Parking as an Ancillary Revenue Stream

Parking as an Ancillary Revenue Stream for Hotels: Shifting Perceptions and Maximizing Value

by Joshua Miller, SVP Revenue Optimization


Diversifying revenue streams is critical for sustained growth and resilience in the hospitality industry.

As hotels adapt to changing market dynamics and guest expectations, they must identify and optimize additional sources of income.

Parking is a vital ancillary revenue stream with underutilized potential that can boost a hotel’s financial health. In 2022, only 20.4% of hotels reported parking revenue, so it remained a minor, untapped source of revenue for hotels, accounting for only 3.1% of total revenue.

In this guide, we provide practical insights and strategies for hotels to manage and maximize the value of their parking facilities. Learn to leverage parking as a robust additional revenue source to increase business performance in the competitive hospitality space.

The Importance of Ancillary Revenue in Hospitality

Income generated from goods and services that complement a hotel’s primary business of room sales is considered ancillary revenue.

Ancillary revenue significantly enhances profit margins and improves overall financial stability and growth. By diversifying income sources, hotels can reduce their dependence on their core offerings (which may fluctuate due to seasonal trends or economic changes) and ensure a steadier income flow.

In addition to providing financial benefits, ancillary revenue allows hotels to reinvest in their services and facilities, further distinguishing their brand in a competitive market. It complements primary income sources by offering guests additional convenience and enriching their stay.

By providing high-quality ancillary services, hotels can significantly improve guest satisfaction, leading to higher satisfaction scores and positive reviews. These favorable ratings and reviews can attract more guests, enhance the hotel’s reputation, and ultimately contribute to increased bookings and revenue.

Common ancillary revenue streams in hotels include:

  • Food and Beverage Services: Restaurants, room service, and minibars provide guests with convenient dining options.
  • Spa and Wellness Facilities: These services offer relaxation and rejuvenation, enhancing the guest’s experience.
  • Event and Conference Spaces: Renting out spaces for events and meetings attracts a business clientele and various large groups.
  • Transportation Services: Shuttles to local attractions or airports offer guests added convenience and generate additional income.
  • Parking: Valet, paid guest parking, and parking garages offer guests convenience and security while increasing income.

Parking as a Key Ancillary Revenue Stream

Parking is an important ancillary revenue stream for hotels in all locations, especially those near urban centers, resorts, and airports.

In urban areas, where parking space is at a premium, hotels can capitalize on their existing facilities to cater to both guests and non-guests. Resorts can offer premium parking spots for guests for convenience and exclusivity during their stays. Near airports, hotels can transform their parking lots into long-term parking solutions, providing a valuable service for travelers.

Hotel parking is no longer merely a complimentary amenity; it is a valuable asset that enhances the property’s revenue. At Towne Park, we view parking in the same way that hotels view their rooms – as an asset that should be optimized for maximum financial performance.

Just as hotels measure room financial performance using RevPAR (Revenue Per Available Room), Towne Park measures parking performance using RevPAS (Revenue Per Available Space). This approach emphasizes the importance of leveraging parking facilities to generate substantial income for the property.

Parking provides a steady ancillary income source for hotels. For example, Towne Park helped a large city hotel and convention center convert free parking into paid parking. The change helped the hotel increase revenue by 206% in the second year.

One of the key aspects differentiating parking revenue from other sources of hotel ancillary revenue is its profitability.  The implementation of self-parking revenue, in particular, often has an 80%+ profit margin. This means that while the revenue may be ancillary in terms of overall hotel performance, the hotel EBITDA impact is often highly significant and thus critical to ownership.

A Florida hotel owner recently implemented paid parking fees at a select service hotel in a market that already had high parking rates and created $400,000 in new EBITDA at a hotel that was doing less than $2 million in EBITDA previously. This ability to leverage what is usually a hotel owner’s largest real estate component into a significant profit generator is a tremendous opportunity for properties in any market where charging makes sense from a guest perspective.

Several factors affect the potential of parking revenue for hotels:

  • Location: Proximity to key attractions, business districts, or transport hubs increases the demand for parking spaces.
  • Target Market: Hotels catering to business travelers might see higher demand for parking because their guests seek convenience and efficiency. Conversely, vacationers might have different parking usage patterns, like requiring shuttle service or parking their car while they travel.
  • Seasonality: Demand for parking can vary with the season, impacting how hotels price and market their parking facilities. For example, beach resorts may see a spike in parking demand during the summer months.
  • Local Competition: The availability and pricing of nearby parking alternatives also influence a hotel’s parking rates and occupancy. Hotels might need to adjust their pricing strategy based on competitive factors to attract more patrons.

Recognizing the Value of Parking Spaces

Parking spaces are limited assets with substantial revenue-generating potential that hotels must carefully manage to optimize their value. The opportunity cost of offering complimentary parking can be high; hotels forego a steady income stream that could otherwise bolster their financial performance.

Hotels must analyze both location and demand to price hotel parking. In urban areas or near major attractions and transport hubs, the demand for parking is typically high, allowing hotels to charge premium rates. On the other hand, in more remote or less accessible areas, consider a strategy focused on promotional or packaged deals to enhance value.

Monetizing Parking: Nuances and Considerations

While parking presents a unique ancillary revenue opportunity for hotels, getting it set up, managing it properly, and optimizing it isn’t always cut and dry.

The below section outlines the various nuances of parking services for hotels to implement strategic pricing while balancing revenue goals with guest satisfaction.

Types of parking

Hotels typically offer two types of parking services: valet parking and self-parking.

  • Valet parking, often seen as a premium service, provides convenience and a touch of luxury. This parking solution appeals to guests who value time and personal service.
  • Self-parking caters to those who prefer a more hands-on, cost-effective approach.

Pricing methods and revenue management.

Determining how to price parking is an important part of making it a successful ancillary revenue stream for hotels. At Towne Park, we employ data-driven techniques to set the right rates and optimize revenue.

By analyzing historical data, market trends, and competitor pricing, Towne Park helps hotels determine the most profitable pricing structure for their parking facilities.

Hotels may choose from various pricing models, such as:

  • Flat rates: To ensure simplicity and appeal to guests who prefer predictable costs.
  • Hourly rates: To attract short-term parkers, particularly in urban areas with high transient traffic.
  • Event-based pricing: To take advantage of local events or peak demand times, allowing hotels to adjust prices based on anticipated parking scarcity.

Beyond just setting the appropriate rates, it’s important for hotels to understand the various channels to distribute inventory and adjust rates accordingly.

Leveraging Towne Park’s hospitality solutions and years of experience to navigate the fragmented e-commerce landscape, integrate with parking aggregators, and employ revenue optimization tactics, including dynamic pricing, ensures a balance of guest satisfaction and profitability.

Technology

Hotels also need to consider integrating technology to enhance the parking experience and operational efficiency. Such technology reduces wait times and improves the guest experience, ensuring a hassle-free service.

One notable trend in the industry is the adoption of gateless, digital parking solutions such as Towne Park’s T-Park. These systems utilize advanced technologies like mobile payment options to streamline the parking process, eliminating the need for traditional gates and tickets.

Moreover, creating integrations between parking systems and hotel Property Management Systems (PMS) is a valuable opportunity for hotels. This integration allows for a seamless flow of information, enabling guests to charge parking fees directly to their room and access parking facilities using their room key, ultimately creating a cohesive and hassle-free guest experience.

Other helpful technological solutions include:

  • Automated payment systems
  • License plate recognition
  • Real-time occupancy tracking

By implementing these cutting-edge technologies and partnering with experts like Towne Park, hotels can revolutionize their parking operations, boost efficiency, and deliver a superior guest experience that sets them apart in the competitive hospitality market.

Leveraging Strategic Partnerships

Outside of navigating the nuances of simply creating a plan to monetize parking, leveraging strategic partnerships like those with Towne Park provide hospitality companies with a unique competitive advantage.

Known for its 35 years of parking management expertise with hotels, service standards and revenue optimization strategies, Towne Park transforms parking from a basic necessity into a strategic asset. Outsourcing parking operations to Towne Park brings numerous benefits, including:

  • Advanced management practices
  • Optimized space utilization
  • Maximized revenue
  • Enhanced guest experience
  • Mitigated liability related to vehicle security and guest safety

Towne Park offers customized hotel parking solutions to meet the unique needs and goals of each hotel, including its specific demographic and operational framework, including:

  • Valet Parking: Valet parking by highly-trained teams to provide convenient, safe solutions for guests. Valet parking solutions offer hotels the opportunity to maximize their parking revenue and enhance guest satisfaction. By offering a premium service, hotels can charge higher rates for valet parking, generating additional income.
  • Self-Parking: Convenient self-parking management to help hotels maximize parking assets and enhance the guest experience. Self-parking solutions include gateless, touchless reservations for entry and exit, and several technological solutions to streamline the process.
  • Parking Management: Maximize your hotel parking assets and ensure optimal efficiency with Parking Management services. We monitor and analyze traffic flow, provide wayfinding, and share data-driven pricing recommendations.
  • Revenue Optimization: Data-driven strategies to pricing and inventory management help hotels optimize parking revenue. Our team analyzes market trends, demand patterns, and competitor rates to develop dynamic pricing strategies and maximize the revenue potential of your parking assets.
  • Shuttle Service: Safe, efficient, affordable shuttle service to provide guests with the best experience. Shuttle Service is ideal for hotels near the airport or other major attractions.

With the help of Towne Park, hotels can maximize parking revenue and offer an exemplary guest experience from arrival through departure. Well-trained staff manage vehicles efficiently and act as the first point of contact for guests, setting the tone for a welcoming and memorable stay. The high level of professional and friendly service boosts guest satisfaction and loyalty, reinforcing the hotel’s reputation.

Parking as an Extension of the Hotel’s Brand and Service

Parking services at a hotel are an integral extension of the hotel’s brand and service standards. Ensuring that these services align with the hotel’s image is crucial. Every aspect of the parking experience, from the facility’s layout to the staff’s professionalism, should reflect the hotel’s commitment to quality and guest satisfaction.

Parking staff employees are often guests’ first and last contact points, providing a key role in delivering exceptional customer service and hospitality. Effective training programs focus on skills including:

  • Communication
  • Wayfinding and Problem-solving
  • Friendly demeanor

Integrating parking seamlessly involves smooth transitions from arrival to departure. Hotel parking services must be a hassle-free component of the guest’s journey. By making parking a thoughtful part of the hospitality experience, hotels can significantly enhance their appeal and guest loyalty.

Moreover, there is an opportunity to connect parking services with door and bell services for a fully integrated arrival-to-departure experience. Hospitality solutions experts like Towne Park can deliver this seamless integration, ensuring that guests receive consistently high-quality service from the moment they arrive at the hotel until they leave.

By coordinating parking, door, and bell services, hotels can create a cohesive and memorable experience that showcases their commitment to exceptional hospitality and attention to detail.

Summary

Parking is a critical ancillary revenue stream for hotels, offering substantial financial benefits to enhance overall stability and growth. Hoteliers looking to capitalize on this potential should reassess parking operations and consider partnerships with experts like Towne Park. Their experienced team can significantly elevate parking services’ efficiency, profitability, and quality.

As we look to the future, the landscape of hotel parking will evolve alongside guest preferences and transportation trends. Hotels must adapt to occupancy and vehicle usage trends and find innovative ways to diversify revenue streams.

By proactively adapting their parking facilities and services, hotels can ensure they continue to meet modern travelers’ expectations and secure a robust revenue stream for years to come.

No Comments

Sorry, the comment form is closed at this time.