Performance measures for strategic revenue management: RevPAR vs. GOPPAR
Abstract
A recent paradigm shift toward total strategic revenue management prompted calls for a re-evaluation of some of the practice’s fundamentals, including the question of what should be measured: revenues or profits? This study is the first to explore the theoretical downsides of revenue rather than profit-based optimization by providing proof of suboptimality and bidirectionality attributes. We empirically demonstrate how hotels can assess the adequacy of RevPAR, the lodging industry’s de facto standard measure, as a proxy for profitability, by measuring the correlation between the RevPAR and GOPPAR. Finally, the study evaluates the conditions that might affect RevPAR’s suitability in lieu of the profit measures. The empirical results indicate that overall RevPAR is strongly correlated with GOPPAR, but at the same time suggest that lower-scale properties with substantial non-room rents and food and beverage revenue are instances where GOPPAR than RevPAR may be a more appropriate measure.