Hotel Performance measurement has evolved over time and one of the latest measures is GOPPAR( Gross Operating Profit Per Available Room). This is considered a better measure than REVPAR(Revenue Per Available Room) for the hotel's performance as a whole since REVPAR only looks at room revenue and ignores non-room revenue and cost completely. GOPPAR becomes even more relevant for the group segment since hotels have many costs associated with selling and servicing groups and groups have significant spend on non-room aspects like F&B, meeting space rental, audio-visual, etc. each of which have different profitability.
While many hotels have now started measuring performance by GOPPAR, how do we actually improve it? In the group segment, following are some of the aspects to manage well to improve GOPPAR.
Manage Contracted Non-Room Revenue
Revenue management has become increasingly sophisticated for guest rooms,but many hotels still use the gut-feel technique (well, not really a technique) to manage non-room revenue. This must change and equal responsibility for meeting budget must be assigned to meeting space and catering as revenue and profit generators. More specifically, hotels should define targets for revenue and profit for conference rooms by seasonality and strive to meet that in every quote. It should also be reviewed often and updated for changing market conditions.
Consider the following from HOTSTAT MENA report. Even though ADR and occupancy fell, and expenses increased, GOPPAR increased due to F&B demand,.
Doha hotels felt the effects of the summer slowdown early as performance levels dropped during May with a 1.3 percentage point reduction in occupancy to 74.9% and a 2.8% fall in ARR to US$210.27. The softer rooms performance saw a 4.4% decline in RevPAR, however stronger food and beverage demand resulted in a 4.9% growth in TRevPAR to US$408.85. Although operating expenses were higher during the month, the increase in overall revenues was sufficient enough to ensure the GOPPAR increase of 1.8% to US$181.52.
This shows how important it is to have a holistic view in order to capitalize on one aspect when another is not doing so well.
Increase Non-Contracted Revenue Per Attendee
Conference attendees have budgets beyond what the conference organizer has contracted. Hotels should aim to get the most from that spending ability by cross selling other services and amenities to group attendees. For example, hotels can offer a discount on their bar or spa to group attendees and attract not just the attendees staying in the hotel but ones staying elsewhere too. Getting these promotions in front of the attendees at the right time can be a challenge, but can be done effectively using the event's mobile app or hotel's own mobile app like the free app provided by GroupRevMax.
Plug Profit Leaks
To win group business, hotels offer a myriad of freebies including upgrades, complimentary rooms, discounted rooms, etc. While these may be necessary to gain the business, it's important to watch what you give away and factor it into the price. Make sure your revenue managers and revenue management systems factor all these into pricing a group.
Further, all costs associated with group sales and service must be factored into the budget and profitability goals should be assigned with those factored in. Group sales staff salaries, costs of reservation agents entering group reservations into PMS, agents taking calls for group bookings should all be factored in to get the full picture.
In essence, all group pricing should be done based on not just revenue goals, but also profit goals if you are to really support an increase in GOPPAR.
Aim for Balanced Sales
Revenue managers at hotels with significant meeting space understand that space is more profitable when sold with room component than when it's sold to catering only events. So, in order to achieve maximum profitability, hotels should try to sell these two assets in a balanced way so as to not sell out one and reduce value of the other.
Implementing these can go a long way in optimizing your GOPPAR, but these are tough to include in a sales process without the proper tools. GroupRevMax has revenue management for contracted non-room revenue, a mobile app to cross sell and increase non-contracted revenue, profit goals based pricing, and room to space ratio analysis to support increasing your GOPPAR while improving your speed to market significantly. To schedule and online one-on-one presentation or request a free trial, send us a note by clicking here.
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