Why Making Rate Deals is Bad for Your Marina
Wednesday, February 15, 2012 at 4:25PM
Dennis Kissman in 2010, Consulting, Financial Planning, Industry Articles, Management, Profit Centers, Rate Structure, Valuation

This article, by Dennis Kissman, was published in Marina Dock Age –  April 2010. 

The rates that marinas charge customers and tenants are fundamental to making a profit.  Whether the rates are for a dry slip, wet slip, or services rendered, rates and how management and staff portray them will ultimately determine how your current and future customers view your marina.

How to set/change rates

In formulating a rate structure policy, it is wise for management to set a policy that maintains competitive rates and ensures fair and consistent implementation.  The ability of a marina to charge premium rates is a direct function of the level of service provided, the condition and upkeep of the facility, and market demand.  If a marina raises its rates, then those new rates should match the value and service(s) the marina offers its boating customers.

When setting rates, it is very difficult for marinas to make large increases without having made some significant improvements to the property or having seen major increases in demand.  Even if these conditions exist, the marina should not make changes haphazardly.  The marina should communicate all rate changes to the boaters and tenants at the marina and publish them at least 30 days in advance of implementation.  Customers and tenants won’t begrudge rate increases as long as they see marina improvements being completed and operating costs increasing.  Customers know that marinas will need to adjust their rates to reflect the increased costs to maintain profitability. 

When it comes to setting rates, the first thing the marina manager should tell customers is that it’s the marina policy to review and adjust rates on annual basis.  Then the manager should put this policy in both its Rules and Regulations handbook that is given to boaters, as well as in the Policy and Procedures Manual that the marina staff uses for operating the marina.

Marinas can avoid making large rate increases by performing consistent rate reviews.  Making large increases can have a negative impact on your customer base.  At the same time, now that you have set your dockage rate structure and related rates, you must administer them fairly to all customers.

No rate deals
Administering your rates equally to each customer means no deals and no exceptions.  This issue is constantly being pushed at our managed marinas by captains looking to get a better deal for their owners or by boaters looking to be frugal.  When pressured to make special deals, marinas must stand their ground.  No marina employee should even consider giving anyone a special deal.  Here are four reasons why.

When a marina owner or any member of the management team makes deals on rates, then other employees are inclined to do the same.  This creates a lack of consistency throughout the marina because the lower level employees tend not to communicate these changes to upper management.  As a result, the boater and employee are put into a bind that has to be resolved by management or worse, by the owner.  In the end, no one is happy.

When the policy at the marina for customers is “no deals on rates,” and the ownership or management makes a rate deal, this creates a real problem for the employee.  The uninformed staff will attempt to adhere to the policy when approached by the boater involved.  The staff member will look incompetent, uninformed, and powerless, which will undermine previous staff training and staff confidence.

Boaters talk among themselves on the docks.  No matter how much you stress to a boater not to talk about a particular “deal,” the individual will end up bragging.  Now the downward spiral has begun and everyone at the marina will want to cut the same deal.  The marina manager must be prepared to make the same “deal” for each and every other customer in the marina.  If you don’t, you will lose them.

Remember that the main source of revenue at a marina is dockage.  Reducing its value by offering special deals to individual customers reduces the marina’s ability to remain competitive over time and may make the marina look weak.

Overall marinas must make a stand that no dockage rate deals will be given to anyone.  The marinas must post these rates in the marina office and pass out rate cards as a means of validating that policy.  Clear and concise communication with customers is vitally important to maintaining fair and equitable rates for every boater.

If you are still not convinced that making deals with individual customers is not good for your marina, ask yourself every time you are considering making such a deal: “Am I willing to give the same deal to every existing and potential customer?”  If your answer is “no” then there should be no deal. 

Dennis P. Kissman, president of Marina Management Services Inc. in Boca Raton, FL can be reached by phone at 561-338-5800 or via e-mail: dennis@marinamanagement.com.

Article originally appeared on marinamanagement (http://marinamanagement.com/).
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