Most hotels in urban centers profit considerably off of available parking capacity and, depending on the garage size and operational strategy of the hotel owner, garages can be significant value drivers. Our experience reflects that parking garages can operate with departmental profit as high as 40% to 50% if managed internally, or garages can be significant profit centers when operated by experienced, third-party garage operators. With more and more travelers using shared ride services to get around town, smart hotel operators are renting excess parking capacities on monthly contracts to commuters working in adjacent office buildings. These monthly contracts can boost profits even higher. Moreover, monthly pass users leave garage capacity available overnight when hotel guests may require the spaces the most.
This summer we completed our first annual survey of typical overnight parking rates nationwide. Not surprisingly, the highest rates for parking are generally found in New York City, including the $95 parking rate currently charged by The Plaza. Nightly rates at luxury and upper-upscale properties in New York City, San Francisco, and Chicago tend to trend near the $70 to $75 mark. By comparison, most other city centers offer overnight parking at a bargain or do not charge for overnight parking. Also note the following findings:
- The following data reflect valet parking charges; if self-parking is an option, we have found these hotels discount the valet parking rate by $10 to $15 dollars on average.
- Hotels that reported free parking (when the range in the table begins with $0) are generally located on the fringe of central business districts, and not directly in the center of downtown.
- Luxury and upper-upscale hotels fall at the upper end of the range, whereas midscale hotels fall at the lower end of the range.
- Bold green reflects the cities with the highest overnight parking charges, whereas light green still reflects high parking rates, but not at the nation’s peak level.
From a valuation perspective, be careful when comparing properties in city centers. A few may have major parking components (abnormal for a market) that skew a value high on a per- key basis, compared to another similarly-sized property on solely a room-count basis. It is important to inquire about garage utilization by daily and monthly users, daily parking rates, monthly contract rates, and the trends in all of the above over the last several years.
Data collection assistance provided by HVS team members Yi Ann Pan, Ziggy Hallgarten, and Bryanna Andersen.