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Performance measures for strategic revenue management: RevPAR versus GOPPAR

Author

Listed:
  • Zvi Schwartz

    (Hotel Restaurant & Institutional Management, Alfred Lerner College of Business & Economics, University of Delaware)

  • Mehmet Altin

    (Department of Hospitality Services, Rosen College of Hospitality Management, University of Central Florida)

  • Manisha Singal

    (Hospitality & Tourism Management, Pamplin College of Business)

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.

Suggested Citation

  • Zvi Schwartz & Mehmet Altin & Manisha Singal, 2017. "Performance measures for strategic revenue management: RevPAR versus GOPPAR," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 16(4), pages 357-375, August.
    • Handle: RePEc:pal:jorapm:v:16:y:2017:i:4:d:10.1057_rpm.2016.23
    DOI: 10.1057/rpm.2016.23
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    References listed on IDEAS

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    Cited by:

    1. Lee, Seoki & Pan, Bing & Park, Sungbeen, 2019. "RevPAR vs. GOPPAR: Property- and firm-level analysis," Annals of Tourism Research, Elsevier, vol. 76(C), pages 180-190.
    2. Mehmet Altin & Chih-Chien Chen & Arash Riasi & Zvi Schwartz, 2023. "Go moderate! How hotels' cancellation policies affect their financial performance," Tourism Economics, , vol. 29(8), pages 2165-2182, December.
    3. Michael Murimi & Billy Wadongo & Tom Olielo, 2021. "Determinants of revenue management practices and their impacts on the financial performance of hotels in Kenya: a proposed theoretical framework," Future Business Journal, Springer, vol. 7(1), pages 1-7, December.
    4. Carla Bento & Paulo Almeida & José Luis Jiménez-Caballero, 2022. "The impact of the Web Summit on hotel performance, the case of Lisbon," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 21(5), pages 564-577, October.

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