Hotel Parking Asset Management: Maximize the Value of Your Real Estate

By Joshua Miller Principal, Niche Advisors | October 28, 2008

As the hotel industry faces increasing supply, rising energy costs, and the resulting impact to national travel behaviors, hotel owners must look to every opportunity to maintain their bottom line. One method for doing so is to retain an Asset Manager - a hotel specialist who can provide the resources and expertise needed to maximize a property's cash flow and hence overall asset value. Such experts review every aspect of financial and operations management to ensure no profit-producing stone goes unturned by the property's management team.

While hotels spend tremendous time and energy looking for strategic ways to make the most of their operation, they often fail to look at the fact that the property sits in the middle of a large parking facility. This facility often takes up as much real estate as the hotel itself, but because parking is outside of the core focus of the industry, hotel parking facilities are rarely strategically managed. Utilizing an asset management approach for parking is equally as effective as it is for rooms income, and can often make a significant improvement to an asset's overall value.

Most hotel companies look at parking as an amenity. Service is the focus, and as long as customers are not complaining, the department is considered a success. It is for this reason that service-oriented line associates are often promoted to Parking Manager. While these associates may be able to ensure a pleasant guest experience, they rarely have financial management training despite being put in charge of what can be a multi-million dollar operation. Those companies which do emphasize financial management usually focus on controlling costs. By managing payroll, overtime, and liability claims, profit margins can be maximized and the management team considers itself successful.

What these properties fail to recognize is that parking revenue needs intensive revenue controls in order to ensure full capture. Consider the following conversation between a General Manager and his Front Office Manager. "Sir, unfortunately 15% of our guests were never charged for their rooms last night. The guest service agents forgot to add the charges at check in and I never caught it. Oh, and by the way, this has been going on since the last Front Office Manager was here. He was better at accounting than I am." This may sound like a far-fetched story for rooms revenue, but for parking it is commonplace. The difference is that the conversation rarely happens in parking because few hotels ever discover the problem. Because multiple players are involved in revenue posting and most of the non-guest revenue is paid in cash, hotels lose money on a daily basis to error and theft. We have seen revenue leakage rates varying from 5% to more than 50% of earned revenue.

In addition to revenue leakage, hotels miss opportunities by failing to use revenue management principals as they do in other areas of the property. Failing to charge for parking (or undercharging) in markets which support doing so is a prime example of this. Non-strategic discounting and "comping" of parking revenue also contributes to this loss. Some hotels have excess parking inventory and make no effort to market it to non-guest interests. Other hotels don't have enough inventory and pick the most convenient off site location rather than the financially beneficial one.

Many hotels realize that parking is outside of their expertise and chose to outsource their operation to a parking management company. In addition to providing financial expertise, an effective operator can bring flexible staffing options, traffic flow management experience, and the transfer of liability claims. For a large or complex operation, the fee charged by an operator is usually more than justified by the impact made over the long run. However, the lack of expertise that leads management to outsourcing often causes them to make poor deals with parking management companies. Many hotels never realize this because the improvements the operator generates over the hotel's prior internal management are so large. Taking an unbiased look at the compensation generated by the operator in a revenue sharing deal, or the corporate overhead "slid" through a management agreement can make the deal less appealing than originally estimated.

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Coming up in February 2018...

Social Media: Engagement is Key

There are currently 2.3 billion active users of social media networks and savvy hotel operators have incorporated social media into their marketing mix. There are a few Goliath channels on which one must have a presence (Facebook & Twitter) but there are also several newer upstart channels (Instagram, Snapchat &WeChat, for example) that merit consideration. With its 1.86 billion users, Facebook is a dominant platform where operators can drive brand awareness, facilitate bookings, offer incentives and collect sought-after reviews. Twitter's 284 million users generate 500 million tweets per day, and operators can use its platform for lead generation, building loyalty, and guest interaction. Instagram was originally a small photo-sharing site but it has blown up into a massive photo and video channel. The site can be used to post photos of the hotel property, as well as creating Instagram Stories - personal videos that disappear from the channel after 24 hours. In this regard, Instagram and Snapchat are now in direct competition. WeChat is a Chinese company whose aim is to be the App for Everything - instant messaging, social media, shopping and payment services - all in a single platform. In addition to these channels, blogging continues to be a popular method to establish leadership, enhance reputations, and engage with customers in a direct and personal way. The key to effective use of all social media is to find out where your customers are and then, to the fullest extent possible, engage with them on a personal level. This engagement is what creates a personal connection and sustains brand loyalty. The February Hotel Business Review will explore these issues and examine how some hotels are successfully integrating social media into their operations.