Industry Articles - 2008
Boat & Motor Dealer / Marina Dock Age, December 2008
Creating sound business plans to grow the marina industry of the future
by Dennis P. Kissman
Having worked in the marina industry for more than 20 years, I have seen it weather some severe fluctuations and have always remained optimistic about its future. I think we can all agree that the current global economic situation will have serious impacts on the marina industry for the immediate future. These impacts will change our industry, but as the market improves, which it will, the industry should emerge stronger and better organized than before.
Flawed business plans
I continue to believe that properly managed and maintained marinas are very good investments for the long term. However, in recent years and as is the case with many industries, the marina industry has been hit with an influx of what turned out to be flawed business plans. These included plans for the acquisition, development, redevelopment, and exit of marinas and boatyards.
A typical example of the flawed business plan would be a non-industry (commercial or residential) developer that was looking for a short-term exit strategy, which required the selling of individual wet slips or dry racks. In fairness to some of these groups, this was the only option to preserve the water access for boaters. Many properties, particularly in the Southeast, were targeted for condominium development that would have eliminated existing marinas and boatyards. To preserve marina usage, the sale of individual wet slips or racks were the only option available to justify the acquisition and development costs.
The problem with these plans often had to do with a combination of market factors, socioeconomic issues, bad timing, inflated or bad market data and statistics, and an overall lack of understanding of the marina industry.
The success of the marina industry depends on attracting a customer’s leisure time and discretionary income. Developers and lenders who were familiar with residential assets, which are a necessity to end users, overlooked what makes the marina industry work. Without fully understanding the marina industry, it is no surprise that business plans and financing were approved based on a business plan concept that was familiar to the residential development world.
The financing hurdle
When entering the marina industry, financing has always been a major hurdle, and I believe that in the present economy, it is even going to be a much bigger factor to deal with than it has been in the past. I base this belief on two facts. First, the financial community does not generally understand the marina industry. Second, many marinas in the last few years were financed with only one exit strategy in mind, and that was to individually sell either the wet slips or dry racks.
In terms of selling wet slips or dry racks to individuals, the market for this type of product is very small and exists in unique markets in limited geographic regions. As a result, the marketplace is beginning to show some fallout from projects that were purchased, designed, and built with only one exit strategy. When that strategy does not work, the lender usually forecloses on the property. We are already starting to see some of this taking place in a few markets. Lenders will typically take the owners’ position, but after a short period of time they will attempt to “fire sale” the property. This action further depresses the value of all marinas and takes a long time for the industry to recover, particularly in the eyes of lenders.
The major reason why the sale of wet slips and dry racks has met with such strong opposition is that it does not make economic sense to most boaters. With a sale, a person is asked to buy a wet slip or dry rack, and on top of that, the buyer must also pay for the operation and maintenance of the marina. Without exception, this latter cost exceeds the monthly cost just to rent the slip, so the incentive to buy disappears.
Do not get me wrong, the sale of wet slips and dry racks is an option and a very good one in some markets, but the transaction points out an underlying problem with the industry and one that must be resolved if the marina industry is to successfully recover and have a long, stable growth pattern. The problem is marinas do not charge enough for the value of the services they provide. Let me explain.
A return on investment
Whether one builds or renovates an existing wet slip marina with the intent to sell the slips or rent them, the cost is virtually the same. If the rental fee is the same as the operating and maintenance fee charged by an association in a sales scenario, there is no return on the investment to build or buy and convert the marina. Without a return, there is no viable business. The burden to solve this problem rests with existing marina owners who must realize the value of their property if they had to replace it today. This does not mean that just raising prices to customers is the answer. There has to be a balance between what the market will bear in increased rates and the ability of the marina operator to implement cost saving measures in the operation. The objective is to achieve a fair return on investment.
The marina industry cannot expect people outside the industry who play a vital role in our industry, such as lenders, developers, and regulatory agencies, to understand our needs until we gain their confidence by demonstrating our ability to successfully acquire, develop, operate, and maintain marinas and boatyards.
Marina Dock Age, November 2008
Operating consistently can lead to increased profits
by Dennis P. Kissman
In perfecting your business model for success, how you manage your marina should be your top priority. Sounds like a business school statement, but it is just common sense. To focus on what I mean think of the term “consistency.”
There are five areas in managing a marina where I believe sending a consistent message will improve your business: marketing, customer service, accounting and financial reporting, human resources, and rate structuring. If we take a look at each of these areas, we can see how being consistent will improve your business.
To start, let’s not confuse consistency in management with stagnation in the business. Being consistent should promote change but in a logical approach with a defined goal in mind.
First, let us look at marketing and getting the word out that will attract customers to your marina. Where does consistency come into play? Well, the message that you want to convey must fairly represent what you have to offer. The more people see, hear, and experience your message, the more successful your marketing effort will become.
Notice that the message you want to convey does not dictate the media you use to convey that message. For example, your marina offers the widest selection of bait on the lake. This is the message that is conveyed through advertising in guidebooks, road signs, radio, Internet, or any other appropriate form of paid or unpaid advertising. This is what people see or hear. Then suppose someone hears your message from a trusted person reaffirming that what you are advertising is what you have to offer because they have experienced it as a customer of yours. Now this new person comes to your marina for the first time because of what they saw and heard and is there to experience what you have to offer. You now have a new customer who will keep the chain going. By delivering what you say you deliver is how being consistent in your marketing will lead to success.
People will typically relate to a message that is seen repeatedly, so visual advertising also needs consistency. When that repeated message is no longer in words and becomes a symbol, it is called branding, an example of this is the Nike logo. Branding is a good way to convey a consistent message. A word of caution here: branding does not necessarily mean that it will always be a positive message. See an article I wrote on this topic in the December 2007 issue of Marina Dock Age, “Is Branding Marinas Good for the Industry.”
Consistency also plays a role in customer service. Treating all customers the same is one of the biggest staff problems I see at many marinas. Many staff that deal directly with customers deliver consistent levels of customer service, but it’s only consistent with the amount of tips they expect to receive from the customers. Training staff to perform in a consistent manner is probably the most difficult task you will undertake. It is the one area that will require the majority of your time on an ongoing basis through constant monitoring.
In order to succeed in this area, make sure that you have proper detailed documentation as to how you expect staff to respond to customer service issues. This helps new staff members understand what is expected and does not change when word-of-mouth training is used. Hold regularly scheduled staff meetings where customer service issues are routinely addressed. Try implementing a program for recognizing exemplary customer service and be able to take disciplinary action when expectations are not met.
Knowing how you have done in the past as compared to how you are currently doing allows you to make sound business decisions based on historical data from consistent accounting and financial reporting.
Record keeping is something most marina managers stay away from like the plague, but it is the scorekeeper of your business. One of the biggest problems this industry faces is its ability to obtain lender financing. This is because there is no consistent record keeping by marinas. A number of books of record that I have seen will classify the same type of income or expenditure in several different ways and never reclassify the past to be able to logically compare one period to another. This adds suspicion to any financial information given to lenders to support financing request. More importantly in the day-to-day managing of your marina, you cannot compare how you are currently doing with the past and what should be changed to improve the future. Making changes based on bad information can be worse than not making any changes at all.
The fourth area where consistency is important is in the area of human resources. If you have not noticed, there are federal laws that prohibit discrimination against employees. The easiest way to avoid discrimination is through a consistent employee policy and administering that policy in a consistent manner.
Most managers I know take shortcuts and liberties in this area by offering certain employees benefits not afforded to other employees. This is one area where documentation is critical, and understanding every word in that documentation and its implication is important. For example, a frequent problem I have run into at marinas is giving employees who are entitled to overtime pay compensating time off in lieu of paying overtime. That may be a deal that you have worked out with certain employees, and they are perfectly happy with that arrangement. Later on you may have another employee that is disgruntled about that practice, and that person complains to the Department of Labor. Before you know it you end up paying everyone you ever offered this arrangement to, besides paying a hefty fine to the government. Do not underestimate what this could cost you.
The last area where consistency is critical is in rate structuring. If there is one thing that your customers know how to do, it is to talk. If you make one rate concession from your published rate schedule to a customer, you had better have a very good reason because before they leave that day, half of your marina customers will know about it. Trust me they will be knocking on your door for the same deal, and if you do not have a valid reason and can’t defend that reason to other customers, you will be giving deals to everyone. The main reason this becomes an issue is most marinas do not have a consistent policy for raising rates. This leads to large increases at less frequent intervals creating boater complaints. Your best policy when it comes to a consistent rate policy is to raise them annually.
Being consistent in the way you conduct your business will translate into profits for your marina.
“Fundamental Truths About Marinas, Past, Present & Future”
by Neil Ross, October 2008
This PDF article will open in a new page.
Marina Dock Age, September/October 2008
Managing ever increasing fuel costs in today’s market
by Dennis P. Kissman
Has your marina experienced a down turn in boating activity and the lack of new customers this season? If you have, you are not alone. In addition, if your marina sells fuel, I am sure you have seen the volume of fuel sales drop because of high prices. If you only track your fuel sales by the dollars sold, you might have actually seen an increase in money received over your prior year’s sales, but this number is deceiving.
Let’s do the math and see what’s happening. In June 2007, the U.S. average consumer pump price for premium gasoline was $3.17 per gallon. Over the last 12 months the price of that same fuel has risen to a per gallon price of $4.53 (at press deadline), which is an increase of 42.9 percent. When we look at the consumer pump price of diesel, the change is even more dramatic. In June 2007, the U.S. average pump price of diesel was $2.82 and this year the average price in June was $4.66 (at press deadline), which is a 64.6 percent increase in the price per gallon.
How does that relate to tracking your fuel sales by dollars received? It means that for every 10,000 gallons of gasoline sold at last year’s prices, if you sold 7,000 gallons at this year’s prices, you would be depositing the same amount of money into your bank account. Likewise, for diesel, you would have to have sold only 6,100 gallons this year to deposit the same amount of money in the bank as last year. Many marinas sold more than the breakeven number of gallons and actually saw their bank deposits increase.
On the surface, everything sounds good, but is that really the case? Let’s follow this same example from the cost and profit sides.
First, I think it is fair to say that most marinas today are marking up their fuel at a set number of cents per gallon over cost rather than a percentage amount, because it would not make them competitive with the high cost of fuel. For easy figuring, we will assume that you are getting a profit of 50 cents per gallon on both gasoline and diesel. If that is the case, based on the average cost of fuel in June of this year, you would have paid $4.03 per gallon for premium gasoline and $4.16 per gallon for diesel. Let us assume that your fuel sales volume in dollars is the same as last year. The question is what happened to your profit? Last year for every 10,000 gallons sold, your gross profit on fuel sales would have been $5,000. If your sales dollars this year are the same as last year, your gross profit for this year would be $3,500 for gasoline and $3,060 for diesel for every 10,000 gallons sold. To make the same amount of profit on every 10,000 gallons of fuel sold this year as compared to last year, the volume in gallons sold would have to be the same.
What I have heard from some fuel distributors is that many of their customers, not only marinas, seem to be looking at only the revenue they are receiving and ignoring the increase in cost. As a result, they quickly get into trouble and cannot pay their fuel bills. Today a single fuel delivery can easily cost you between $20,000 - $30,000. Most marina operators do not pay for fuel in advance. They usually have some kind of payment terms hoping the majority of fuel is sold before the invoice comes due.
Today, however, with the high cost of fuel, boaters are not buying as much fuel and as a result, that fuel is usually in your tank longer than you expected, many times after the payment terms expire and you have to come up with the money or lose your credit. One of the best ways to minimize the impact is to discipline yourself to make weekly payments for fuel sold that week. This means that you will be paying only part of the invoice amount. Before you do this, contact your fuel supplier and explain what you are doing and why. If you do not, fuel suppliers have told me that when a customer starts paying only a portion of an invoice, it is an indication that they are in financial trouble. You want to explain to them that the reason you are doing this is just the opposite, to prevent you from getting into financial trouble. This is one approach you can take to help you manage your cash in these tough times and keep your marina solvent. You are dealing with a lot of money here, so do not underestimate how fast you can get into trouble if you do not manage your fuel sales and costs on a daily basis.
Marina Dock Age, July/August 2008
Sometimes the only thing to say is goodbye
by Dennis P. Kissman
As business people, we all strive to develop long-term business relationships with new and existing customers. Successful marinas thrive on the support and patronage of a loyal customer base. But, from time to time, you come across situations that challenge those goals.
It is these situations that require a well thought out plan of action. On a daily basis, as managers of marinas, we are required to make difficult decisions that may not always be well received by every customer in the marina. As marina consultants, we are not surprised that in some marinas we work with, the hard decisions are put off for days, months, and in some cases, years.
When making difficult decisions, it is important to remember that as the manager or owner of the property your success depends on providing service to your customers. Over the course of time, changes need to be made to ensure that you are able to deliver that service. If your insurance premiums jump 30-40 percent, then you need to adjust rates to cover those costs.
These business decisions will inevitably affect some of your existing customer base, and you will come across some special customers who take the situations to the extreme. A small percentage of these customers, no matter what you do to address their concerns, will never be satisfied.
It is at this point that you need to take a step back and ask yourself some very important questions. First and foremost, you need to remind yourself why the decision was made that has resulted in the complaint. The decision was made in the best interest of the marina. Then ask yourself: what is the validity and scope of this complaint, and does this complaint affect the majority of my customer base? It’s important not to dismiss the problem or concern as being trivial or foolish — even if it is, because this will only create additional problems. The way the complaint is handled is just as important as the reason why the decision was made.
Open communication with employees can help. It is important that all employees have an understanding of why the decisions were made. The complaints often do not make it all the way to the manager; it is much easier for the customer to vent to the dockhands or front desk staff. Making sure they receive informed responses to their questions/complaints is a great way to diffuse a negative situation.
Making difficult decisions is part of a manager’s responsibility. To help guide you in this process, do not lose focus on your managerial responsibilities. Ask yourself, does the decision I make relate to protecting the marina from liability exposure? If the answer is “yes,” then you have to move on without compromise. If the complaint can be accommodated without exposing yourself or the property to undue liability’ then ask yourself why this complaint is bothering this customer so much and try to address the complaint.
Another comment that often accompanies customers’ complaints is that if you do not meet their demands, they are going to leave your marina and take all their friends with them. In reality, they usually do not have the number of friends that they would like you to think they have or at least those that will follow them. Do not be intimidated by these kinds of remarks. These customers are typically those that have the biggest mouths around the marina and are very good at agitating other customers and getting their agenda out, usually with a negative spin about the marina or management. If this is the profile of a customer in your marina, this is a good candidate to say goodbye.
Before you take that bold step and say goodbye, take the time to reflect on what your customer is saying to you by putting yourself into your customer’s shoes. More often than not, we have found that the problem or concern that is brought to your attention is not the real issue. If it is a legitimate problem or concern, you will usually find it is an issue with more than one customer.
In my opinion, this may be one of the most cancerous types of customers you can have in your marina. Very rarely do these customers have the best interest of the marina in mind; they usually have an agenda that benefits their personal wishes. The decision as to whether or not these are customers you want in your marina is going to depend on how well you maintain and run your facility. As long as you can keep complaints to a minimum and without merit, these customers are manageable.
The more you do to anticipate and resolve problems in your operation that are prone to generating customers complaints, the better off your operation will be. Where we see the most problems is with reactive management, solving problems only when they are brought to management’s attention. This style of management will eventually lead to groups of customers banding together to bring more pressure to bear on management and possibly put you in a situation that is either very costly or impossible to correct.
One of the most important things to consider when making that ultimate decision whether to get your customer to move on or stay is that if you make changes or concessions based on customers complaining, the change that you implement has to apply to everyone in the marina. That is why you must always weigh the questions. First, is it good for my business, and second, is it good for the majority of my customer base? The wrong decision could lead to you losing more customers and income than what you first thought.
Marina Dock Age, May/June 2008
Marina development from a different perspective
by Dennis P. Kissman
I recently saw an article that caught my eye about a new marina being developed near Charleston, S.C. The article said that the marina was going to have a combination of about 550 wet slips and dry stack racks. The article went on to say that the marina development would include a restaurant, boat ramp, community fishing pier, and a waterfront park with an outdoor entertainment facility and scenic trails for a total cost of $20 million. Knowing the market where this marina was to be built, it made no economic sense. What the article did not say was that the marina was part of a large residential development and tourist area.
This is the dilemma the industry faces today; waterfront property and the cost to construct a new marina, especially when you have to add in all the non-revenue producing amenities, is becoming too expensive to be supported by just the income generated from the marina itself. Other revenue generating development must be part of the equation or at least the ability to spread the marina development cost over the entire project. Yet without increased water access, the entire marina industry will be facing more difficult times, than it already is facing.
One of the approaches to solve this problem in recent times has been the sale of individual racks and slips in a marina. This is a very viable solution in order to retain water access and has been very successful in selected markets. The problem is that oftentimes the cost to store or dock your boat exceeds the value of the boat. When this happens and there is no alternative in the marketplace, the boater is faced with the decision whether or not to stay in boating. Under these circumstances, the boater is no longer viewing the marina as a place to store his boat, rather whether or not he should make an investment with limited exit strategy if he changes his boat or retires from boating. Unfortunately, the boater will oftentimes get out of boating. When this happens, not only does the marina lose but also all the marine related businesses supporting that boater lose.
The other approach to solving the problem is what is taking place in the Charleston project, where it is part of a much larger development and some of the infrastructure cost is spread over the entire development. This is not a new concept and in fact has been the main stay for golf course development for many years. In a number of markets today, we see traditional landside developers buying up waterfront property and not understanding the value of the water access they have, as a result these developers build a product that restricts or eliminates water access or at best puts in a token marina to serve a very limited number of residents.
We are currently working with a client who is set on restricting marina customers to property owners in the residential development. The marina is going to have about 200 wet slips and about the same number of residences. The developer is not interested in selling individual slips to cover the construction cost of the marina. We know from experience that just because someone wants to live by the water, they are not necessarily boat owners. The irony of this is there appears to be a very strong demand for a marina at this location. In the economic modeling we did for this client, we projected that when restricting the marina to residents only, the marina would be 62.8 percent occupied after five years as a best-case scenario. On the other hand, when we model the same marina allowing outside customers, the marina is full within three years and a strong demand going forward. When you look at the bottom line in one case, you have a successful marina and the other it is questionable whether it should even be built. This client is now rethinking his entire project to keep in tack the exclusivity of his upland development as well as the value the marina component brings to the project while opening the marina to non-residents.
What we are seeing in these two examples is how some forward thinking developers understand the importance of marinas to their overall development plans and are coming up with ways to improve overall access to the water.
For the past several years when preparing feasibility studies for clients on new marina developments, no matter how strong the market indicators are, those developments that do not have a residential or commercial component to them are hard to justify economically when considering the land cost and total development cost. In my opinion, it is this approach toward marina development that will define the industry’s future.
Marina Dock Age, April 2008
Researching options prior to construction will save money and headaches
by Dennis P. Kissman
During the past 20+ years of working in this industry, I have seen some very interesting people pass through it. Some stay involved longer than others, but very few are dedicated enough to take the time to understand what the marina business is all about and make a contribution toward the future of this industry.
Those marina owners that have dedicated themselves to this industry understand the work it takes to have a successful marina operation. It is the hard work of these individuals that makes it look easy to those on the outside looking in.
These people on the outside have not taken the time to understand what it takes to buy, build, or expand a marina property before they jump in. These people will always be around because of the allure of marinas and nothing will change that. Yet, there are some existing marina owners that fall into this category as well. What I am saying is that there are some marina owners out there that are trying to expand or change their marinas at the cost of their existing customer base only to realize, often too late, that the information they relied on to make their decision did not apply to their circumstances.
Real world examples
The buzz around the industry for the last few years is the increase in the megayacht market. Recently, one of the most widely quoted statistics is from the 2007 Order Book published by Showboats Magazine stating that there is a 15.3 percent increase in megayacht construction over the prior year, the fastest growing segment of the industry.
A megayacht is defined as any yacht 80 feet and longer. This sounds impressive and everyone wants to chase this market and build or reconfigure their marina to accommodate these megayachts often at the expense of smaller slips. When actual numbers of megayachts being built is applied to this percentage, it equates to 103 new megayachts on order to be introduced into the world’s megayacht market in the next few years. If one subtracts from this number the yachts owned by foreign individuals who would never come to the United States for one reason or another, this number is probably reduced by at least 50 percent.
The other buzzword in the industry is “Rackominium,” the selling of individual racks in a dry stack facility to boat owners. This concept first started on the west coast of Florida in Collier County known for a concentration of high net worth individuals and limited marina facilities. The concept has been very successful in this market. We get inquiries from marinas in various parts of the country that want to emulate the Collier County model either with a new facility or with an existing marina.
The first question to answer is how a marina’s market and boating patterns compare to those in Collier County. When asked, the only thing these people know is the price per foot the racks sold for and how long it took to sell them. No one takes the time to understand why those projects were successful. All they see are big profits for themselves. Again, potentially big profits, but yet a bigger risk.
Finally, we have the development scenario where the successful non-marina developer who owns a boat, most likely in the million-dollar range, is planning a residential development that has the possibility for a marina component. His whole perspective of boating is based on his personal boating experience. As a successful developer, he studies the residential market in great depth and makes the right product decision for his upland development. However, when it comes to designing the marina, his whole perspective is what he expects in a marina for him without regard for what is compatible with his upland development or what the local boating market wants.
Several years ago, we worked with a developer of this mindset. The residential project that he came to us with was in a northern state on a freshwater river. His plan was to build a marina and surround it on three sides with a townhouse development and off the water were single-family homes. At the time, the price range for his upland development was going to be in the $180,000 to $300,000 range and he was targeting the primary home buyer. When it came to the marina, all he had in mind was a marina that could accommodate his 55-foot sports fishing boat.
Granted there were a few of these types of boats in the marketplace, but the people who owned them did not live in $180,000 townhouses or $300,000 homes in a planned development. The market for boats that complemented the residential development turned out to be in the 20 to 35 foot range. When combining a residential development with a marina, one needs to be careful. There is the potential to add value to both or limit the market to such a degree that it hurts the value of the entire project.
Summing up
It is important for marinas to take the time to understand what the information they are relying on is telling them and that it applies to their specific set of circumstances. It is a lot cheaper to do some in-depth research from various sources and adjust a project on paper rather than once the construction starts.
Dealing with deadbeat slipholders
by Dennis P. Kissman
I was recently asked a question about how to deal with deadbeat slipholders. It can be summed up in a single word, aggressively. When I say aggressively, you are probably thinking of threatening collection letters and phone calls or even possibly engaging the services of a lawyer or collection agency. All that sounds well and good, but in the end you lose.
When I speak of taking aggressive action, I mean get that boat out of the slip as fast as you can. Let us look at it logically: The person probably already has financial or other problems; otherwise, he or she would be paying their slip fees. Let us say you decide to chain the boat in the slip to keep it from disappearing as a security for that person’s debt to you. By chaining the boat, all you have done is given that person a place to keep his boat with no way to pay.
Remember, you only have 365 days a year to collect money from that space. Is not the logical approach to get that boat out of your marina sooner rather than later? My experience has shown that the longer you hold on to the hopes of collecting that debt, the more it will cost you. It is better to cut your losses and move on.
Getting the boat out of your marina
The question now becomes how to get those boats out of the slips. Unfortunately, for many marina owners, success is measured solely on the total number of boats in the marina, and not just those that are paying to be there. If you are one of those people, you have a personal conflict that you are going to have to overcome before any program to remove deadbeat slipholders from your marina will be successful. For those of you that do not have a problem like this, it is still not as easy as cutting the dock lines and pushing the boat out of your marina. The solution starts before the problem begins, meaning the documentation you use when a new customer signs up.
Every state has variations as to your rights regarding boat removal from your marina of non-paying customers. We have learned through the years a couple of things that will help prevent the problem in the first place or expedite eliminating it.
First, before the boater becomes your customer, ask for a recent picture of the boat he intends to keep in your marina. Does the boat complement the rest of your customer base? If it does, but later appears differently when the boat arrives, reject it right then. The person may be put out at the time, but that’s better than trying to get him out in the future.
Second, run a credit check to see his payment history. If it is questionable, reject him. Remember, before you can run a credit check on that person, you need to get his approval in writing. It is better to have an empty slip for a couple of months and the ability to rent it, than it is to have the slip occupied and not receiving slip fees.
Obtain a license agreement
Assuming that everything checks out to your satisfaction and you want the boater as a customer, then the type of agreement becomes important. I am not a lawyer, but our experience has shown you want a license agreement as opposed to a rental contract. If a problem arises in the future, your rights as a marina owner are greater when it comes to getting the boat out of the marina with a license agreement. If the situation becomes an issue with the courts, you do not want a “tenant-landlord relationship,” which is typically what happens with a rental contract. This gives many more rights to the customer than to the marina.
Another bit of information that can help you when it comes to collecting on a past-due debt is knowing who the lien holder is on the customer’s boat. This is important because your claim for dockage will come before any claim by the lien holder.
On more than one occasion, we have contacted the lien holder On the customer’s boat and advised him of our intentions to obtain title to the boat in order to settle a claim for outstanding dockage. The lien holder has then put the necessary pressure on the customer to settle his bill with the marina.
Let’s face it: Lenders usually have a lot more at risk, as well as a lot more experience when it comes to collecting bad debts than a marina owner or operator has. With that said, the threat to obtain title to the boat should be real. Before it is time to take action, you need to research how to obtain title to a boat for non-payment of dockage, because every state seems to have a little different procedure.
One thing we have learned is that it is a lot cheaper and faster if you understand the procedure. You should do it in-house and working directly with the proper government agencies, rather than trying to use an outside attorney.
Before we get off the subject of the agreement and customer information, make sure it is current. Any agreement should have a beginning and end date. There should also be specific provisions for carryover beyond the termination date if a new agreement is not initiated to make sure you do not lose any of your rights.
The final steps
OK, now you have this boat in your marina, and the owner is not paying his slip fees, and you are working diligently to get the title to the boat so you have the right to remove it, what should you be doing in the meantime?
First, you need a policy for writing dunning letters and placing phone calls. For this policy to be the least bit effective, it must be followed to the letter. If the first dunning letter is to be sent to a delinquent customer on the 10th of the month, it must be sent on the 10th and not the 11th or the 12th. If the customer responds to your letters or calls, be prepared to work out a payment plan. We have done this successfully in the past where it is evident that a previously good customer is going through some difficult times and the boat is worth more than the slip fees due. Typically, you freeze the past due amount and any repayment agreement of the past due amount is dependent on his keeping the current slip fees paid on time.
Another very inexpensive but effective way to get a customer to pay, particularly when he can pay but just thinks he can ignore your terms and pay when he feels like it, is to get bright orange or green fluorescent colored shipping tags imprinted with “Important, See Harbormaster” and nothing else. Tie the string that is on the tag around a rail so it flutters in the breeze and is visible to everyone walking the docks. You will be surprised by the response you will get. Everyone knows what those tags are there for, and it is embarrassing to the boater to have one tied on his boat. These should be placed on the boat beginning with the second request for payment.
Once an account starts getting into arrears, do not think it will turnaround without your intervention because it will not. We have seen more than one marina operator get into serious financial trouble because of non-paying slipholders. Sometimes it is hard to accept, but there is less operating cost and maintenance on a marina when a slip is not occupied than when it is occupied with a non-paying customer. The more aggressive action you take against a deadbeat slipholder, the better off you will be in the long term.
Marina Dock Age, January/February 2008
How decision-making can make or break your business
by Dennis P. Kissman
Successfully managing a business requires an ability to make some tough decisions. The decisions a marina owner makes can affect the business beyond what he had originally intended, even in cases where he spends time giving serious consideration to a particular decision. Others may rush to a decision based on what their gut instinct tells them without regard to any negative consequences a decision could have on them. One thing is certain: it is easier to change a strategy before implementing it, than it is to backtrack once a change is made.
Here are two examples involving different marinas in different parts of the country that illustrate this point.
The first example took place about four years ago. This particular marina had negotiated a very good fuel purchase contract with a local fuel supplier that allowed the marina to purchase fuel at a lower price than any other marina in the marketplace. Four other marine fuel providers shared this market, but this marina already enjoyed the bulk of the fuel sales — it had a very respectable gross profit of more than 75 cents per gallon at the time. The marina’s policy was to adjust fuel prices every Monday based on the well-respected Platts Energy Market Data index. This was the same index the marina used to negotiate its purchase of fuel from its supplier.
Then greed took over. The marina’s management made the decision to capture all the fuel sales in the local market. To achieve total market share, they lowered their profit by 25 cents per gallon. Management implemented and followed this policy for the next year. At the end of that year, they were pleased with their results — a 40 percent increase in the volume of fuel sold. They captured the balance of the fuel sales in the marketplace. Upon further analysis, however, it turned out that the marina’s total year’s gross profit on fuel sales was actually about $40,000 less than the total profit during the prior year — when they actually sold less fuel! This is a classic example of what happens when the focus is put on a single objective without regard to thinking through all the effects that a decision might have on a business.
Where did they miscalculate? One, they already had the best fuel prices in the marketplace because they negotiated a good deal to purchase fuel. Two, there was no reason to think that they would lose existing market share. Three, and probably the most important, they underestimated the total market. They already had the bulk of the fuel sales in the marketplace and did not realize it. By cutting their profit by 25 cents a gallon on the existing volume of sales, it cost the marina about $200,000 in gross profit. The increase in sales volume could not make up this loss.
The next example would be laughable if not for the fact that it’s so tragic. What’s happening at a once successful marina proves that old adage, “Don’t throw the baby out with the bathwater.”
In this particular case, the customers of this marina live about one to two hours away. The area around the marina lacked good places to eat, both in terms of quantity and quality. The marina had a very successful restaurant on its property, popular with non-boaters as well as marina customers and which was, due its location, a favorite weekend get-away for transient boaters.
Five years ago, the owners of the marina decided to operate the restaurant themselves despite having no previous restaurant experience. They determined that the previous operator of the restaurant on the property was successful and, lured by the potential profits, they plunged in.
The restaurant was well-known for its weekend brunches, and the owners wanted to improve on the already successful operation by adding shrimp to the weekend menu. This was a welcomed addition, and the weekend brunch became even more popular with non-boaters. The owners knew the shrimp was bringing them in because it was the most frequently ordered item, disappearing by the platefuls.
Then reality hit. The marina’s management discovered it was losing between $8,000 to $10,000 a month, which was directly linked to the amount of shrimp being consumed each week. Here is where the decision-making was flawed. When there’s an increased demand for a product, it's time to raise prices, right? Not in this case. Instead of increasing the price of the brunch to cover the additional cost of the shrimp — or take the shrimp off the menu altogether — the decision was made to shut down the restaurant.
It was a judgment call that has had a major, negative impact on the property. Over the last several years, the occupancy rate has slowly decreased. Transient activity is a fraction of what it was, and the other commercial tenants on the property are hurting financially with a decrease in traffic through the property.
It is management’s responsibility to make the tough calls. It’s also management’s responsibility to not underestimate the negative impact any decisions are likely to have on the business. Best advice: think through all of the ramifications of your decision before it is put into effect. And in those cases where you try to think of all the consequences of a decision and you find you’ve overlooked something, as long as you learn from the decision, you will become a better manager.
Boating Industry White Paper, January 2008
Planning on purpose
A guide to creating a well conceived development plan for water access facilities
by Tim Keogh
The future of water access depends on the usefulness of existing and new facilities. The success of these facilities relies heavily upon developing and maintaining the physical infrastructure. Therefore, preserving existing water access facilities and growing water access with new facilities require a well-thought-out plan for development.
Marine industry professionals must take the lead in the planning, development and operation of these water access facilities. Governments and private developers must reach out to marine professionals for assistance in the identification, design, development, and operation of such facilities. The goal must be to expand and improve access to our nation’s waterways through a deliberate process.
Clear identification of the parameters for the development and redevelopment of these facilities is critical to the future of water access. A poorly designed facility, with rough waters, silting issues, inadequate vehicle or pedestrian access will negatively impact the boating experience. A facility designed without understanding the market will be under-utilized and will eventually deteriorate.
In either scenario, a failed project leaves the owner with little incentive to maintain water access as a primary use; making other uses more attractive. Addressing the following topics will guide the planning process and maximize project success.
Select the right site
The requirements for successful water access facilities limit the amount of natural, suitable locations for development. These specific requirements include calm, deep water; adequate upland for parking and amenities; neighborhood compatibility; and a market that will support the facility. There are different approaches for identifying the development potential of existing and new sites.
For existing facilities, where the site is already suitable for water access, the challenge lies in altering the facility to meet changing markets. The strategy for redeveloping existing marinas must focus on maximizing the property’s footprint for water access.
New sites for water access present a unique set of challenges. Too often lands ear-marked for water access are poorly located — seemingly leftovers of the available waterfront. Local governments should be encouraged to conduct a systematic examination of potential sites for water access development — one that considers the requirements for such facilities, identifies suitable areas, and creates zoning codes that support development. It is important that government incorporate this information into the master plans.
Once the site is selected, the next step in the planning process is to gain a full understanding of the development potential of the site. The goal is to create a framework for all additional work in the planning process. This includes identifying realistic development opportunities that take into consideration the space available for development.
Work with experts
Don’t assume that personal boating experience or operating experience qualifies you to design and develop a new facility. The planning process is a collaborative process that should involve experts in their respective fields.
Depending on the size of the project, expert consultants are required to evaluate a variety of potential technical solutions and develop recommendations. Conducting workshops or “charettes” with all involved parties will provide the best opportunity to create a comprehensive plan. Roundtable discussions on issues including the market, physical limitations, permitting, local/regional zoning, regulatory compliance, operational design, and economic feasibility are all important topics for review.
The following disciplines are examples of those that should be involved in the planning process:
• Architects
• Civil engineers
• Land planners and landscape architects
• Coastal and environmental engineers
• Dock and building manufacturers
• Marina operation consultants
• Legal representation and local zoning experts
The goal is to produce an economically viable and profitable project without negatively affecting the opportunities for future development or neighboring property. This master planning approach helps avoid costly mistakes and problems in the future. Leaving any one discipline out can undermine the feasibility of the project.
I have worked on several projects that had difficulty expanding or reconfiguring because previous development decisions were made that restricted the property’s footprint. Because they developed without a master plan, buildings were placed in such a way on the site that new additions were difficult or impossible. Therefore, costly demolition had to be undertaken to accommodate the redevelopment.
Know the market
There should be a proportionate amount of market research conducted before making any development decisions. The focus is to identify if the project makes sense and adds value to the surrounding area.
There is a significant difference in the amount of research involved in putting in a picnic area as compared to building a dry stack storage building. Be realistic when conducting and reviewing the research.
The objective is to identify services and amenities that the market perceives to have value. Boaters don’t like to pay for amenities or services that they don’t use. If they feel that the dockage rates are helping to support amenities, like a pool, which they do not use, then eventually the boater will move on. Conducting market research should also identify unmet needs that represent new development opportunities for the market.
The first step in framing out a market for review is to identify the boating activities to which the facility will provide access. The boating activities in a particular area will not change with the addition of a new facility. If the marina is 1.5 hours to the nearest ocean inlet, then that facility will not cater to an active sport fishing community. If there are fixed bridges or restrictive waterways, then the size of boat will be determined by those limitations.
Recognizing that different boaters have different needs is an important step in the planning process. For example, a fishing customer base and a family cruiser customer base will drive activity to the property at different times of the day. The services provided and the hours of operation must be matched to the customer base.
Having an existing customer base in the market makes research much easier than targeting potential customers in an emerging market. To identify demand in emerging markets, those with limited or no water access infrastructure, that takes qualified expertise. There are a number of empty, dilapidated marinas in obscure locations that were developed on unrealistic market expectations. A proper amount of research may have shown that resources should have been spent in better locations or targeted to a different market.
The best ways to conduct research is to assume that you don’t know anything about the customer or the market. Let the market tell you what it wants. Don’t try to force personal expectations or ideas out into the market. It will not work. Projects are often hampered when decision-makers impart their concepts of boating or the market onto the facility.
For example, we once worked with owners who were having a problem with their restaurant tenant. The owners had solicited an upscale restaurant operator to sign a long-term lease based on the owners’ preference for dining. The restaurant was failing.
After reviewing the market and speaking with boaters, it became clear that there was more demand for a casual dining experience than a high-end restaurant. The owners’ expectations were not in line with the market, and the restaurant struggled to survive. If the market had been systematically reviewed with an open mind, the marina could have avoided a costly mistake and delivered the services demanded. The lesson here is: Don’t assume you understand the market and, in some cases, hire an unbiased party to review the market.
Conducting market research goes beyond asking the marina across the lake what the cost of dockage is this season. Take an inventory of the services provided in the market and identifying the services that the facility could provide to the overall market. Take some time to identify any new marina developments, or the expansion and reconfiguration of existing facilities. Keep in mind that no two marinas are alike — and that the services and amenities that the neighbor offers, or is adding, may not be what every marina needs. The goal is to identify where the facility fits in, or will fit in, to the overall market.
Some items to look for on the waterways include the location of fuel docks, haul out and service facilities, successful restaurants and popular destinations.
Once you have identified these items some important questions to ask are: What makes this property different? What are the limitations of the property that become clear during the market assessment? Are there services that every marina is providing that you are not?
Start to think about what should be provided to meet the demands of the market.
As mentioned earlier, it is important to match the level of research to the size of the project. Large projects should conduct a full, formal feasibility study that can be used as the tool to make informed decisions. Some banks, lending institutions, or investors will require a full market feasibility study. If this is the case, it is important to utilize a firm with hands on experience with marinas and water access facilities. For smaller projects, a less formal approach to reviewing feasibility can be utilized.
In any scenario the approach to reviewing the market should incorporate the following components:
• Talks with marina owners, boaters, and other marine industry professionals. Boat dealers and brokers can be great resources of information, if they are willing to talk.
• A review of boat registration statistics for the area.
• Talks with dock manufacturers and marine contractors in the area.
• Visits to other marinas to review services and amenities offered and how they conduct business.
• Participation in local and national industry associations. These are great opportunities to find out what is going on in the market — and in other comparable markets.
Be systematic about the data collected; take notes during conversations, and immediately follow up with a summary of the findings. Knowing the market will help you make informed decisions.
Identify goals and objectives The opportunities for development and redevelopment are limited, which makes it essential that projects are built with a clear set of goals and objectives. Take some time to ask yourself what you are trying to accomplish as a developer, a business operator, or a government agency. To expand the business? To maximize return on the investment? To create a greater good for the community?
Whatever the answer is, create a well-thought-out business plan that identifies specific goals and objectives; benchmarks for analysis. Don’t set objectives for specific development programs that may limit the openness for new ideas. Committing to a launch ramp or dry stack before knowing if it works on all levels may steer the project in a wrong direction. Researching to a specific end is a recipe for disaster. A well-written, specific statement of goals will guide implementation and provide a clear map for decision-making as the project progresses.
The final water access facility may end up different than the original concept or goal for the project. Realize that going through a thorough investigative process may yield results different than the initial opinion of the project. A comprehensive review of the project may uncover new and unique opportunities. Take a feeling of comfort in moving forward with the project, knowing everything was analyzed in an educated and efficient manner. You will be armed with the facts and data to ensure that the project makes sense and will efficiently provide access to the water.
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