Many hotel owners feel reassured when they receive the monthly performance report. Occupancy is improving. ADR is up. RevPAR is growing. Everything seems to be moving in the right direction and the commercial team deserves recognition for it.
But a few weeks later, once the financial report is completed, a quieter but far more important question often emerges:
“If revenue is growing, why isn’t profit growing with it?”
This is where hotel management needs to look beyond the top-line numbers.
In the hotel business, revenue certainly determines how much room there is to grow. But the health of the business depends on how much of that revenue remains after the hotel operates every day: rooms are cleaned, breakfast is served, air conditioning runs, linen is washed and guests are taken care of.
The number that helps tell this story is Gross Operating Profit, or GOP.
What Exactly Is GOP?
Simply put, GOP is the hotel’s total operating revenue minus the operating expenses required to run the hotel.
Revenue does not come from rooms alone. It may also come from food & beverage, laundry, spa, meeting rooms and other sources. Operating expenses, meanwhile, include payroll, utilities, food costs, OTA commissions, linen, amenities, marketing and other departmental expenses.
This is why GOP is not the same as net profit.
GOP does not yet account for expenses such as rent or certain property-related costs, depreciation, loan interest, taxes and some owner-related expenses. But because it focuses specifically on operations, GOP is particularly useful for understanding whether a hotel is being managed efficiently on a day-to-day basis.
Think of a hotel as a large restaurant. Revenue is all the money coming in from every table. GOP is what remains after ingredients, staff salaries, kitchen electricity and the other costs required to operate the restaurant have been paid.
A restaurant can be full every night. But if its costs are not properly controlled, the owner may still see very little return.
Why Doesn’t Strong RevPAR Always Make Owners Happy?
RevPAR is an essential hotel performance metric. It helps measure room revenue performance through the combination of occupancy and ADR.
The limitation is that RevPAR only tells us what happens on the room revenue side.
It does not tell us whether that growth was achieved through excessive discounting, expensive distribution channels or additional staffing costs that outweigh the incremental revenue.
For example, imagine a hotel increases occupancy from 70% to 82%.
That sounds like excellent news.
But what if the additional occupancy comes from aggressive promotions, high OTA commissions, breakfast inclusions that have not been properly costed and additional operational shifts?
The hotel may be busier, while its GOP actually becomes thinner.
On the other hand, a hotel with slightly lower RevPAR may generate stronger GOP if it has a healthy market mix, maintains its rates, achieves strong team productivity and controls departmental expenses effectively.
For investors and owners, this is often the difference between a busy hotel and a hotel that genuinely makes money.
GOP Is Not Just Finance’s Responsibility
One common mistake is to treat GOP as something that belongs solely to the finance department.
In reality, almost every operational decision leaves a direct impact on GOP.
Sales influences the quality of revenue coming into the hotel. Revenue management determines the quality of rates. F&B manages menu margins and waste. Housekeeping influences productivity and the use of linen and amenities. Engineering plays an important role in utility management and preventive maintenance.
The General Manager has perhaps the most important role because GOP is where commercial strategy meets operational discipline.
There is little value in one department achieving its individual target if the end result weakens the hotel’s overall profitability.
