Marina Dock Age, May/June 2006

Rate structuring should be more than a guessing game
by Dennis P. Kissman

With the boating season underway, marinas are hoping to earn a profit this season. And while every marina owner and operator would like to be profitable, the sad reality is that most of them do almost nothing to implement a plan to make profits a reality. In this article, we are going to closely examine how rate structuring impacts the marina’s bottom line.

Defining terms

Call them rental rates, dockage fees, slip fees, or berthing tariffs, no matter what you call them, every marina’s top priority should be to understand what goes into them.

For the purpose of this article, the various fees associated with dockage or storage will be referred to as a “rate structure.” It’s important for marinas to consider as many elements as possible when reviewing their rate structure. Often time, they overlook key elements. Try this for a fun exercise: think about the questions you have asked yourself when reviewing the rate structure for your marina. If those questions are like, “What are other marinas charging?” or “What did I charge last year?” then you are missing key elements to properly reviewing the rate structure for your marina.

Marinas should consider two components when developing their rate structure. First, how has the cost of operating the business changed since the last rate adjustment? And second, how has the value of the services provided changed in relation to what is happening in the marketplace? If this is the first time a marina is using this approach, then there is one more thing that it needs to consider. When was the last time the marina adjusted its rates, and was the adjustment sufficient to achieve a “fair” profit margin? If this was not the case, it may be time to ramp up with a couple of interim rate adjustments, rather than trying to correct the past all at once.

A question that always comes up is how often rates should be adjusted? We recommend at least once every 12 months. The time of the year that it should take place will depend on your location. In a cold climate, where dockage is contracted for an entire season, the marina should set a rate structure before signup begins for the next season. If the location is where the boating season last 12 months, then the agreements are written either on an annual or monthly basis. Then the implementation of a new rate structure will probably be governed by the wording used in the marina’s license agreement.   Continue »