Understanding gross operating profit (GOP) in hotels

Key takeaways

• Gross operating profit (GOP) measures what a hotel earns after all operating expenses, making it a more reliable indicator of day-to-day management performance than revenue alone.
• With hotel operating costs consistently outpacing revenue growth, monitoring and improving GOP has become a core priority for owners, operators and asset managers.
• Technology that centralizes operational and financial data gives revenue managers the real-time visibility needed to protect margins and act on cost pressures before they compound.

Full rooms don’t always mean strong performance. You can hit occupancy targets, push RevPAR (revenue per available room) and still see margins tighten month after month. That’s where gross operating profit (GOP) comes in; it reveals whether your revenue is actually translating into profit or quietly being absorbed by rising costs.

According to CBRE's 2025 Hotel Horizons forecast, hotel profit margins at both the GOP and EBITDA level declined in 2023 and 2024, with operating expenses outpacing revenue growth, a trend expected to continue through 2025.

For revenue managers and operators, GOP cuts through the noise. It shows what’s left after running the property day to day, making it the most direct measure of operational performance.

What is gross operating profit (GOP)?

Gross operating profit is the amount of revenue a hotel retains after subtracting all operating expenses. It measures the efficiency of day-to-day operations and sits above ownership-level costs on the income statement, making it the clearest view of how well a management team is running the property.

What GOP includes

GOP covers everything generated and spent at the operational level:

• Revenue: Rooms, food and beverage, spa, parking, ancillary services and any other income the property generates
• Operating expenses: Labor, utilities, supplies, distribution costs, sales and marketing, and departmental overhead

What GOP excludes

GOP stops before ownership-level and non-operational items:

• Debt service and interest payments
• Property taxes and insurance
• Depreciation and amortization
• Management and franchise fees
• Capital expenditure reserves

This boundary is what makes GOP useful. It isolates operational performance from the financial structure of ownership, so two properties can be compared on equal operational terms regardless of how they are financed or structured.

The GOP margin

GOP margin is GOP expressed as a percentage of total revenue. It is calculated as:

GOP margin = (Gross operating profit / Total operating revenue) x 100

For example, a hotel generating $5 million in total revenue with $3 million in operating expenses has a GOP of $2 million and a GOP margin of 40%. That margin is what owners, operators and asset managers track over time.

Why is GOP valuable for hotels?

RevPAR shows how well you sell rooms. GOP shows whether that revenue turns into profit. That distinction matters when costs rise faster than rates.

GOP focuses on what remains after operating the property, making it a direct measure of profitability, not just demand. It also gives owners and asset managers a consistent way to compare performance across properties and time periods.

Because GOP links revenue to operating costs, it improves budgeting accuracy and forecasting. It’s also a core metric in hotel valuations, used by investors to assess how efficiently a property is run and how much profit it can generate.

According to CBRE data cited in Hotels Magazine, hotel expenses above GOP increased 4.1% in 2024 while total revenue grew just 2.4%. That gap is precisely why GOP has moved from a reporting metric to an operational priority.

How do you calculate GOP?

The formula is straightforward:

Gross operating profit = Total operating revenue – Total operating expenses

What matters in practice is what you include in each category and how consistently you apply your accounting definitions across periods and properties.

Why accounting consistency matters

GOP is only useful for comparison if it is calculated the same way across periods. Shifting how you classify labor costs, departmental overhead or distribution expenses between reporting cycles distorts trend analysis and makes benchmarking unreliable.

Most hotel operators use the Uniform System of Accounts for the Lodging Industry (USALI) as the standard framework, which ensures consistent definitions across revenue and expense categories.

What is considered a good GOP margin?

There is no single number that defines a good GOP margin. The right benchmark depends on property type, market, service level and demand cycle. What matters more than any snapshot is the trend over time and how your property compares to a relevant peer set.

Broad reference ranges by segment give useful context:

These ranges are directional, not prescriptive. According to MMCG Invest, gross operating profit margins for full-service hotels declined from 36.9% in 2019 to 33.5% in 2024, reflecting the sustained cost pressure that has compressed margins across segments. Seasonality, local labor markets, energy costs and distribution mix all influence where any individual property lands within or outside these ranges.

A single GOP figure in isolation is less meaningful than the direction of travel. A hotel with a 32% GOP margin that has improved four points over two years is performing better operationally than one posting 38% with a declining trend. Benchmarking against a comparable set using tools like HotStats or CBRE's Benchmarker gives GOP its context.

GOP vs. other hotel revenue metrics

No single metric tells the full story. RevPAR, TRevPAR and EBITDA each highlight different parts of performance. GOP connects them by adding the cost layer that turns revenue into profit.

GOP vs. RevPAR

RevPAR measures how effectively you fill and price rooms. It reflects demand and pricing strategy but ignores the cost of generating that revenue.

GOP adds that missing context. If distribution, labor or energy costs rise faster than room revenue, RevPAR can grow while profitability declines.

GOP vs. TRevPAR

TRevPAR expands the view by including all revenue streams, from rooms to F&B and events. It shows how well the entire property generates revenue.

But it still stops at the top line. GOP reveals whether that revenue holds up after the cost of delivering those services. High TRevPAR with weak GOP often signals inefficient operations or high service costs.

GOP vs. EBITDA

EBITDA moves further down the income statement, including ownership-level costs like taxes, insurance and depreciation. It reflects overall asset performance and is widely used by investors.

GOP focuses on operational performance by excluding those external factors. It’s the clearest way to evaluate how well the property is run day to day.

The table below summarizes where each metric fits:

Each metric answers a different question. GOP is the one that shows whether your revenue strategy actually delivers profit.

5 strategies to improve gross operating profit (GOP)

With cost growth consistently outpacing revenue across most markets, improving GOP requires both revenue discipline and cost control. These five strategies address the levers most directly within an operator's control.

1. Optimize labor costs

Labor is the single largest operating expense in most hotels and the most significant driver of GOP compression. According to CBRE insights, labor costs rose 4.8% in 2024, with operators paying 22.1% more than in 2019 for 7.4% fewer hours worked.

• Align staffing levels to occupancy forecasts by shift and department, not just weekly totals
• Cross-utilize staff across departments during low-demand periods to reduce contract labor reliance
• Use data-driven scheduling tools to reduce overtime and eliminate unnecessary positions
• Conduct position-by-position reviews in high-cost departments, particularly F&B and housekeeping

2. Improve operational efficiency

Operational inefficiency is a margin leak that compounds quietly. Manual processes, duplicated effort and poor inter-departmental communication all add cost without adding guest value.

• Streamline housekeeping workflows with mobile task management to reduce room-turn time
• Eliminate manual reconciliation between front office, F&B and accounting through integrated systems
• Automate routine guest communications to reduce front desk workload without reducing service quality

3. Enhance revenue management

Profitable revenue is not the same as maximum revenue. A focus on volume without cost awareness can improve occupancy while diluting GOP through high-commission bookings, excessive discounting or demand that costs more to serve than it returns.

• Optimize channel mix to shift demand toward lower-cost direct bookings and reduce OTA commission drag
• Use dynamic pricing to capture demand upside on high-intent dates rather than leaving rate on the table
• Focus forecasting on net revenue after distribution costs, not just gross room revenue

A dedicated revenue management system automates pricing decisions in real time, reducing the manual workload on revenue managers and improving rate accuracy across all channels.

Mews RMS, powered by Atomize, uses live demand signals, comp-set data and 24-month forecasting to optimize pricing around profit, not just occupancy. Hotels using Mews RMS have reported up to 35% higher RevPAR andaround37% higher ADR.

4. Control operating expenses

Cost control is not a one-time exercise. It requires ongoing visibility into departmental spending and the ability to act on anomalies before they accumulate.

• Monitor utility consumption by area and shift, not just monthly totals
• Review vendor contracts annually and consolidate where possible to improve negotiating position
• Track distribution costs by channel and booking source to identify margin-diluting segments
• Use real-time reporting to surface cost variances at the department level before they reach month-end

5. Leverage technology and data

Disconnected systems are a GOP problem as much as an operational one. When financial, operational and revenue data sit in separate platforms, reporting is slow, errors multiply and decisions get made on incomplete information.

• Centralize operational and financial data in a single platform to eliminate reconciliation lag
• Replace manual reporting with real-time dashboards that surface GOP-relevant metrics by department
• Use integrated revenue management metrics to connect pricing decisions directly to profitability outcomes

Enhance your hotel's profitability with Mews

GOP improvement is not a single initiative. It is the result of better pricing decisions, tighter cost oversight and faster access to the data that connects the two. When those functions run on disconnected systems, the lag between what is happening and what you can act on costs margin every day.

Mews RMS gives revenue managers a centralized platform for pricing, forecasting and performance analysis that integrates with Mews PMS so operational and revenue data move together in real time.

Key capabilities that directly support GOP improvement include:

• AI-driven dynamic pricing that adjusts rates 24/7 based on live demand, comp-set signals and forward-looking forecasts
• Autopilot pricing automation that saves revenue managers 20–30 hours per month, freeing time for strategic cost and channel analysis
• 24-month forecasting and budgeting tools that connect forecasts to budgeting and planning
• Portfolio-wide visibility for hotel groups, with aggregated KPIs and property-level rate detail in one view
• Seamless two-way integration with Mews PMS, keeping availability, rate plans and restrictions in sync without manual updates

Book a demo to see how Mews helps revenue managers and operators build the data foundation that turns better pricing and tighter cost control into sustainable GOP growth.