PERSPECTIVE
The GOP squeeze : How asset managers maximize hotel profitability
Contributed by JOHN PAULSEN , HOTELAVE
Despite RevPAR being the legacy , go-to metric to gauge the health of the hospitality industry , owners and investors know , as the adage goes , that you can ’ t it to the bank . The most important figure to them is GOP , or gross operating profit , a number that is derived from operating revenues minus operating expenses . In sum : what is left at the end of the day before items like property taxes are deducted .
In the ever-evolving hospitality industry , owners often turn to asset managers , who play a critical role in safeguarding their investment by maximizing profitability . As economic challenges , such as a potential recession , still-rising interest rates and wage increases , loom , asset managers must identify areas of improvement to ensure sustained profitability . Focusing on operational performance is a key strategy to blunt their effects — and that ’ s where strong asset management comes into play .
By engaging in effective discussions with operators and brands , asset managers can drive positive changes that lead to superior financial outcomes . Here are seven strategies to help boost the bottom line :
➀ LABOR OPTIMIZATION : Labor costs constitute a significant portion of hotel expenses . As inflationary pressures continue to drive up wages , it is essential to prioritize efficiency . Asset managers should encourage the management company to conduct a comprehensive labor audit , aiming to identify inefficiencies and declining productivity . By comparing hours worked by position against productivity standards , the audit can reveal areas for improvement .
Benchmarking against similar properties can provide valuable insights . Monthly productivity measurement and annual productivity standard reviews should become routine practices . Furthermore , asset managers should challenge the management team to assess the necessity
52 hotelsmag . com Jul / Aug 2023