Gross Operating Profit (GOP) is a hotel financial performance measure representing operating revenue minus the operating expenses included in the hotel’s GOP calculation. It helps management evaluate the operating profitability of the property before certain expenses and deductions that may be excluded from this measure.
Formula
GOP = Total Operating Revenue − Applicable Operating Expenses
The precise expense categories included depend on the hotel’s accounting framework and reporting practices.
Practical Example
A hotel reports the following monthly results:
- Total Operating Revenue: CAD 600,000
- Applicable Operating Expenses: CAD 420,000
GOP = CAD 600,000 − CAD 420,000 = CAD 180,000
The hotel’s gross operating profit for the month is CAD 180,000.
How to Interpret GOP
GOP helps hotel managers assess how effectively the property converts operating revenue into operating profit. It reflects both revenue generation and control of operating expenses.
An increase in revenue does not necessarily produce a higher GOP if expenses rise at the same time. Similarly, reducing expenses may improve GOP, but excessive cost reductions can negatively affect service quality and guest satisfaction.
GOP should be interpreted consistently, using the same accounting definitions and expense classifications when comparing periods or properties.
Related Terms
GOPPAR · TRevPAR · Contribution Margin · Room Revenue · Ancillary Revenue · Budget Variance · Revenue Management