1 Hotel cover.indd - Nicola Cottam

Key Issues: Benchmarking
So is it case closed? Not quite. GOPPAR is also very sensitive to RevPAR. Hotels’ profit margins for rooms tends
to be very high, so movements in room rate or occupancy will have a marked knock-on effect as far as operating
profit is concerned.
This reliance on available rooms has led other critics to tout available space as a better overall benchmark: hence
the previously mentioned GOPPAS. Imagine this scenario: two hotels generate similar revenue per room and have
identical square meterage, but with one is exclusively rooms, and another that has 35% of its space taken up by
conference space. RevPAR would tend to flatter the latter, as in the room revenue/no. of rooms equation, it will
have a smaller denominator. However, if examined by available space, in square metres, the results will be more
in line with expectations. [see tables at the end of this article for more]
So is GOPPAS the new RevPAR? Actually, RevPAR is the new RevPAR. Revenue per available room provides an
excellent, easy to prepare snapshot of a hotel’s, or a market’s performance. One needn’t measure the number
of square metres of London dedicated to hotels in London to compare them to the same figure for Moscow or
Istanbul. The same is true looking broadly at hotels across groups or chains. And it should not be forgotten that
for the most part, hotel results arrive conjunction with other metrics such as profit, yield, occupancy, EBITDA
and the like.
That does not mean that going forward, that the like of GOPPAR and GOPPAS will go the way of laser discs and
Betamax. Many hotels do report such measurement figures, and there are plenty of asset managers and decision
makers who know – from necessity – precisely how their groups are performing on those levels.
Furthermore, as hotels sell their real estate, the ‘bricks’ side of the equation is likely to place more emphasis on
profit and square meterage, as they would a standard holding – a shopping and leisure centre, for example.
“I think increasingly at the moment, investors are becoming more demanding,” says Jennifer Viloria, Research
Supervisor at PKF’s Management Consultancy services. “Changes in the market in the last few years have seen
ownership beginning to fall into the hands of more investors rather than hotel operators. That’s why there’s this
discussion now as to how you measure performance. The hotel companies, or hotel operators are still pretty
much focused on RevPAR, but increasingly investors who own the property would want to look at profitability.
So you’re seeing a shift in thinking.”
“I think revenue per square metre on an entire asset basis will become more and more useful,” adds Jamie Chappell,
MD of The Bench. “Hotel companies are in the in the real estate business as much as they are in the hotel
operating business.”
He adds: “If you think of hotel businesses being four businesses in one. You’ve got room side, conference and
banqueting, food and beverage and the asset itself, and you’ve got different parameters for those four, the easiest
way to tie those all together is revenue per square metre.”
March 2007 Hotel Report Guide to UK Hotels l © William Reed Publishing 26