The 28% Solution

May, 2008

I had a conversation with PT Editor JVH over lunch a month or so ago, and the content of the conversation ended up anonymously in the PT blog. We have these conversations because we both are very driven to improve the public perception of the parking industry. Plus, we have had some version of this conversation many times over the years, and it usually revolves around how much money is not collected by the parking operations and the operators not really wanting the owners to know the truth.
Since it is no fun to have a meaningful conversation where both sides agree, I usually take the position that the parking operators aren’t trying to hide anything. Everyone seems to believe the amount of parking revenues missing is about 10%, and the cost of getting that considerably lower is too great. Parking operators have an obligation to always try to collect 100%, and owners have to balance costs vs. return. The owners usually win, so 100% is not in the cards.
Then one day, sitting in an airplane seat (one of my assistants a few years ago always said I had my best ideas up high where there is a little oxygen deprivation to the brain; I never could figure out how to turn that into a compliment; anyway, she no longer works for us), I thought: The Parking Network audits some of the highest-profile operations in the country every year; why not take our audits and drill down to the actual revenue-lost findings and see what the real average turns out to be.
The result? The average of the last 10 audits we had done – all class-A office buildings in well-known cities – was 28%. Oooops. Now 10% may not be much of a problem, but 28% becomes something you may want to consider hiding from the owners. Nothing like a good cover-up to spark good conversation over lunch.
The 28% number is really not a good average because it is specific to one type of operation: commercial office buildings. Operations such as airports, universities, public garages and events would not have some of the issues that caused the 28% average. Over the next year, we will get a good look at some other types of operations and try to refine an industry-wide number. I am sure it will be much smaller.
The 28% number didn’t surprise JVH, but I remember well late at night working on the audit findings and finally coming to a number that I thought was defensible; I was not surprised at all. In the job we do, we really get to see the insides of hundreds of parking operations every year. As a result, we begin to see common themes that can very easily be transferred into large amounts of revenue loss. So, you ask, “Why does this happen?”
The parking industry operates as thousands of little packets of space and revenue – none of which operate exactly the same. One commercial parking operator in a city with 100 locations can have three or four different brands of parking control equipment that represent as many as 20 different generations of hardware and software. They also may have 70 or 80 different landlords that have different levels of understanding of the parking operations and have different (usually low) levels of commitment to dollars for upgrades or maintenance.
Therefore, instead of a Wal-Mart or McDonalds that looks virtually the same in terms of cash control technology from Portland, ME, to Seattle, WA, you really have something that looks more like a bunch of mom-and-pop operations. Nothing is standard at almost every level. Therefore, training of the people on the streets becomes difficult at best. As we audit from facility to facility, we see different procedures in place or no procedures at all. That tells us there really isn’t a formal training program, because if there were, it would be training to a standard set of procedures. If every manager being hired to manage and be responsible for a $3 million revenue stream had to go through a parking accounts receivable class, a cash control class, and a “how in the heck do I keep up with validations” class, my 28% number would drop to below 10%.
Instead, the frontline managers are not being trained as professionals, and the real expertise is at the top of the organization, not on the streets where parking really happens. So we have a bunch of frontline managers operating locations generating millions of dollars in revenue with little or no training and never having a seasoned, experienced manager with a little time on his hands giving pointers.
At a large operation just a few months ago, I experienced the absolute best example of how we are viewed by the public and clients, and how we can be viewed with a little time on the streets. There could not be a better example of night-and-day parking evolution in the mind of the owners than this one, and I sincerely wish I could tell you who the players were.
We were hired by a very large landowner to review their operation. The parking company had been there for many years, and the owners were just flat fed up with them. Everyone in the owners’ organization wanted them out of their lives. There was not even one compliment or something that could be considered a compliment. They asked me who were the top three or four companies in the industry. When I told them and they heard that their company was included in the list, they almost fired me. I bravely told them not to worry, it’s a great company – just something off the tracks here that can be easily fixed. They laughed. So off we go to do our job, full of confidence, knowing the operator, knowing that with this operator nothing could be this bad. It must be a personality clash or something that could easily be fixed.
The next evening, our employees out in the field looking at the locations started calling our command post saying, “You are not going to believe this: this is the worst operation I have ever seen”; then the next one calls with the same story. The next day, I headed out to see this for myself, and sure enough, I can’t even tell you how bad it was. I could stand to the side and look at this and safely say, “If this is the parking industry, leave me out.”
Every violation of operating procedures that we in the industry just know how to do was being violated. I met with the owners; they had given up. They thought this operator must be one of the worst in the country and felt that there was no hope in improving their operation. When you look at this operation, you have to know there was a lot of revenue missing. If they are this sloppy on the surface, how bad are they going to be on the very detailed job of collecting and tracking millions of dollars in revenue? My 28% number is looking good! JVH, eat my grits.
I knew the top dogs at this operation, so I decided to give them a call and see if I could get a reaction. I knew they would never tolerate this type of operation, if they ever bothered to show up and take a look. The great news is that they responded wonderfully. They sent a lot of talent to town and completely overhauled the operation. They established a higher level relationship with the owners, and three months later, the owners told me how unbelievably pleased they are now with their parking operator.
This proves my theory that the operators have the talent and expertise to make our industry perform to a level that we can be proud of, but we are not putting enough talent time on the street where it counts. This operation went from beyond terrible to excellent in a matter of months. This big of a turnaround is something that a few months ago I would have thought impossible. And finally, not surprisingly, the revenue is up.
The 28% number, while very real, does not need to be the average. Our commercial operators have the talent to shrink it to a reasonable level. With attention to details, street-level work by experienced professionals, concerted diligence, and a program to educate the owners on the requirements on their part and the operators’ part in running a high-performing parking operation, my 28% number will be a distant unpleasant memory. JVH and I will need to work on other subjects to discuss over lunch.
Clyde Wilson is President and CEO of The Parking Network. He can be reached at clyde@parkingnetwork.com.