01 May Parking Basics Will Never Change
As originally posted on Compliantia website May, 2018
As new technologies are constantly emerging to better process parking transactions and provide real time availability, the true success of any parking facility must still follow some very basic operating principles. Real time vehicle movements, revenue transactions and data management are all great operational resources for owners, but if industry best practices are not in place, annual facility success and customer satisfaction will be marginal at best.
Parking operators compete in a RFP tender process for the opportunity of Managing or Leasing a facility. A well structured and detailed RFP document will assist in comparing key operational targets and site requirements, but operator proposals will vary greatly between projected revenues, proposed parking equipment and operating expenses. Parking operators may outline their merits, corporate strengths and achievements in a proposal, but parking basics will never change. Below, I have listed three operational strategies that should be considered before deciding on a parking operator:
- MONTHLY PARKER AUDITS:
How will the parking operator monitor access cards/transponders for the facility and how often? Will it be done annually? Quarterly? Or even done at all? Parking operators should provide a comprehensive monthly revenue report to the ownership, but does that report include an “audit” of monthly parker access cards/transponders? By comparing the list of paid parkers from the parking operator’s billing system vs. the parking equipment’s active parkers list (on the 1st of every month), the parking operator can be held accountable if monthly parking payments go uncollected. Back when I used to work for a parking company, I would always first dig through the monthly parker accounts of sites that we had taken over from other operators to see how much “Monthly Parker A/R” was accumulated. I still remember one particular site where the previous operator had amassed over $560,000.00+ in monthly parker receivables that were between 30-90+ days. Of that original amount, over $260,000.00+ was never collected due to incomplete customer information or unsigned parking agreements.
- DETAILED FEES & EXPENSES:
Management agreements should clearly define the payment of expenses for both the parking operator and property owner. Expenses that are to be reimbursed by the client to the operator should be limited to site specific operating expenses only. Ensure that a detailed breakdown or invoice for each product or service is included in a monthly revenue report. Charges will include such items as credit card fees, site supervision, supplies or parking enforcement. Although these expenses are shared amongst a parking operator’s whole portfolio, many products or services are billed in full for each specific site and not on a shared ratio. For example, many sites are billed for 30hrs of parking enforcement per month, but does an enforcement officer really show up for an hour every day? If 30hrs of enforcement are being billed at twenty different sites, it would be physically impossible for an enforcement officer to visit that many sites per day. Ask the parking operator to provide you with a detailed enforcement schedule to verify how often your site will be enforced. Other fees, such as credit card processing rates, are very low for operators (1.7%-2%) but are always marked up to clients by as much as an additional 5%. Some facilities process more than $1M/year in credit card transactions so it’s easy to imagine what a 5% mark up in credit card fees could mean to a facility’s bottom line. Always negotiate your facility’s credit card processing fees/rates.
- REALISTIC REVENUE PROJECTIONS:
Not to long ago, I was reviewing parking proposals for a client when I came across the most ridiculous 5-year revenue projection I had ever seen. At the time, the incumbent parking operator had a Lease agreement for the facility and was paying a monthly fixed rent to the owner. The parking operator also had the benefit of a monthly revenue share (a percentage of Net revenues over a specific threshold amount). It was one of the most lucrative Lease agreements I had ever seen, completely favoring the parking operator. Looking to improve on their parking operations and revenue, the property owner hired me to create a RFP document for a management deal and to consult on the tender process. While reviewing the incumbent parking operator’s revenue proposal, I noted that they were projecting just over $1.1M in additional revenue within their first year. During the interview process, I asked the operator, “…how can you now project an additional $1.1M in revenue under a management agreement, when you were never able to generate (and benefit from) this much additional revenue under the current Lease agreement? How do you justify such a huge revenue projection? What’s changed?” The parking operator responded, “…we just think we’re going to do better.” Their proposal didn’t contain any new business initiatives or marketing campaigns. It didn’t even substantiate where all this new-found revenue would originate from. It was just a shot in the dark in hopes of winning the contract by providing the highest revenue bid. When reviewing RFP revenue projections, ask the parking operators exactly how they plan to generate and sustain their proposed revenues. At the end of the day, it may just be some made up numbers in an Excel sheet.
It is also important to issue a RFP Tender for parking operations every three years. It may seem unnecessary given the relationship with your current parking operator, but it is the only process that ensures the highest revenue yield for your parking facility while providing the best level of customer service. Don’t get me wrong, I’m not adverse to long term business relationships. Heck, without it, I wouldn’t have lasted very long as a parking consultant. But the reality is that industry competitors must adapt to their clients needs and expectations or simply get eliminated from the selection process. If an incumbent parking operator is truly the right choice, then a RFP tender process would only highlight and reaffirm their strengths and achievements and support your decision in the long run.