Parking Has Become A Major Profit Driver For Hotels

American hotels posted record-high daily rates and revenue per available room in 2023, but new research from CBRE hints that the parking space may be more important than the room when it comes to driving profits. 

Parking revenue at U.S. hotels grew 23% from 2019 to 2023, according to a CBRE study of 1,178 hotels, more than four times the total revenue growth of the hotel industry over the same period.

Profits from parking were up 32% across all hotel types from 2019 to 2023, and resorts have especially been able to charge premiums for a parking spot, with profits up 48%. At convention hotels, parking profits are up 7.5%. 

Parking department profit margins were 61.3% of total department revenue in 2023, compared to the 58.7% average for all other hotel services. 

Occupancy in 2023 at the 1,178 hotels analyzed by CBRE was still 9.1% below 2019 levels. U.S. hotel occupancy was up 0.6% year-over-year, according to CoStar, while average daily rates grew 4.3% and RevPAR grew 4.9%. 

The average hotel in CBRE’s sample earned $11.53 daily in parking revenue per occupied room, but the type of hotel makes a difference. Resorts earn an average of $14.85 per day per occupied room, while limited-service hotels, which are more likely to have free surface parking, bring in $8.35 per day. 

The destination-style hotels have been able to increase fees because they drew droves of travelers fleeing pandemic-era lockdowns. Airport hotels, many of which generate revenue from nonguests who use hotel lots as an alternative to airport parking, saw the second-fastest rise in revenue.

Resorts, with a wide array of amenities and services they can charge guests for, still only rely on parking for just under 2% of total revenue. Urban and airport hotels generate more than 3% of total revenue from parking costs, with extended-stay hotels that charge for parking relying on the fees even more, according to the CBRE analysis. 

Rising parking costs are part of the ongoing commoditization of the hotel space. During the pandemic, some hotel operators moved toward what MCR CEO Tyler Morse in 2021 called “à la carte pricing.”

By unbundling services and amenities from the cost of every night, the base rate for a hotel room can be lowered for a budget traveler, while everything from breakfast to pool access and late checkout can be added on for a fee. 

“The airline business is now doing 55% of revenue outside of fare revenue,” Morse said at a Bisnow event in 2021. “It’s a better business than the actual seat revenue business. The hotel business can get there as well.”

There could be more opportunity to grow revenue in hotel parking lots and garages by integrating electric vehicle charging services into the amenities package, Jim Hurless, CBRE’s global leader for EV infrastructure, wrote in the report. 

More than 200 companies already offer third-party integration tools to add charging capabilities to parking lots and incorporate it into the guest experience, including firms that integrate billing for car charging into the traveler’s hotel invoice, Hurless wrote.