PARKING FACILITIES ARE A CASH COW….. POSSIBLY

PARKING FACILITIES ARE A CASH COW….. POSSIBLY

By Michael Tepper and CJ Follini

“Hello my name is CJ Follini and I own a parking garage; more than one in fact.” If you think this sounds like an excerpt from a substance abuse meeting you’re not mistaken. Sometimes my professional real estate investment peers think I should only disclose my garage ownership to small, support groups of like-minded folks drinking coffee, people who know what its like to own a parking facility. But I decided to write this article in collaboration with Mike Tepper of the premier parking facility manager/owner – Standard Parking (ticker ‘STAN’) – to announce a dirty little secret. Listen closely: PARKING GARAGES ARE FREAKIN CASH COWS!….…….possibly. I add the last disclaimer because it all depends on proper management. That’s where Mike and Standard Parking come in.

Operating a Parking Facility – More Than Just Parking Cars

When Standard Parking began providing parking management services back in 1929, the first facility was a Standard Oil filling station in Chicago. STAN also introduced the concept of paid airport parking in the United States at Cleveland’s Hopkins International Airport in 1951. A lot has changed since then, but the overriding goal remains to be the development and promotion of a customized operating plans. Many owners operators fall into the “one-size-fits-all” operations mentality that fails to recognize parking as a service-oriented business that must consider the disparate needs of all facility users unique to that location. Thus we believe the primary key to success is to customize service programs according to the facility’s customer base using technology for operating solutions to enhance the customer experience. If you believe as we do that the successful facility is akin to a “hotel for cars” then you are on the right path.

First Impressions – Customer Service

Parking facilities are an extension of the commercial asset and they often serve as the “front door” to the development. Ample lighting, brightly painted entrances, strategic yet simple signage should be mandatory while other environmental enhancements such as potted flowers and landscaping are certainly not excessive and promote a general feeling of quality and care. This also applies to customer service – it’s critical to a client’s brand, reputation and sustained business growth. Exceptional customer service begins in the garage lobby, at the valet stand or in the parking office. New and repeat parking transactions only occur if our employees exist as an integral component of the “customer service” chain. All it takes are a few unpleasant exchanges or nasty run-ins with garage staff before your monthlies flee in droves. Then a few reviews are posted to Citysearch or Yelp and your facility is in a death spiral. Remember, your service has to win over your customers on a monthly or even daily basis just like a hotel.

Generating Revenue

Obviously, a sound marketing plan is key to the success of any business. But how? First, start with a market survey including the customer groups you intend to target and where they are coming from both geographically and economically. Then literally map your competition and prepare a competitive analysis of their product (daily, night only, or 24/7), size, and of course, pricing. After this ask yourself a question – is their a gap? For example, no 24/7 garage; or no garage offering monthlies; or maybe no large vehicle parking; or maybe every other garage in the area is either full or too damn expensive.

Once you have identified your customers, your competition and what the “gap” is, how do you reach them? Innovative marketing programs focus on the importance of business partnerships and the value of integrating various media channels including: web sites, newsletters, customer brochures and email broadcasts. Below are some examples of how you can effectively promote products and services to build customer brand awareness and loyalty.

Partnerships – Event marketing is a very effective communications medium for increasing potential partnership marketing and promoting brand awareness and loyalty. Developing partnerships with professional sports teams; entertainment venues; cultural institutions (i.e. museums, theaters); and retail establishments/restaurants allows the parking operator to advertise its location to a larger audience without bearing the entire advertising burden.

Web Site Development – Surprise. Web sites can even be beneficial for parking facilities. They provide regional advertising through localized search engines like Google, Yelp or Citysearch and they offer links to your commercial partners. Enhanced web site functionality can introduce the facility to with prospective clients and enhance communication with existing clients especially your monthlies with special offers, announcements, etc.

Radio Advertising – When radio advertising is used effectively, it can be a good investment that will help you increase top line revenue. This is an extremely efficient way to market parking facilities for sporting events and concerts.

Proper Pricing – The best for last. The essential ingredient to effective marketing is the proper pricing. With the use of today’s parking software, you can create optimal parking rate structures for the facility by analyzing ticket data and modeling your rate structure on user tendencies.

Operation managers and marketing staff can view information such as duration of stay statistics, entry and exit peak times, and ticket transaction volumes to model different rate scenarios. Revised revenue projections can be obtained by inputting historical ticket data into these beneficial price structures. For example, if you own the only 24/7 garage in the neighborhood, then maybe a more expensive overnight rate is warranted and it won’t bother your daily business users or your monthlies. Or if you notice that you have plenty of short timers ( 1 -2 hrs) then a higher first-hour rate while maintaining the same daily maximum will increase revenue while only affecting your most transient (and probably not your regular) users.

Expense Reduction Through Automation

Labor costs are one of the highest operating expenses for most parking facilities. To minimize facility operating expenses and maximize labor efficiency, the use of automated parking access and revenue control systems provides a cost efficient way to conduct cash transactions. Furthermore, it expedites traffic flow during peak exit times by eliminating the bottlenecks that typically occur in the cashiering lanes at the facility’s exit. Another benefit not visibly apparent with automation is the added audit control by removing human error and theft during the cash transaction process. Most facilities can experience a 3 – 5% increase in revenues just from the error/theft reduction of automation depending on the type of audit program previously conducted.

Although there are no parking employees stationed at the exit in an automated facility, it does not mean that customer service is also non-existent. Customer service is provided through intercom devices at each of the entrance and exit lanes, as well as at each pay station. With the advancement in audio and video technology, customer service representatives can easily assist parking patrons from a centrally located office. What’s even more impressive is that the centrally located office does not have to be in that same facility. However, I recommend going automated only during overnight hours if you have the normal nightly drop-off in occupancy.

This type of off-site monitoring is referred to as a “Central Command Center“concept.

Some of the benefits of the “Central Command’ concept include:

  • Ability to monitor and manage multiple locations from one garage office.
  • “Command Center’ manager can monitor transient and contract garage capacity at each location.
  • Monitor alarms with the ability to dispatch a customer service rep to address issues as necessary.
  • Ability to compile and manage revenue by individual location or as a full portfolio.
  • In addition there is the potential for staff reductions (enhanced cost savings) as the locations can be managed from a single site thus allowing for the sharing of personnel across facilities versus a need to have personnel on-site at each facility regularly.
  • The “Central Command” concept can be achieved by installing a DSL or T1 connection between the various garages and placing additional work stations at the designated “Command Center”.

The business case to justify the capital investment of an automated parking access and revenue control system will vary based on several factors. While the automation equipment and software can range from $250,000 – $500,000, a mid-sized garage can recoup the investment from labor savings within three years and even faster in expensive labor cities like New York or Boston. Better yet, management companies like Standard Parking offer attractive financing for such systems.

Debit Cards – Debit card technology offers an alternative to the monthly parking program for people who travel to their office only a few times per week or at different times during the day when all day parking specials are typically not offered. In the past, the revenue from this potential customer base would have been lost to remote parking lots offering low rates but inconvenient to the worker’s office location. New software allows the debit card to be encoded in a variety of ways thus accommodating corporate groups and pay as you go programs.

Value Cards– This magnetic striped card activates upon first use and can be programmed to expire as required by the customer group. This technology provides the flexibility for hotels, medical offices, and building tenants to deliver these parking access devices in advance of their guest or visitor’s arrival with easy to use to instructions.

Final Tips From A Garage Owner

I offer the following drawn from my (CJ Follini) mistakes and successes as an owner.

  1. Always perform a structural engineer’s report prior to purchase; at approximately $30,000 – $50,000 its money well-spent that could save you hundreds of thousands of dollars.
  2. Prepare a market survey mapping competitive garages and their pricing.
  3. Target facilities with at least 50% of revenue derived from monthly contracts.
  4. Strongly consider switch to automation especially if the facility is or will be 24/7.
  5. Analyze hourly usage reports to identify potential revenue gains from customized pricing such as reducing hourly increment from 15 – 20 to 5 – 10.
  6. Treat your ownership as if it were a hotel. Presentation. Brand. Service
  7. ALWAYS HIRE A PROFESSIONAL FACILITY OPERATOR such as Standard Parking

Michael Tepper is Senior Vice President of Standard Parking for the Boston Region.

CJ Follini is the Publisher of BLACKSWAN.

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4 Responses to “PARKING FACILITIES ARE A CASH COW….. POSSIBLY”
  1. Ah,,,,,Standard Parking and the Great Howard Metzembaum of Cleveland a marriage made in heaven….JDS

    by Jim
    on 13. Oct, 2009

  2. Social comments and analytics for this post…

    This post was mentioned on Twitter by jfloring: A good article on parking garages as investments #CRE; http://bit.ly/stw2M

    by uberVU - social comments
    on 26. Oct, 2009

  3. […] Here is the full post at the Black Swan Blog […]

  4. A centralized control center is a must for any service that caters for multiple locations. It lets you reduce staff costs as you need less people to manage stations from one point than you do more, and the service is also better because many things can be monitored at once.

    by Jacob @ Luton airport parking
    on 01. Dec, 2009

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