I had breakfast the other day with a consultant and two of his staff, one of whom was the former head of the fraud squad at a major police department and the other who at one time ran the parking for one of the largest building owners in the US. The conversation was fascinating.
I posited that the parking business had changed considerably in the past 30 years, moving from operators who negotiated leases with building owners to the concept we see in most of the country (except perhaps the Northeast) where the operator is under contract on a month to month basis. (This change in how garages are operated has, many think, caused major problems with the business of owning and running parking operating companies. Income has gone down and the business has become more and more cutthroat. Fees are so small that often operators can’t afford to properly staff and run the garages. They are forced down by building managers who think that paying the lowest price is best, and the operators who are willing to take the job for such small fees.)
One of the group commented that this phenomenon may have been cause by one person, the then head of the largest parking operator in the country. That was Monroe Carrel and Central Parking. Its well known that Monroe’s goal was to be the biggest and strove to take over parking operations across the country and around the world. At one time Central had over 5000 locations. Monroe once told me that one of his goals was to get as many "take aways" as possible from his competition.
It makes some sense, but frankly there are other factors at work. Asset managers are also incentivized to lower costs and paid on how much they can keep down expenses. So they were quick to jump on board and sign contracts, some with incredibaly low fees (I know of one case in SF, where the operator, not Central, ran the garage for $1 a year and a piece of the action over a certain amount, and never hit that amount — but that’s another story.) They then thought they could browbeat the operator into a performance level that was impossible to achieve with the money available.
Of course, when you have such low fees and want to stay in business, you begin to look for ways to lower your costs and the concept of charging for every piece of copy paper, having the garage manager run four garages in the neighborhood, and charging for FICA and SDI even when the employees was over the payroll limit becomes routine.
This lowballing also brings the sleazier side of our business out into the open. They are willing to "perform" for incredibaly low prices, but then under report income and don’t pay taxes, pay their staff in cash under the table, and pocket the difference. Legitimate operators find it difficult to compete in that environment and lose market share.
So whatcha think? Was this change in the parking business due to the influence of one person or is there more to it than that. Let’s face it. Monroe Carrel is an extremely successful parking operator. He provided good jobs for thousands over the years and ended up selling his company for hundreds of millions. He must have been doing something right.
Update: I received a call from a senior VP at Central — he told me that although Central and Monroe did strive for new business, that bonuses at the company were based on the profitability of a location. He said that certainly in recent years, the goals of managers have been to make a location well run and profitable using technology and good operations. In our discussions he concurred that there has been downward pressure on fees and that this has hurt the business. Asset managers are always looking for a ‘better deal’ and often his firm has to walk away from contracts because there just isn’t enough money to do the job.