Marina Dock Age, March/ApriL 1995

Changing Rates Can Change Your Customer Base
by Dennis P. Kissman

Just around the corner is a new summer boating season. You probably have already established your rates for the coming year and have a good idea of how the season is shaping up. However, have you determined just how many customers you might lose or how many new ones you would need to attract to maintain or exceed your previous level of slip revenue? What effect would an increase or decrease in slip rates have on your customer base? To determine the impact of these changes, use a break-even analysis, basically what change in occupancy can take place without a change in revenue.

Let’s use the following example for our marina: Assume we have 100 slips at an average length of 33 feet. The average length is not necessarily the slip length but the average length the customers are being charged. Our marina is 90 percent occupied for the season and the current rate equates to $6 per foot per month. We want a rate increase of $25 per foot per month. With this increase, how many of the slips need to be occupied to maintain the same amount of slip revenue as the previous year?

Armed with these assumptions, we start our analysis: Each boat is currently paying an average of $198 per month ($6.00 x 33 feet). The new rate for the same boat is $206.25 per month ($6.25 x 33 feet), an increase of $8.25 per month. Multiply the increase by the number of slips occupied ($8.25 x 90) for the total amount of additional income you will receive per month at the same occupancy level. This amounts to $742.50 per month. Divide the total amount of additional income by the new monthly rate per boat ($742.50/$206.25) to get the number of customers you can lose and maintain the same level of slip revenue. Round your answer (3.6) to the nearest whole number, in this
case 4.

The process for determining the number of additional boats you need when contemplating a decrease in rates is identical. Just remember to use the difference in the two rates and divide by the new rate, in this case the lower amount per month. Using the same assumptions for our marina, for a $.25 decrease, the number of new customers required would be 3.9, rounded up to 4, to break even.