Whether it's to recoup costs or make pure profit, there's money in hotel parking.
Not every hotel takes the same approach. Strategies depend on the market and whether the hotel owns the parking lot or garage it uses. For hotels that do charge for parking, the way they set rates has changed in recent years, but it's still about finding that sweet spot.
When To Charge
Expotel Hospitality’s portfolio has a mix of hotels with different parking scenarios, said Mike Nixon, president and chief development officer at the hotel management and development company. It has some hotels in suburban locations that don’t charge for parking along with urban and airport properties that do.
Much of the company’s decision whether to charge for parking comes down to location and the circumstances there, he said. If a hotel owns the parking lot, guests can park for free.
“I don’t really subscribe to the notion of charging the guests for parking if you own the parking lot,” he said. “It’s a different animal if you’re renting parking spaces from a garage. Then certainly you need to pass that cost on to the guest.”
Nixon said he’s worked for companies that charge for parking regardless, and that’s not an approach he likes.
“To me, it’s in conflict with what we do for a living,” he said. “We’re in the hospitality business.”
There comes a point when guests get upset when they find out the $200-a-night room they booked is actually $240 because of a parking fee that wasn’t disclosed or was hidden in the fine print, he said.
The typical urban, convention and business hotel that offers valet services or self-parking is going to charge, and guests expect that, said Larry Trabulsi, managing director and executive vice president at hotel asset management firm CHMWarnick.
And while more hotels outside of urban cores are adding parking fees, Trabulsi warned that those hoteliers won't be able to charge New York City rates right away.
“If you start charging, then you may be breaking even early; but at least you’re now creating a path and a revenue stream so that one, two, three years from now, it could be meaningful,” he said.
Often those hoteliers can use fees to pay for some infrastructure, such as arms and gates, to help at least control the flow.
Setting Rates
For a hotel in an urban location that leases parking spaces from a garage, the hotel typically leaves rate-setting to the company running the garage, Nixon said. Whatever that garage’s daily rate is, the hotel will match it.
“We try to stay with our competitors on that,” he said.
Similarly, hotels with valet service typically leave the setting of rates to the company running the valet service, he said.
“It’s a rare circumstance where we would say, ‘No, we want you to cap the parking fee and this will subsidy your contract with the difference,’” he said.
For Expotel’s properties that set their own rates, the goal is to keep them as steady as possible, Nixon said. While dynamic pricing comes into play for special events, it’s good to stay competitive with surrounding parking rates.
“I don’t want to be the guy that charges the most for parking,” he said. “I don’t want to be the guy that’s charging the least.”
The first step in figuring out parking rates is to review what the hotel currently charges and look at different options, Trabulsi said. Hotels used to change parking rates twice a year, but now many are changing them three to four times a year to move with the market.
“We’ve had cases where you might go on to become the market leader and other hotels follow shortly thereafter,” he said.
Some may argue there’s a competitive advantage by having the lowest rates, but being at the top usually isn’t a problem, he said.
When working with a third-party parking operator, it’s important to keep in mind these companies have become more sophisticated in their revenue-management strategies, Trabulsi said. They’re looking at daytime rates, evening rates and discounts.
“They’re almost like [online travel agencies] for parking spots here,” he said. “Understanding that thinking from a revenue-per-space maximization perspective is key. It’s no longer just an amenity — you can make some money here.”
EV Charging
Some of Expotel’s hotels have electric vehicle charging stations, Nixon said. As EVs grow in popularity in the U.S., hotels controlling charging services will need to evolve as well.
Currently, the company’s hotels offer EV charging as a free service to guests, but Expotel has explored options to bill guests for EV charging down the line.
“I think there'll be a time in the near future where we're going to have to because the number of electric vehicles is increasing every year,” he said. “But so far, we have not crossed that line.”
Some of the hotels that Twenty Four Seven manages have charging stations, including the Hilton Garden Inn Temecula, Cambria Hotel LAX and Cambria Hotel Calabasas, said Rod Hurt, regional director of operations at the hotel management and development company. They each have four charging stations available for guests, working out to about one station per 25 rooms. Most of the time, there are enough charging stations available for guests given the occupancy cycles of each hotel.
“It’s almost like Goldilocks,” he said. “I think we’ve got the number just right because there’s not a waiting game. There’s not a line to access them, which could be problematic.”
There’s no question there will come a point when hotels that already have charging stations will find they need more, Hurt said. It’s not a simple matter to add more charging stations, particularly if there are limited funds in the budget for additional stations.
“I think that’s going to revert back to us making sure that guests are very mindful that once their car is fully charged, they’re going to have to make arrangements to release that charger to another customer,” he said.
Twenty Four Seven Hotels is planning its five-year capital expenditures strategy, Hurt said, and adding more EV charging stations in the next few years is part of the conversation.
Factors the company considers include whether the cost to install charging stations may decrease over time, and whether advances in EV technology could reduce the time it takes to charge a battery.