations, or in a property’s first few months of operation.

5. How often should I calculate GOPPAR?

Most hotels calculate what is the formula used to calculate goppar on a monthly basis as part of their financial reporting. This allows for timely analysis and strategic adjustments. Some advanced revenue management systems can even track it on a daily basis.

6. What expenses are NOT included in the GOPPAR calculation?

GOPPAR focuses on operating profit. It excludes non-operating expenses like property rent or mortgage payments, property taxes, insurance, depreciation, and amortization. These are typically considered “owner’s costs.”

7. How can I improve my hotel’s GOPPAR?

Improvement comes from two sides: increasing revenue and decreasing costs. Strategies include optimizing pricing (yield management), upselling services, driving direct bookings to avoid OTA commissions, controlling labor costs through better scheduling, and implementing energy-saving measures.

8. What is the difference between GOPPAR and TRevPAR?

TRevPAR (Total Revenue Per Available Room) measures the total revenue from all sources on a per-room basis. GOPPAR takes it one step further by subtracting operating costs to arrive at a profit metric. TRevPAR tells you how much you’re earning; what is the formula used to calculate goppar tells you how much you’re keeping. For more details, see our article on Hotel KPIs.