A lot has been speculated about what could and should change because of the pandemic. There is one aspect of the hotel business that desperately needs to change and the Covid crisis is not to blame. However, it will most certainly speed things up.
To get to a new point first see where the industry is today. The one aspect of the business that has garnered the most attention in the past 30 years is the measurement of REVPAR.
That number and the index of that number’s performance has been the most studied and reported on in the hotel universe. This number and the hyper focus of investors, brands, as well as owners, has revolutionized the industry and created a whole slice of quasi science – the revenue manager – that did not exist some 20 years ago. REVPAR and index revolutionized the industry, and they are here to stay.
Most brands and some management companies have performance clauses in their agreements with owners that indicate a level of REVPAR index to be maintained, usually 100 percent. Slip below this level for too long and down comes the flag and away go the fees. This ensures the owner gets their fair share of value as it relates to how the hotel is sold and marketed, and the resulting room revenue. This makes a lot of sense but it is only measuring room revenue, occupancy and rate.
The new deal proposed here is the need for a new number to emerge and be adopted in the same way REVPAR and REVPAR index was and is. This new deal applies to managed hotels by brands, management companies, and their owners. The new mega number that sits at the front door of the new deal is GOPPAR. What is the profit per room available after all expenses within the control of the manager and how does that index to your competitive set of hotels?
What the last 10 years plus Covid have shown hotel owners is that it is not enough to drive revenues. What matters to owners is profit. The proper way to measure the profit achieved from your hotel is to index your properties results to your competitive set of hotels. The same way you index REVPAR. Once this is established as the “new deal” management companies and brands will be capable of measuring their ability to drive profits for owners.
Today no such arrangement exists.
Think about how the adoption of GOPPAR index would change the hotel business for brands and management companies.
Here are a few aspects that I think would take hold because of a new deal:
If management companies and brands are to survive and prosper then the ability to deliver a superior profit result for their owners needs to be the new focus. The ones who adopt this the best will have a huge advantage. This, at the end of the day, means leadership. Is it time to step up?
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For more information about David Lund, visit hotelfinancialcoach.com
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Portland, ME 04103
David Lund is The Hotel Financial Coach, an international hospitality financial leadership expert. He has held positions as a Regional Financial Controller, Corporate Director and Hotel Manager with an international brand for over 30 years. He authored an award-winning workshop on hospitality financial leadership and has delivered it to hundreds of hotel managers. David coachs hospitality executives and delivers his Financial Leadership Training throughout the world, helping hotels increase profits and build financially engaged management teams. He speaks at hospitality company meetings, associations and he has had several articles published in hotel trade magazines and he is the author of three books on Financial Leadership. David is a Certified Hotel Accounting Executive through HFTP and a Certified Professional Coach.
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