We Made Over $56,000 In Five Minutes
March, 2005Ah, technology! It complicates our lives, but we can't live without it. Let me tell you about the most impressive thing I have seen in this sector of parking.
The boss and I were at a major hotel on the West Coast checking out a new system that had been installed. He was interviewing the head honcho, and I was sniffing around for bits of information that might make his article a bit more focused.
As I sat at his feet listening to the hard-hitting questions that were turning his interviewee into jelly, something caught my ear.
One question had to do with the grace period, currently set at 30 minutes. This caused no end of problems. Seems that since the staff knew there was a 30-minute grace period, they would tell people who were staying only a short time that parking was free for the first 30 minutes. People staying, say, 35 minutes, would become incensed and cause trouble at the exit lane.
Also, there was a long discussion between the boss and the head honcho about how much money could be made by simply reducing the grace period. While this discussion was going on, I noticed that one of the parking pros in the room was madly keyboarding on the hotel's parking system.
Less than five minutes later he said: "Hey, if we reduce our grace period to six minutes, we would increase our revenue by $85,000 a year."
You could have heard a pin drop in the room. Technology, at least with this system, had given them the ability to know exactly what changing their policy would mean money-wise.
What did they do? There are factors other than revenue in setting rates. Their exit lanes are restricted, and at peak traffic times, the backup can be 10 minutes or so. They elected to move the grace period to 15 minutes. That change increased the revenue by $56,785 a year, according to their computer.
They also elected to tell the staff that there was no grace period. People entering the lot would understand that if they pulled a ticket, they would pay the first increment ($5). That would stop the complaining, and the 15-minute grace period would keep those caught in the 10-minute line from moving into the next increment while waiting to exit. Everybody was happy.
Oh, by the way, the change in the grace period was done right then, in the middle of the interview. Would I have done it that way? Probably not. I would have put out a memo to all the staff telling them about the "no grace period" rule and made a minor change to the signage. That would have taken a couple of days. Then I would have made the change. Getting your staff on board and involving them in the changes in policy can make a big difference in your operations.
What struck me as I was looking up at the fellow on the keyboard was that now managers have facts at their fingertips and can make decisions based on what is really happening, not on a "gut feel" or the famous Ouija board.
Keep in mind, however, that you still need experience to make these policy decisions. The hotel manager knew about the backup issues and went for a solution that not only increased revenue, but also kept the needs of his guests in mind.
Data are great, but they are only one part of the decision-making process.