By David Lund
GO PAR is the new and exciting measurement everyone is talking about in the hotel business. But let’s be honest. It is a bit of a stretch to comprehend. It is a little more complicated than REVPAR.
Why you ask? Well, REVPAR has two components: occupancy and rate. That is all you need to square the calculation. GO PAR has six components and I am going to lay them all out here.
A big part of the struggle people have is the idea that GO PAR is an accounting thing. It is true that the calculation is based on accounting theory but stick with me here, it is a straightforward concept. GO PAR like REVPAR is easy to square. You just have six pieces to deal with not two.
The pieces are groups of like items:
- Room Revenues – REVPAR
- F&B Revenues – FBRPAR
- Other Hotel Revenues – OTRPAR
- Hotel Cost of Goods Sold – CGSPAR
- Hotel Payroll – PAYPAR
- Hotel Expenses – EXPPAR
The way the accounting system works allows us to group these six items together because each account is recorded separately. If we have all the amounts from each of these six items and the hotel follows the uniformed system of accounts for the lodging industry “USALI,” You Sally, then we have absolutely every dollar captured, and we simply divide the total amount from each group by the same available rooms. These six items equal the hotel’s GOP every time, in every hotel.
There are no other items that we need to consider so long as we follow You Sally.
I am going to define and give you an example of each of the six components just so we are clear. Remember, we just divide each by the total rooms available for the same corresponding period.
REVPAR – Total room revenues divided by total rooms available for any period, typically for a day a month or a year. Does not include no show or attrition.
FBRPAR – Total F&B revenues divided by total rooms available for any period, typically for a day, a month or a year. Includes all other F&B revenue items including food, liquor, beer, wine, minerals, banquet room rentals, cover charges, audio visual, pass throughs, house portion of gratuities, rentals, electricity, and any other item that sold to a guest in the F&B outlets and banquets.
OTRPAR – Total Other revenues divided by total rooms available for any period, typically for a day, a month or a year. Includes all minor operating departments and other income. Basically, any income the hotel receives that is not derived from rooms or F&B. Typical items like telephones, SPA, golf, health clubs, shops, rents, concessions, interest income, no shows, attrition and foreign exchange.
CGSPAR – The total cost of goods sold from all applicable departments divided by total rooms available for any period, typically for a day, a month or a year. Cost of goods derived from food and beverage sales make up most of the dollars here, but we also must include any other minor operating departments cost of sales. The rooms department does not have a cost of goods sold, just expenses. Why, you may ask? Because Sally says so.
PAYPAR – Total hotel payroll for all employees in all departments divided by total rooms available for any period, typically for a day, a month or a year. Includes all payroll items including wages, benefits, supplemental and payroll taxes. Does not include payroll processing fees. Those are an expense.
EXPPAR – Total expenses divided by total rooms available for any period, typically for a day, a month or a year. Includes all expenses from all departments including energy. Does not include any payroll or cost of goods items. It does not include financial expenses like insurance and property taxes. These are recorded below GOP, so they are not part of the GO PAR calculation.
With these six items grouped into their own separate boxes we encompass everything that makes up a hotel’s GOP.
It looks like this:
Be sure to check out my other articles on GO PAR. The new superstar of the hotel financial landscape.
Here are some convenient links:
Hospitality Financial Leadership – Why the Future Must Include a GOPPAR Index
Hospitality Financial Leadership – RevPAR vs. GOPPAR and Why We Need a New Champ