Raising gross operating profit starts with flow-through, not occupancy. This is the order I work through as a former general manager — and the numbers to pull before the next owner's meeting.
By Ahmet Can Yeşildağ · over thirty years in the tourism, travel and hotel industry · Cornell General Managers Program
Gross operating profit (GOP) is what the hotel earns from operations before management fees and fixed charges such as rent, property taxes and insurance. It is the number the operator controls most directly.
Flow-through measures how much of each extra dollar of revenue reaches GOP: flow-through = change in GOP ÷ change in total revenue.
An example with round numbers: revenue is up $200,000 on last year and GOP is up $60,000, so flow-through is 30%. If revenue rose and GOP fell, flow-through is negative — the extra business cost more to serve than it brought in. In a down year the same logic runs in reverse: the aim is to keep GOP falling more slowly than revenue.
Occupancy can rise while flow-through falls. That is why the five levers below start after the revenue line, not before it.
ADR is what the guest paid. Net ADR is what the hotel kept: net ADR = (room revenue − commissions, transaction and channel fees) ÷ rooms sold. Read it by channel. A booking that looks strong on ADR can be the weakest in net terms once commission and payment fees come off. The question is not which channel sells the most rooms, but which one leaves the most money per room.
Labour is usually the largest cost a general manager controls day to day. Hours per occupied room = paid hours ÷ occupied rooms, by department. Compare the schedule with the forecast, not with last year's schedule. Most labour leakage is not overstaffing on busy days; it is a schedule written before the forecast moved and never rewritten.
Read F&B as a department with its own profit, not as an amenity: covers, average check, menu mix and labour to covers, outlet by outlet, with banquets read separately. Some outlets exist for the guest experience and run at a planned loss — that is a decision. An outlet that loses money without anyone having decided it should is a leak.
Pickup, pace against the same point last year, booking window and length of stay. Rate fences — the conditions attached to a lower rate — stop cheaper rates from eating the higher ones. And the forecast has one job beyond pricing: it drives the labour schedule in lever 2. A forecast that never reaches the schedule is a report, not a tool.
Revenue, sales, front office, F&B and finance in one room, for one hour, on one agenda: forecast and pace, channel mix and net ADR, rate decisions, next week's labour plan. Every decision leaves the room with an owner and a date. Hotels with good data and no rhythm still leak; the rhythm is what turns numbers into action.
Cutting hours across the board. GOP rises for a quarter; guest scores follow it down a quarter later.
Buying occupancy with discounts. Revenue rises while net ADR and flow-through fall.
Adding a channel before knowing net ADR by channel. More rooms, less money per room.
Twelve months of occupancy, ADR and RevPAR — by month, against budget and last year.
Segment and channel production — room nights, revenue, and the commission or fee on each.
The departmental P&L — rooms, F&B and undistributed expenses, down to GOP.
Forecast against actual — what the hotel expected four weeks out, and what happened.
Paid hours by department — to set against occupied rooms and covers.
Guest scores — so every profit gain is checked against what guests felt.
In 2014, as general manager of Park Inn by Radisson Azerbaijan Baku, gross operating profit rose 13.5% while the guest Net Promoter Score rose from 38.9 to 54.6. All five targets for the year were beaten.
The hotel was named The Best Hotel 2014 — Deliver Results by Carlson Rezidor Hotel Group. Read the case →
It depends on the hotel, the brand and where the extra revenue came from. Rate growth flows through at a higher rate than volume growth, because a higher rate on the same room costs almost nothing extra to serve. Agree a target with ownership and read against it every month.
No. GOP comes before management fees and fixed charges such as property taxes, insurance and rent; net operating income comes further down, after them. GOP is the number the operator controls most directly.
Yes — when rate, channel mix and labour improve faster than volume falls. It is often the healthier kind of growth.
The revenue diagnostic takes five business days and is done remotely. It costs CA$750, credited in full against a larger engagement within 90 days.
Over thirty years in the tourism, travel and hotel industry, including general manager roles carrying the full P&L. Cornell General Managers Program. Based in Oakville, Ontario; working across Canada. The introductory call is free and there is no obligation.
Greenmountains Trade Ltd. · Oakville, Ontario · +1 (289) 300-8985