RevPAR and GOPPAR: Two Key Metrics in Hotel Performance

Measuring hotel performance goes far beyond simply looking at how many rooms are sold. Metrics such as RevPAR and GOPPAR help hotel managers better understand both revenue generation and profitability. In this article, Hotel Link explores these two important KPIs and how hotels can apply them in their revenue management strategies.

What Is RevPAR?

RevPAR (Revenue Per Available Room) measures the revenue generated per available room in a hotel over a specific period of time. It is one of the most important KPIs in hotel revenue management.

In simple terms, RevPAR shows how much revenue each room in the hotel generates on average, whether that room is sold or not.

How to Calculate RevPAR

There are two common ways to calculate RevPAR.

Method 1

RevPAR = Total Room Revenue ÷ Total Available Rooms

Method 2

RevPAR = ADR × Occupancy Rate

Where:

• ADR (Average Daily Rate) is the average room price per day
• Occupancy Rate is the percentage of rooms sold

Example of RevPAR

Imagine a hotel with:

• 100 rooms
• Average Daily Rate (ADR): $40
• Occupancy Rate: 80%

RevPAR would be:

$40 × 80% = $32

This means that each available room generates an average of $32 in revenue per day.

Why RevPAR Matters

RevPAR is widely used because it combines the two most critical elements of room performance:

• Room pricing
• Occupancy rate

By combining these two factors, RevPAR allows hotel managers to quickly evaluate how effectively their rooms are being sold.

For example:

• If room rates are high but occupancy is low, RevPAR may still remain low.
• If room rates are lower but occupancy is strong, RevPAR may actually increase.

This makes RevPAR a useful indicator for finding the right balance between pricing and occupancy.

Limitations of RevPAR

Despite its popularity, RevPAR has several important limitations.

First, RevPAR only measures room revenue. It does not include other revenue streams such as:

• Restaurants and bars
• Spa services
• Minibar sales
• Meeting and conference services

Second, RevPAR does not account for operating costs. A hotel may achieve a high RevPAR but still struggle to generate profit if operating expenses are too high.

For this reason, many revenue management experts are increasingly focusing on a more comprehensive metric: GOPPAR.

What Is GOPPAR?

GOPPAR (Gross Operating Profit Per Available Room) measures the gross operating profit generated per available room in a hotel.

Unlike RevPAR, which focuses solely on room revenue, GOPPAR reflects the actual operating profit a hotel generates after deducting operating expenses.

How to Calculate GOPPAR

GOPPAR is calculated using the following formula:

GOPPAR = Gross Operating Profit ÷ Total Available Rooms

Where:

Gross Operating Profit (GOP) = Total Revenue − Total Operating Expenses

Operating expenses typically include:

• Staff costs
• Housekeeping and room operations
• Food and beverage expenses
• Administrative and management costs
• Marketing and sales expenses

Because of this, GOPPAR provides a more comprehensive view of financial performance.

Example of GOPPAR

Assume a hotel reports:

• Total revenue: $6,000,000
• Total operating costs: $2,850,000

Gross Operating Profit = $3,150,000

If the hotel has 55,000 available rooms per year, the GOPPAR would be:

3,150,000 ÷ 55,000 = $57

This means each available room generates $57 in operating profit.

The Difference Between RevPAR and GOPPAR

Both RevPAR and GOPPAR are key performance indicators in the hospitality industry, but they serve different purposes when evaluating hotel performance.

1. Revenue vs Profit

RevPAR focuses on room revenue, while GOPPAR reflects overall profitability. RevPAR measures the average revenue generated by each available room. In contrast, GOPPAR focuses on profit after operating costs have been deducted.

In other words:

• RevPAR shows how effectively a hotel sells its rooms.
• GOPPAR shows how much profit the hotel actually generates.

Each metric answers a different but equally important question.

2. Scope of Revenue

Another major difference lies in the revenue scope included in each metric.

RevPAR only measures room revenue. Other revenue sources are not included.

GOPPAR, however, considers all revenue streams, including:

• Restaurants and bars
• Spa services
• Meetings and events
• Additional guest services

After subtracting operating expenses, GOPPAR reveals the actual profit generated per available room, providing a more complete view of hotel performance.

3. Role in Management Strategy

The two metrics also play different roles in hotel management strategies.

RevPAR is typically used in revenue management, particularly when developing pricing strategies and monitoring room performance over time. Many hotels also use RevPAR to compare performance with competitors in the same market.

GOPPAR, on the other hand, is more commonly used for financial performance analysis and profitability evaluation. Investors and senior management often pay closer attention to GOPPAR because it reflects the real profit generated by the hotel.

For example, a hotel might increase RevPAR by raising room prices or expanding distribution through OTAs. However, if this results in significantly higher marketing costs, OTA commissions, or operational expenses, the hotel’s overall profitability may decrease.

In that case, RevPAR may increase while GOPPAR declines.

For this reason, hotel managers typically analyze both metrics together to gain a clearer understanding of the relationship between revenue and profitability.

When Should Hotels Use RevPAR vs GOPPAR?

In practice, these metrics do not replace each other, they complement each other.

RevPAR is useful when:

• Evaluating room sales performance
• Analyzing market demand and competition
• Monitoring pricing strategies
• Benchmarking against nearby hotels

RevPAR is often used in industry benchmarking reports such as STR reports.

GOPPAR is more useful when:

• Evaluating overall financial performance
• Analyzing profitability
• Controlling operating costs
• Assessing the investment value of a hotel

For this reason, investors and hotel owners often focus more on GOPPAR.

See also: 5 Essential Hotel KPIs to Track for Success

Why the Hospitality Industry Is Paying More Attention to GOPPAR

For many years, RevPAR was considered the “king of KPIs” in the hospitality industry. However, as market competition intensifies and operating costs continue to rise, many hotels are realizing that revenue does not always equal profit. This is why GOPPAR is gaining increasing attention as a more comprehensive performance indicator.

1. Rising Operating Costs

Operating costs in the hospitality industry have increased significantly in recent years.

Expenses such as:

• Labor
• Energy
• Technology investments
• Marketing

are all rising.

Labor costs, in particular, often represent a large portion of total operating expenses. In addition, investments in hotel technology systems and digital marketing have increased operational budgets.

In this environment, focusing solely on room revenue is no longer sufficient to evaluate business performance.

A hotel with strong RevPAR but high operating costs may still struggle to generate profit. This is where GOPPAR becomes an essential metric for measuring true financial performance.

2. Hotels Are Generating Revenue From More Sources

Today, hotels are no longer limited to selling rooms. Many properties have expanded their offerings to diversify revenue streams.

In addition to room revenue, hotels may generate income from:

• Restaurants and bars
• Spa services
• Coworking spaces
• Event venues
• Local experience packages

These additional revenue streams can significantly contribute to total revenue.

Since RevPAR only measures room revenue, it cannot fully capture the overall performance of a hotel. GOPPAR, however, includes all revenue streams and related expenses, providing a clearer view of the hotel’s total business ecosystem.

3. Investors Focus on Profitability

For investors, the most important factor is not simply how many rooms are sold, but how much profit the hotel generates.

A hotel may achieve strong occupancy and high RevPAR, but if operating costs are excessive, the actual profit may still be low.

Therefore, when evaluating hotel investments or property valuations, investors often pay closer attention to profitability metrics.

GOPPAR plays a crucial role here because it shows how much operating profit each available room contributes to the business. This allows investors to better assess both the true value of a hotel asset and its long-term profitability potential.

Learn more: Stay on Top of Hotel Performance with Hotel Link’s Operational Summary

How Hotels Can Improve RevPAR and GOPPAR

To improve overall business performance, hotels must optimize both revenue generation and operating costs.

Below are several common strategies.

1. Optimize Pricing Strategy

Dynamic pricing allows hotels to adjust room rates based on:

• Seasonality
• Market demand
• Booking behavior

This helps maximize RevPAR.

2. Increase Ancillary Revenue

Additional services can significantly improve GOPPAR, such as:

• Food and beverage upselling
• Spa packages
• Local experience tours
• Meeting and conference services

3. Optimize Distribution Channels

Managing OTAs and direct booking channels effectively helps reduce commission costs.

Lower distribution costs improve profitability and therefore increase GOPPAR.

4. Leverage Technology for Operations

Modern hotel management systems can help:

• Automate operational processes
• Optimize room inventory management
• Reduce labor costs
• Improve guest experiences

More efficient operations ultimately lead to improved GOPPAR.

Read more: Leverage Occupancy Based Pricing (OBP) To Improve Hotel Business Performance

Conclusion

Both RevPAR and GOPPAR are essential metrics for understanding hotel performance. RevPAR measures the ability to generate room revenue, while GOPPAR provides a broader view of overall profitability.

By analyzing these two metrics together, hotel managers can make more informed strategic decisions in both revenue management and operations.

If you want to learn more about how technology can help optimize hotel operations and revenue, contact Hotel Link to explore solutions tailored to your hospitality business.