This article was originally published in the September 2023 edition of Parking & Mobility Magazine by the International Parking & Mobility Institute. To read it in its original format, check out pages 26–27 here.
This post features the insights of Chris Everton, Chief Executive Officer at Ocra, formerly Director of Ecommerce at Towne Park, where he oversaw all aspects of third-party revenue generation. To connect with Chris, add him on LinkedIn or email chris@getocra.com.
Kicking Off: The State of Hotel Parking
Fact #1:
Most hotel parking is underutilized.
Many hotels have vast amounts of excess parking space due to lowering drive-in numbers, even those situated near airports, venues, or other points of interest.
Fact #2:
Parking isn’t the hotel’s core business.
Unlike maintaining high occupancy of guest rooms, delivering excellent customer service, and keeping food and beverage revenues high, parking isn’t seen as a profit center. At best, it’s a guest perk; at worst, it’s a problem.
Historically, the hotel manager has viewed parking through the lens of the guest experience: their first and last touchpoint with the hotel.
But today, some innovative hotel groups are waking up to the possibilities of monetizing parking tapping into parking as an ancillary revenue source.
Fact #3:
For a hotel, higher parking revenues have a direct impact on net operating income (NOI).
There’s a substantial opportunity for the parking industry here – and for the hospitality industry, too. So, how do we capture it?
Let’s explore what hotels are getting right about parking, what misunderstandings and misgivings we’re up against, and how, as an industry, we can shift that mentality using data for stronger revenue outcomes across the board.
What Hotels Are Getting Right About Parking
When it comes to parking, what are hotels and hotel asset owners doing right?
What I see across the board is that they’re starting to embrace technology.
In general, tech adoption is being driven by hotel ownership groups more so than by hotel management companies or on-site hotel personnel.
Why is that, do we think?
It all boils down to boosting net operating income (NOI).
In many industries – parking and hospitality no exceptions – the insights and capabilities offered by technology result in lower OpEx and higher margins.
Ways of driving incremental revenue that have historically required large CapEx and OpEx investments, such as parking, now cost less due to technology; therefore, hotels are starting to view parking as an ancillary revenue stream worth activating.
To summarize:
New parking tech is making it easier and cheaper for hotels to light up parking as an incremental revenue stream that yields strong NOI outcomes.
The Pitch: Increasing NOI With Parking Revenue
Some hotel management groups are keen on driving NOI, but overwhelmingly it’s the hotel ownership group that has NOI on the brain 24/7.
In parking, the opportunity to drive capital rate increases with more NOI is massive.
Operators who have a quality pitch on how to drive NOI at a high-margin retention should certainly look to talk to hotel ownership groups and influencers on the hotel management side.
Think about it this way:
If an operator can drive 8-10% more revenue with parking sales, that substantially increases cap rates, which makes the hotel ownership group’s portfolio a lot more valuable. That’s significant, sticky value.
Ultimately, everyone’s looking for additional ways to drive revenue.
Delivering Value With Low-Cost Solutions
The most efficient, economical, and high-impact way that operators can increase NOI for hotels is to implement lightweight, low-cost tech solutions that show immediate revenue impact and then ramp up the program over time with higher-cost solutions like equipment and personnel.
First, some context:
Hotel groups refer to the channels that consumers use to reserve rooms at their properties as “online travel agents”, or “OTAs” for short.
OTAs like Travelocity, Expedia, Booking.com, and Hotels.com present consumers with alternatives to contacting the hotel directly. You can find a room, book it ahead of time, and transact online or onsite – sound familiar?
Our OTAs, in parking, are aggregators: consumer marketplaces that invest millions in marketing to surface inventory to consumers who prefer to use this technology over drive-up or an operator’s direct booking channel.
Aggregators are low cost solutions that implement high margin collection.
They can be configured with relative ease and start yielding quickly.
After a short time of collecting some parking revenue, the operator will have the funds for more substantial investments like full-blown gates, enforcement, and staff which will drive further NOI.
In the airport vertical, operators could invest in additional airport shuttles to be able to service more customers and park more cars on a daily basis.
My Approach: Viewing Parking Through the Lens of the Asset Owner
I’ll share a bit about how I approach conversations about monetizing unutilized (or underutilized) parking with hotel managers and ownership groups.
This isn’t a sales pitch, don’t worry. Just some general insights.
On the hotel management level, I recognize that hotels will always prioritize the guest experience, of which parking is often the first and last touchpoint.
For me, as someone who works for a tech company that partners closely with aggregators and other demand channels, drawing the comparison to OTAs is useful.
This helps the hotel understand that in the same way that customers like to use a diversity of channels to reserve rooms ahead of time and develop loyalty to these brands, there is strong demand (which I validate, based on market and location) from customers to do the same for parking.
And, lastly, I mention that working with the right suite of parking partners will ensure that monetizing and managing parking assets won’t create extra work for them.
These partnerships introduce technology (gates, sensors, scanners, drive-up digital payments, wayfinding, etc.) and expertise (yield management, revenue management, customer service, etc.) that make parking an even more powerful revenue generator.
The hotel can stay laser-focused on the customer experience while still increasing NOI through an incremental revenue stream.
For ownership groups, it’s pretty straightforward: parking revenue increases the value of the asset. It’s all about bottom-line growth and the data that backs it up.
Selling parking to non-guests can be simple, scalable, and show quick returns, all without removing focus from the guest experience.
It’s worth their time to explore.
How To Eat An Elephant: One Bite At A Time
To eat a whole elephant, you need to take one bite at a time.
In my personal opinion and professional experience, this is the most profitable, productive mentality to have when building and growing partnerships.
When starting with hotels, the ultimate question for operators to ask themselves is what is the long-term goal?
If the goal is to fill a lot, how does the operator do that most economically?
And what kind of partners do they need in order to make that happen?
Ultimately, the operator needs a holistic technology ecosystem to solve the problem of unused real estate… which, at a hotel, is what parking often is.
Consumer-facing (B2C) brands can help operators collect and drive incremental revenue (i.e., marketing and revenue generation partners like SpotHero, ParkWhiz, Airport Parking Reservations, and Cheap Airport Parking).
If the operator has a big enough network, white-labeling (with technologies like Get My Parking) will open the funnel substantially.They can also consider payment solutions (e.g. HONK, Parkmobile, and TEZ, along with other scan-to-pay and text-to-pay solutions) to facilitate collection.
Shifting The Hotel Mentality Towards Parking
Hotel ownership groups and hotel management groups are embracing technology and starting to view parking as a viable way to increase NOI with minimal overhead; however, we in parking are still being roadblocked by a state of mind.
There is a fallacy that we’re up against:
To make money in parking, hotels need to spend a lot of money on parking.
As discussed earlier, adding more staff, equipment, enforcement, etc. to build a connected ecosystem will drive further NOI for the hotel.
But hotels are assuming that they need to make a large investment right off the bat, which simply is not the case.
Operators can deliver value on Day One with low-cost, high-margin technologies like aggregators and scale up as revenues grow.
Especially in the case of hotel groups and hotel management staff, parking for non-guests feels out of scope. The revenue opportunity of monetizing it for non-guests is not obvious, nor is it likely to be prioritized.
Consider this:
The mentality for many (not all, by any means) hotels is to respond to an influx in demand for room inventory to shut off parking.
This happens a lot. We see it at large convention hotels, in particular. They’ll give away 1,000 cars worth of parking that they would typically charge $20 a pop for.
During that busy period, they wouldn’t stop charging for breakfast, which they consider to be a prime revenue source at a ~30% profit margin. But they’re happy to give away self parking, which sits at a >60% margin.
Those numbers are purely hypothetical to illustrate a point. But fact is, outside of top metropolitan markets, the average deal value of a room is sub-$200, and the margin is a lot lower, as well.
I assure you that hotels don’t want to pass up the revenue opportunity that parking presents to them, which is where our partnership comes in.
True Partnership: Guiding Hotels Towards Parking Profits
Hotels prioritize the guest experience above all, and many view parking as a problem to be solved for their customers, not as an asset that can increase NOI.
Operators need to take on the onus of opening the hotel’s eyes to the possibilities of monetizing parking and guide them along the way.
As an industry, we need to help them stop viewing parking as an afterthought and rather as its own business, and an incredibly profitable one.
More often than not, parking, especially self parking, is an extremely high-margin business, especially with the use of technology.
In fact, I would be hard pressed to think that there are very many revenue streams in a hotel that are higher margin than self parking.
Wrapping Up
More so every day, hotel management groups and ownership groups are waking up to the opportunity to sell underutilized parking assets to non-guests, just as they are open to non-guests buying a coffee in their cafe.
Technological advancements have massively reduced the initial investment required in order to start making money off of parking.
Activating a handful of parking “OTAs” (AKA aggregators) right off the bat is a fast and economical way to start earning revenue.
Then that revenue can be invested in technology, personnel, and equipment that make parking an even bigger revenue driver for the hotel.
Ultimately, it’s about shifting the hotel’s mindset from parking-as-problem to parking-as-profit, which requires true partnership.
As an industry, we can create awareness of this massive NOI opportunity for hotels.
Parking is the rising tide that lifts all ships here, enabling the effective utilization of physical space to strong revenue outcomes across industries.
