GOPPAR, A Derivative of RevPar!
By Elie Younes Associate, HVS International | September 02, 2010
While RevPAR is one of the most recognised and used performance measures in the hospitality industry, providing general market trends and some revenue indications, there are some pitfalls to be aware of when analysing a hotel's performance based solely on RevPAR.
This article shows the major pitfalls of RevPAR, and elaborates on the advantages of using a complementary performance measure, GOPPAR (Goh-Par).
RevPAR, or rooms revenue per available room, is calculated by dividing a hotel's net rooms revenue (after discount and sales taxes and net of breakfast or other meals) by the total number of available rooms or by multiplying a hotel's average daily room rate (ADR) by its occupancy.
Pitfalls of RevPAR
Revenue Mix: In some instances, rooms revenue accounts for no more than 50-55% of total revenue. These include hotels with substantial food and beverage (and meeting and conference) operations. In such cases, RevPAR would only reflect a portion of a hotel's revenue performance, disregarding all other sources of incremental revenues. This will result in an inaccurate analysis when comparing hotel performances. For example, Hotel X has an average rate of lb70, 70% occupancy, and 100 rooms. Other departmental revenues (including food and beverage and other operated departmental revenues) for Hotel X are lb500,000. On the other hand, let's assume that Hotel Y has the same size and average rate as Hotel X, but an occupancy level of approximately 60% and other departmental revenues of lb1,000,000. While the RevPAR of Hotel X is approximately 15% higher than that of Hotel Y (lb49 compared to lb42), Hotel Y has higher total revenue than Hotel X; lb2.28 million for Hotel X compared to lb2.5 million for Hotel Y. If the two hotels have similar direct expenses (say 35% of revenues), and the quantum of overheads is the same for the two hotels, Hotel Y would end up making more money than Hotel X, despite having a poorer RevPAR;