When it comes to providing a quick snapshot of how a hotel, or a chain of hotels, or a hotel segment is doing financially, the measurement of choice is RevPAR � Revenue Per Available Room � the standard measure of top line performance. 

Sometimes, however, RevPAR just doesn�t reveal enough, and you have to take a hard look at the bottom line.  This is particulary true when the economy turns south, and managers need to get further inside the numbers, searching for anything that might give them an edge on the competition. 

At times like these, it is ProfPAR, or Profit Per Available Room, that is a more accurate indicator of an operator�s effectiveness and an owner�s wealth.  ProfPAR, or GOPPAR (Gross Operating Profit Per Available Room) as it is sometimes called, provides a clearer picture of a hotel�s operating performance and bottom line.

GOPPAR to the Fore

Among the hotel companies currently placing emphasis on GOPPAR is Larkspur Hospitality Company of San Francisco, which has been actively using it since early 2002.  According to Larkspur�s Director of Financial Analysis, Joetta Johnson, Larkspur uses GOPPAR because the measurement provides a clearer picture of efficiency, profitability, and the bottom line, which cannot be derived from RevPAR.

�We use GOPPAR primarily to analyze flow-through,� she says.  �It�s one of the benchmarking tools we employ to analyze against the hotel industry and within our regions, across brands and compared to budget.  GOPPAR assists in analyzing the results of cost-saving measures, not only how the savings flow through, but how well we can sustain them over time, even when market conditions improve.�

In the Larkspur system, GOPPAR supplements other measuring systems, including RevPAR.  According to Johnson, Larkspur uses GOPPAR calculations along with other Key Performance Indicators within a scorecard system.  �This provides us the ability to rate how each individual property in our portfolio is performing on an overall basis,� she explains.  �It allows us to establish benchmarks, best practices, focus, and strategy.  The change in RevPAR compared to change in GOPPAR is another point of reference and basis for comparison.�

Larkspur executives have reacted positively and supportively to the use of this new measurement, Johnson says.  �Since it is being used in a scorecard system and included within our financial results, both corporate and field personnel receive the results and can contemplate what the results are for their respective areas and how they fit into the bigger picture.�

�The scorecard is internally posted on our intranet for decision-makers to assess and make decisions proactively, based on these results.  Our general managers are expected to control and actively manage all expenses above GOP, so this statistic assists them in monitoring their progress,� Johnson adds.

Johnson sees GOPPAR not as merely numbers for numbers� sake, but providing a more comprehensive picture of a company�s financial position with regard to flow-through, profit, efficiency, and expense control, especially when coupled with RevPAR and profit margins.

�It�s one of the most crucial and powerful statistics we utilize,� she says, �since it tells us the actual profit per room and measures controllable expenses at the hotel level.�

�In the short term, GOPPAR is most meaningful for analyzing the cost-saving measures we�ve implemented and what that translates into on a per-available-room basis.  Since we use it with our scorecard system, it ties directly to the strategic direction of the company and the formulation of that strategy.  Additionally, we use GOPPAR in our operational review meetings and rely on it in formulating action plans and other considerations during the budgeting process,� Johnson explains.

Benchmarking the Bottom Line

Getting down into the numbers is the stock-in-trade of PKF Consulting and The Hospitality Research Group.  Whether it�s a financial feasibility study, an appraisal, a customized Benchmarker report, or a copy of Trends in the Hotel Industry, we can provide you with the data you need to make the most informed decisions. 

Our Benchmarker is a tool specifically designed for people who want to analyze more than just their top-line revenues.  Benchmarker reports allow owners and operators to compare their hotels� revenues, expenses, and profits to a selected group of comparable properties.  For more information, and guidance through all the �pars,� please contact one of our PKF/C or HRG offices.  To order a Benchmarker report for your hotel, call Claude Vargo at (404) 842-1150 ext. 237.

The Hospitality Research Group (HRG), headquartered in Atlanta, is the research affiliate of PKF Consulting, the international consulting and real estate firm specializing in the hospitality industry.  HRG, along with PKF Consulting and the PKF Consulting Capital Markets Group, are wholly owned subsidiaries of Hospitality Asset Advisors International, a U.S. Corporation.  HAA International has offices in New York, Boston, Philadelphia, Washington DC, Atlanta, Houston, Dallas, Los Angeles, San Francisco, and Singapore.