How do you decide if scanner integration is worth it as a business investment and a commercial real estate investment without trying one out yourself?
To save you the time and money, ParkingExec dug into a real case study and today we’re sharing the results. The case study itself demonstrates the value a scanner can add to a parking business, and the conclusion adds a shocking commercial real estate perspective on top of that.
SITUATION: Scanners As A Means To Grow Business
A 120-space subterranean parking facility in a major city accepting monthly, transient and online reservations wanted to make a push to increase revenue.
After exploring several options, the operator decided to make the online reservation redemption process easier by installing a scanner in order to drive sales. A scanner can cost anywhere from $1,200 to $12,000 for two lanes, and software adds an additional $99-$160 a month. ParkingExec collected revenue data at this facility to determine if the investment in a scanner paid off.
EXPERIMENT: Comparison Of Two Facilities Across The Street, One With A Scanner
We measured the revenue of the facility mentioned above and a competing facility for a month. We will call the first facility “Scanner Facility” and the other facility “No-Scanner Facility.” At the beginning of the experiment, neither facility had a scanner. The facilities are located across the street from one another in a top 5 US city. Here is a quick rundown of both facilities:
|Scanner Facility||No-Scanner Facility|
|online sales||online sales|
|1 hour = $16||1 hour = $16|
|2 hours = $25||2 hours = $24|
|120 spaces (valet when full)||accommodates 600 cars|
After one month of data collection, we put a scanner in Scanner Facility and continued measuring revenue for another month to see if the scanner would help. The results were really amazing!
RESULTS: Scanner-Enabled Facility Saw 4 Month Payback And $3,500+ Increase In Revenue
No-Scanner Facility was outperforming Scanner Facility before scanner installation. However, once the scanner was added to Scanner Facility, revenue increased by $3,865.56, or 972.92%. That’s almost a 1,000% increase!
Revenue in No-Scanner Facility actually decreased by 1.15% after the scanner was installed in Scanner Facility.
Installing a scanner at Scanner Facility ended up taking business away from No-Scanner Facility, allowing Scanner Facility to increase its market share of parking revenue in the neighborhood.
The graph below shows the percent change in revenue in the two facilities from the month before scanner installation in Scanner Facility until the month after scanner installation:
If Scanner Facility used the most expensive scanners (~$12,000), they would pay for themselves in fewer than 4 months, assuming an average online sales profit of ~$3,500. These calculations were made without taking taxes and online reservation commission into consideration in order to make the results generalizable across cities and reservation companies. However, even if payback doubled to 8 to 12 months, installing scanners would still be a reasonable investment. Here’s why.
CONCLUSION: Scanners Payback Quickly & Increase The Value Of The Property
In addition to increased monthly revenue, installing a scanner at your facility also significantly increases the property value from a commercial real estate standpoint. It’s easy to explain using an example:
Imagine you have a facility valued at an 8 CAP. That means the net operating income (NOI) of the property is 8% of the property asset value.
Now imagine you install scanners that cost you $12,000, and your average onlines sales profits are $1,000 a month. This would get a 12 month payback period.
Here’s where it get’s good. An extra $12,000 annualized income on top of your 8 CAP property would increase the valuation of the property by $150,000. That seems like an easy investment to make.
But it gets better. Full scanner integration has been proven to drive growth by 5-10x compared to non-integrated facilities. If your facility was making $1,000 per month and installing a scanner increased monthly revenue to $5,000 (the low side of the estimate), your annual profit would increase by $60,000, not just $12,000.
An annualized profit increase of $60,000 would increase the property valuation by $750,000. All for just a $12,000 initial investment and a small monthly software fee.
If you own or lease a parking facility, how can you argue with that? If you manage one, you can impress the owner with that piece of knowledge.