Wetslip Pricing and Analytics: Why Occupancy is a Horrible Metric
This article originally appeared in Marin Dock Age Magazine on June 26th, 2018 http://www.marinadockage.com/wet-slip-pricing-analytics-occupancy-horrible-metric/
The marina industry embraces a wide range of wet slip pricing models. Different pricing models represent regional norms, types of marina customers, local seasonality, historical practices, a few hangovers from the 2008 economic downturn and local regulations.
A limited number of marinas effectively use analytics to drive the day-to-day actions of employees. Combining the right pricing model with the right employee facing analytics framework can go a long way in growing wet slip revenues, and more importantly profit, in a marina.
The most common pricing strategy for marinas is based on linear foot measurements. Marinas charge per linear foot of the boat, or per linear foot of a slip. Often, it’s by the length of the boat, or length of the slip, whichever is greater.
Another way to frame this pricing strategy is charging by the slip with potential overages. Framing it this way allows the marina to charge a premium for overages. For example, if the going rate per month is say $25/foot/month, a marina can charge $35/foot/month (a 40 percent increase) for each foot over the slip length. How much overage a boater is allowed depends on where the marina is located. The most common allowable overages are about 10 percent or 3 feet over the slip size.
Some marinas might also allow a ratio of overages relative to the width of the channel between slips and the length of the slips. This presents an opportunity for managers to legally create new value for owners by extending the overages beyond simple 10 percent or 3-foot formulas. If this is the local regulatory framework, some slips will naturally allow different maximum overages due to their location in the marina.
There’s often a difference between the manufacturer’s bow-to-stern measurement and the actual length of a berthed boat. Things that can extend the length of a boat include stern accessories like swimming steps, outboard motors (especially when they’re raised out of the water) and various bow attachments like anchors and bow rails. Some marina managers keep a measuring wheel in the office and measure new boats once they are in their home slips, adjusting the boaters’ contracts accordingly. Of course, it’s good to give boaters a heads up that their boat will be measured some time in the first month to get a true measurement of the boat. No one likes a surprise jump in fees after the first month in the marina.
A trend in boat manufacturing is to go wider, especially with cruisers. This, combined with the increased popularity of catamarans, has caused a lot of issues in marinas especially those built in the 1950s, 60s and 70s. Charging boaters by the square foot (length of slip or boat x width of slip or boat) levels the playing field, especially if you have double slips in the facility. If calculating width, remember bumpers and some space between boats who share slips.
Another pricing strategy is to adjust the pricing of different sized slips based on market demand. A lot of marinas have a high demand for slips 50 feet and larger, while 25-foot slips sit vacant. Whether using a square foot model or a linear foot model, there’s the option of adjusting pricing relevant to the market demand for specific slip sizes.
One of the most progressive pricing strategies is a dynamic pricing model, based on slip location desirability within the marina. For some, high desirability would be a slip closer to the entrance of the marina for sailboats, or in calmer waters by a ramp for liveaboards. The easiest framework to calculate a dynamic pricing model is to establish a mean or average desired slip price in the marina. Go through each slip in the marina and score them on a scale of 1 to 10. Then, calculate the desirability ratio with a swing of say 25 to 50 percent difference in price.
From the boater’s perspective it can be a win-win. Those who are more price sensitive feel like they’re getting a deal. Boaters who are less price sensitive feel like they’re paying for prestige and convenience.
Although it isn’t used much in the marina space yet, hotels, airlines and ridesharing companies use a dynamic pricing model called surge pricing. This model adjusts pricing dependent on demand for the service in a reactionary manner over a compressed time frame. Times of higher demand result in higher prices, while during slow times the business tries to entice customers with low prices. Some marinas do this statically with high and low seasonal rates for transients. It probably won’t be long before transient marketplaces like Dockwa and Snag-A-Slip are offering the feature to marinas reactive to the day of the week and holidays.
One of the most interesting pricing models is seasonal fluctuations for marinas in northern climates. From launch to haul-out, the services the marina offers are similar to marinas in southern climates. The rest of the year the boat usually sits in the parking lot wrapped up through the winter. To represent this fluctuation in service, prices are adjusted between warm and cold months.
Key Performance Indicators
The best marina managers know that a pricing model alone only tells part of the story. Each pricing model requires careful, ongoing tracking of the key performance indicators (KPIs) within the marina to fully understand the health of the slip based revenue stream. This also helps managers in making future adjustments accordingly to maximize slip revenues.
Most businesses set a series of internal KPIs and one “North Star” metric that drive business activities and employee actions. Too often business owners and managers pick profit as the North Star and then set some generic KPIs like customer acquisition cost (CAC) to back it up. Tracking these metrics are important for any business or organization as they give clear high-level indicators on business health, but they’re often too abstract or high level to shape daily employee activities.
Effective KPIs need to be understandable to employees on a linear, simple cause-and-effect outcome. Saying profit is the North Star is fine if the marina has a highly educated and engaged workforce who understands every cost center, input, and output of a business. As a customer service-based business, marinas do better bringing their KPIs down to the individual level.
The default key performance indicator (KPI) that most marinas use is occupancy, as in what percentage of slips are filled. Occupancy is a similar metric to the national unemployment rate. It gives a top-level signal of health, but gives little context to what, why and how. For owners and professional managers looking to maximize revenues from a marina business adding additional KPIs will give it a much clearer picture.
How efficiently are boats allocated into slips? This is commonly referred to as slip utilization or slip differential. Data suggests the average occupied slip is underutilized by 17 percent. Calculating utilization is as simple as dividing the actual size of the boat by the length or area covered in the slip. Including allowable overages in the base metric motivates employees to fill all allowable space in the marina.
A granular KPI that is rarely seen is the concept of revenue per foot (linear or area depending on the pricing strategy). This KPI is great because it allows weekly tracking with clear indications of revenue fluctuations relative to employee actions. Employees are incentivised to, for example, take that transient booking even though it’s a short stay, or ask tenants to move to a smaller slip because it will free up space to rent out to a bigger boat with a healthy overage.
This article is only focusing on wet slips, but there are a lot of other KPIs that can be included in an action-based analytics framework. Specifically, tracking boaters as a relative profit center helps a marina understand who spends the most in the facility on goods and services, and what products or services to invest in.
Whatever a marina’s pricing structure and various profit centers are the communication of KPIs to front line staff are a great way to ensure business objectives are met. It also helps to be very clear about the change in the KPI over time attaching that variance to employee compensation.
Iaian Archibald is the CEO of marina software company Swell Advantage. Based in Nova Scotia, Canada, Iaian grew up boating and swimming in the North Atlantic. In his 20s, he was a professional whale watching guide on the West Coast of Vancouver Island.