In the hotel sector, the concept GOP, acronym for Gross Operating Profit, is widely used. In Spanish, the Gross Operating Result is used more frequently to refer to the same term. The meaning of GOP is the result of subtracting direct costs, indirect costs, payroll and direct operating expenses from total income.
This financial indicator is concerned with measuring the profitability and the performance of those responsible for the area, from administration, sales, advertising and marketing and most of the operational concepts of the hotel establishment.
The GOP concept is very similar to EBITDA (earning before taxes, depreciation and amortization). Its function is to measure the profitability of taxes and without taking into account the expenses that are not paid such as depreciation, amortization and provisions. Regarding the GOP, it only includes operating expenses, while EBITDA also includes non-operating expenses. EBITDA is presented as an indicator that measures the profitability of the hotel establishment to meet the different commitments with banks, both in capital and interest.
The results of the GOP are of great value for the manager of a company, since in this way he can know how much he contributes in the income and profits for which he is responsible. Here the role of the different components of the executive committee is analyzed, both in monetary terms and in percentage.
For its part, EBITDA is a concept of importance for the investor, since this result will be the basis for knowing the amount that is available for future investments or to meet different commitments with financial entities.
How to calculate the GOP?
The GOP formula can be represented as a percentage.
% GOP = (Total income - operating costs and expenses) / total income x 100