Beyond Rooms: How Hotels Are Boosting NOI by Monetizing Parking
Many hotels have vast amounts of underutilized parking space due to lower drive-in numbers, especially those situated near airports, venues, convention centers, and other points of interest.
But unlike maintaining high occupancy of guest rooms, delivering excellent customer service, and keeping food and beverage revenues high, parking isn’t necessarily seen as a profit center.
In the case of 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.
But today, some innovative hotel groups are partnering with parking partners who implement low cost, high margin solutions that increase net operating income (NOI) with higher parking revenues.
Let’s explore what hotels are getting right about parking, the actual revenue opportunity of selling excess parking inventory to non-guests, and how to find the right parking partner.
What Hotels Are Getting Right About Parking
Across the board, the hotel industry embraces technology and is open-minded to new viable ways to increase NOI with minimal overhead.
New tech entering the industry affords hotels insights and capabilities that remove high-cost barriers to entry for activating new revenue streams.
As a parking executive who works with hotel ownership groups, hotel management companies, and on-site hotel personnel, I’ve observed that a lot of the tech that’s widely utilized in the hotel industry parallels what’s currently being developed and adopted in parking.
For example: In the hotel space, online travel agencies (OTAs) are consumer marketplaces that enable travelers to book hotel rooms, flights, and car rentals.
In parking, technologies that we call “aggregators” or “third-party reservations platforms” (such as Airport Parking Reservations, SpotHero, Way.com, & ParkWhiz) function similarly by marketing surface inventory to consumers who prefer to use apps or websites to book parking ahead of time.
Similar technologies and functions for revenue management (hotel parallel: RMS) and global inventory distribution (hotel parallel: GDS) are rapidly maturing in parking, as well.
Why Sell Extra Parking to Non-Guests?
Hotels are open to non-guests buying a latte in the lobby cafe or a martini at the hotel bar, and it’s profitable and productive to extend this mindset to parking, as well.
What I’ve seen is that many (not all, by any means!) hotels will react to an influx in demand for room inventory by shutting off parking. I 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 a busy period, they wouldn’t stop charging for breakfast; it’s a prime revenue source at a ~30% profit margin. Then why give away self parking, which sits at a >60% margin?
And the demand exists: People who drive and park at the airport value a higher degree of predictability in their travel day. Booking parking ahead of time is one way for them to achieve that.
Hotels listing a configurable amount of inventory on parking OTAs creates win-win outcomes for the non-guest customer and for the hotel:
The customer can reserve a spot at a price that corresponds with the perceived value of pre-booking convenient parking, and the hotel unlocks revenue from unutilized or underutilized parking assets that increases NOI.
Increasing NOI with Low-Cost Solutions
Selling excess parking inventory to customers who are not staying at the hotel substantially increases cap rates, which makes the hotel ownership group’s portfolio significantly more valuable.
One myth held by hotel groups that I’ve worked with is that selling parking to non-hotel guests requires significant upfront investment in terms of opex and equipment.
However, due to new tech, parking companies are now able to help hotels implement low-cost, high-margin solutions that show immediate revenue impact and can scale up as revenues grow – for example, parking OTAs that spend millions to market parking spots and convert customers.
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.
Finding the Right Parking Partner
Your best partners will always try to view parking through the lens of your hotel.
They’ll understand that hotels will always prioritize the guest experience, of which parking is often the first and last touchpoint.
Selling hotel parking in areas with high consumer demand due to the hotel’s proximity of points of interest (airports, event venues, convention centers, etc.) will yield substantial revenue… so long as it doesn't require extra work that distracts from the hotel’s core business.
These parking partnerships will introduce low-cost ways to start driving revenue and increasing NOI without adding any operational lift on the part of the hotel’s staff.
They’ll combine boots-on-the-ground insights from the hotel staff and management with eyes-in-the-sky data and software to ensure parking rates align with consumer demand.
They may 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.
Ultimately, the best partner will allow you to stay laser-focused on the customer experience while still increasing NOI through an incremental revenue stream – proving out with numbers that selling parking to non-guests can be simple, scalable, and show quick returns.
About the Author
Ethan Glass is the CEO & Co-Founder of Ocra. Hotel ownership groups, hotel management companies, and hotel on-site staff partner with Ocra’s team of online parking revenue management professionals to increase NOI by selling their underutilized parking inventory to non-guests looking for parking near airports, venues, convention centers, and other points of interest. To learn more about Ocra, visit email [email protected] or visit getocra.com.