This article, by Dennis Kissman, was published in Marina Dock Age – December 2013
If you are going to create the proper rate structure for keeping boats at your marina there are two things to keep in mind about a marina. First you have a fixed amount of physical space from which you can generate revenue and second you are in an industry that is highly seasonal. With both these constraints you have very little flexibility or control over changing your business model. We often talk about all the profit centers to generate additional income from at a marina but do not lose site of the fact that your core business and principle income generator still comes from storing boats.
In our twenty five years of consulting with clients about marina operations I believe it is fair to say that as no two marinas are exactly alike, neither is there a single approach to setting up a rate structure to charge customers. With that said, there is one thing that should be common regardless of how you decide to structure your dockage and storage rates. Owning a boat is an option and not a necessity to living therefore as circumstances changes in a person’s life their reason why they wanted to own a boat may change. When this happens suddenly like a job transfer or lost of a job maybe an illness in the family boating may be out of the picture. Even though a person may have made a long term commitment with the marina in order to receive a lower dockage or storage rate they cannot keep their commitment. When this happens the customer often times creates a reason why the marina is not good in an effort to break the agreement. The end result is the marina is out the revenue it would have received on a shorter term agreement with that customer as well the customer spreading negative comments about the marina that are not true to justify reasons for breaking his agreement. When this happens the marina is the loser.
Now the question becomes, how do you eliminate this problem. Your goal should be if a customer has to break his agreement with the marina for any reason you want that customer to be welcome back in the marina when his circumstances change. The way that you accomplish this is by making the monetary reward for offering a lower rate at the end of the agreement if the customer fulfills his obligation. There are a number of ways this can be done and it will depend upon how your rates are structured.
Here is one scenario that you can use as a guide when looking at your particular situation. Let’s say your marina is located in an area where boating is year round but there is a peak season. The peak season could be either the summer or winter months depending upon your location. In your rate structure you have a monthly, seasonal (six months) and annual rate with the longer you commitment to stay the less per foot per month the rate. For this example we will say the monthly per foot rate is $15.00, the seasonal per foot rate is $14.00 and the annual per foot rate is $13.00 per month. A customer comes in with a thirty foot boat and says he plans to stay for the year. You offer him the annual rate of $13.00 per foot and his monthly charge is $390.00. Four months into his agreement circumstances change and he takes his boat out of the marina. On a monthly agreement the marina would have received $450.00 per month not the $390.00 per month annual rate. The marina is out $240.00 for the four months from what they should have received on a shorter term agreement. Because he has an annual agreement at a reduced rate excuses are made as why the marina is no good and that is why he is taking his boat out of the marina.
A better policy would be for the marina to charge everybody the monthly rate and then at the end of the term he has free months. Working through the mechanics on how this would work: If the customer had honored his commitment he would have paid a total of $4,680 for twelve months at the annual rate. Paying at the monthly rate $450.00 he will reach paying the total annual rate in the eleventh month of his annual agreement. This breaks down as fellows; the first ten months adds up to $4.500, in the eleventh month he pays the balance of the annual agreement of $168.00 and the twelfth month he pays nothing. Bottom line, customer leaves after four months, no bad feelings or lies to break an agreement and the marina is fully compensated for the time the customer is in the marina.
Here is another scenario that applies sometimes. Rather than rates based on length of stay you may have rates based on time of year. This is particularly true in areas subject to hurricanes or where special events are held annually that attract boaters. Using hurricanes as an example the season is typically designated from June 1 through October 31, five months. Some marinas are considered safer locations than others during this season and as a result will have a higher rate for boats coming into the marina during these months. Sometimes these rates are two to three times higher than the normal published rates.
Now comes the boater to your marina in July and wants to sign up for your annual rate which is lower than the hurricane season rates. The question is do you give him your published annual rate or the hurricane rate. The answer is the higher hurricane rate. Here is how you work this so if plans change and the boater leaves earlier than the stated time when the hurricane ends you begin giving him credit towards his annual slip fees until such time the difference is used up. Here is the example; remember we said boat arrived at the marina on July 1 and let’s assume the hurricane season rate is twice that of the non hurricane season rate. From July through October he would have paid four additional months dockage fee based on the annual dockage rate. We will also assume he was not just trying to negotiate a lower rate then leave at the end of hurricane season but really intends to stay longer. Your program should state that for every month after hurricane season that the boat is in the marina 50% of the annual per month fee would be credited towards his dockage until excess is used up. Let’s say that the annual rate for the customer’s boat is $800 per month and the hurricane rate was twice that amount for the months of July through October. Since he was there for four months of hurricane season for the next eight months starting November 1 he would only pay only half of the normal monthly dockage or $400. Let’s also assume he really intended to leave at the end of December but did not want to tell you but does leave. The marina would have only credited him for one month dockage over the months of November and December. The marina is not out any extra money that they would have been if they offered this customer the annual rate when he first came into the marina. He did not live up to what he committed but there is no reason to leave on a bad note and the boater is welcome back any time.
There are more examples that could be given but always keep in mind that you want the burden put on the boater to fulfill his obligation if he wants the reward. This is an easy concept to sell to your customers because it is fair.