My RevPAR is Rising But My GOP Is Not: Taking a Channel Diagnostics Audit
One of the lessons learned while conducting research for “Distribution Channel Analysis: A Guide for Hotels,” was that hotels will have to proactively manage distribution to deal with dozens of new channel partners or they risk reaching a point where costs will compromise profits. Distribution costs are often running second only to labor and, because of the varied commission models, owners and managers don’t often have visibility into what these costs mean to their financial status. Plenty of hotels are already there as evidenced by this common refrain: my RevPAR is rising and yet my gross operating profit (GOP) is not; I am managing operating expenses well, but I feel I am losing out in my reservation or marketing expenses.
High distribution costs also pose a threat to the franchise and brand model by creating a situation in which the hotels start to question the fees they pay for a hotel brand. Some no longer feel they should pay for third-party business (transient or group/meetings) since they argue they can acquire that business without the brand’s help. Most hotels are not well equipped to set objectives for an optimal channel mix, figure out the related profit contribution and manage to that target.