Parking Operators and Owners Feel the Financial Pain of 9/11
Parking operators across the nation are reporting gross revenue losses of as much as 50 percent in the wake of September 11. This comes on the heels of a mild recession that has put pressure on office rentals and business activity, and thus parking operations.
Hardest hit was New York City. Not only has the Big Apple been reeling emotionally from the 9/11 disaster, but the resulting slowdown in business activity, hotel usage and entertainment along with city-wide layoffs has brought parking revenues down an incredible amount in Manhattan.
One major ongoing problem for operators is new driving regulations put into effect after 9/11. The rules say that vehicles with fewer than two occupants cannot pass through the tunnels during the morning rush hour, and single-occupant vehicles cannot drive in mid-town or downtown until late morning. This means simply that the number of vehicles to park is cut drastically.
A major worry for operators in New York is that the mayor has gone on record that if the new rules solve other problems (traffic congestion, gridlock) -- and they seem to have done so -- he may lobby to make them permanent.
Central Parking, which has a major part of its bottom line coming from New York City, had a 25 percent reduction in its profits for its fiscal 2001, ending September 30. Revenues were down to $705 million from $730 million a year earlier. Central CEO William Vareschi has predicted that 2002 will be challenging for the company and doesn't project much growth in the upcoming year.
Central's major problem in New York City is that many of its locations are leased rather than managed. Leases are very profitable for operators in good times, however the high fixed costs of the lease are disastrous during downturns. Operators with management contracts feel the lower revenues only as it relates to their override percentages, if they are included in the agreement.
September 11 wasn't the only problem impacting operators. The dot-com implosion has greatly affected building occupancy in Northern California and Seattle. One operator noted that raising rates wasn't a solution, since there simply weren't cars to fill the spaces.
Airports are another area that has been hard hit. Major operators (Apcoa Standard, for example, has 76 airport locations) have seen their revenues recover slightly from a "catastrophic fall off in September." Readers should remember that not only do operators run on-airport locations but many majors and some smaller companies operate and own off-airport locations that have also been hard hit.
Apcoa Standard's gross customer collections for the first three quarters of the year was up 0.8 percent to $1.2 billion. Profits are up a bit, according to CEO James Wilhelm, due primarily to controlling general and administrative expenses.
A major concern for those in the business of designing, building and equipping new garages is the so-called "300-foot rule" set forth by the FAA after 9/11. The rule states that private vehicles can't park within 300 feet of terminal buildings. That, of course, removes a large portion of existing parking and new parking structures on the boards.
The rule is being imposed intermittently, because regional FAA managers have been given the power to issue variances. There also seems to be confusion as to what the rule actually means, which has led to it being enforced differently in differently areas. (Is it 300 feet from the building, the door, the curb? Does it apply to all vehicles or just compacts? Only those not searched? Etc.) Different airports are being held to different standards. What is approved in Jackson Hole is not acceptable for LAX.
Those in the design and construction business are looking for direction, not only as to location but as to other design components such as blast walls and areas for vehicle searches. The FAA seems to be overwhelmed by the different issues. As of mid-December the entire issue was in a state of flux.
Costs have already started to escalate in construction. In one case, a garage was re-bid after 9/11 and added security expenses were tacked on to the new bid. Seems that workers and vehicles that were within the 300-foot limit needed to be searched daily.
John Van Horn is editor of Parking Today. He can be reached at email@example.com.