Marina Management Contracts – Myth or Panacea?
Simon J Arrol CEng FICE
Are marina management contracts profitable for the marina operator, and are they a cost-effective choice for the marina owner? What is the reality behind this much-discussed aspect of the marina industry? This article, written by an internationally renowned personality, explains the pros and cons of management contracts. It also explains how the 4th edition of The Marina Manual will be the best solution for many marina owners.
Introduction
Developers spend many years and tens of millions of dollars designing and developing their marinas, but often pay no attention to managing the marina until a few months before the opening date! This situation occurs because most developers are property developers and have little knowledge about marketing, managing, and operating a marina.
A marina management contract appears to be the panacea the developer needs to avoid a crisis, but is this really the best solution?
Some marina operators have built up a portfolio of managed marinas and believe that they will generate healthy profits. But is this profitability real, or is it a myth?
Are Marina Operators Chasing a Myth?
Many marina operators like to compare themselves to the operators of luxury hotels, but there are huge differences between hotels and marinas.
Consider a five-star hotel with annual revenues of US$50m, and a 35% GOP (gross operating profit) of $16m. For a hotel operator charging 2% of gross revenue plus 7% of GOP that represents a fee of about $2.1m per year. Room revenue might be about $35m, of which about 40% would be booked through the operator’s website earning him a 6% commission worth about $0.8m. Therefore the operator’s total fee would be nearly $3m per year. (These amounts and percentages are given just as an example, and actual figures vary widely.)
On the other hand a typical marina might have annual revenue of $3m and a GOP of $0.7m. At 5% of gross revenue plus 10% of profit, the operator’s fees in this case would be a $0.22m per year. Few berth reservations are made through websites, so the operator has little chance of boosting his income from this source. The total employment and overhead costs of an experienced manager will be at least $0.20m per year, and the contract will absorb the fulltime equivalent (FTE) of one person. In other words, the bottom line profit to the marina operator will be close to zero.
To be fair, there is one case when it does make sense for an operator to manage a marina for a low fee. This is the case when the operator is also a yacht distributor, broker, or charterer. Because he is based at the marina he will certainly achieve greater sales.
The economies of scale to be gained from an international portfolio are relatively minor. The marinas will be located far apart, and every marina will be different in terms of its design and facilities. Furthermore, every client will have different expectations, and the various languages, customs, and legal jurisdictions of an international portfolio will add to the operator’s workload.
One thing is certain but rarely admitted. It is much simpler for an operator to manage his own marina than to manage his client’s marina!
One of the arguments put forward by operators is that their brand name will increase revenue for the marina owner. There is some truth in this, but not to the same extent as in the hotel industry. Travellers invariably have a favourite brand of hotel and will chose that brand when travelling nationally and internationally (e.g. someone who likes Hilton will stay in the Dubai Hilton in preference to one of the many other excellent properties in that city).
On the other hand the typical yacht owner rarely has the opportunity to apply brand loyalty when selecting a marina for the simple reason that most cities and yachting centres have only one, or at most two or three marinas, and therefore his favourite brand is unlikely to be present. In fact there are very few marina operators who manage more than ten properties, and most of these tend to be clustered in one region.
The yacht owner’s selection criteria in order of importance are probably:
• The location of the marina relative to his place of residence or work
• The quality of the sailing waters
• The range of facilities
• The price
• The quality of management
In other words, it is only the last of the above criteria where the brand and expertise of the marina operator may influence choice.
Is the Management Contract a Panacea for the Marina Owner?
As stated earlier, many owners hire a marina operator because they do not understand the marina business, and/or they are impressed by the operator’s brand, and/or they have left it too late to organise their own management team.
Some marina owners compare marina management to hotel management, but the scale and complexity of a large hotel far exceeds that of a marina. A five-star hotel will have multiple food and beverage outlets, conferences, events, hundreds of rooms, complex mechanical, electrical, and plumbing (MEP) systems, and about 1.5 FTE employees per room. For a 300- room hotel that implies about 450 employees. The hotel team will manage this with the help of standard operating procedures (SOPs).
By comparison a typical 300-berth marina in the western world will only employ about 15 people and its core operation will be the management of the berths/slips.
A management contract means that the owner will have to surrender day-to-day control of the marina, its employees, operations, finances, and marketing. If he does try to interfere then he will probably be in breach of the terms of the management contract. The marina owner should do everything through the operator, and this requires numerous meetings that are time-consuming for both parties. Truly, it is more difficult and time-consuming for the owner to manage his marina through an operator than it is to manage the marina himself.
The extent to which an operator will increase profit is debateable, and the owner will have to pay a substantial fee. Depending on the size of the marina the management fee is likely to be in the range $100,000 - $300,000 per year, plus the travel and accommodation expenses for the operator’s visits.
The marina management contract is not a panacea for the marina owner and an alternative should be considered.
The Alternative - Management by the Owner
If a developer has the skills to design, finance, and build a complex real estate or infrastructure project costing tens or hundreds of millions of dollars then he certainly has the organizational skills to set up a marina. His action plan might look like this:
T minus 24 months            Recruit a marina manager who will be involved with the final stages of the construction and equipping of the marina. Begin marketing.
T minus 12 months            Recruit a financial controller, senior dockmaster, and (if applicable) a boatyard manager. Set up the administrative and operations systems.
T minus 6 months                     Recruit the junior employees. Begin training.
T minus zero                      The marina opens.
The administration, training, and operations can be based almost entirely on The Marina Manual, which is a complete A – Z about how to manage a marina safely and profitably. The purchase price of the manual is a tiny fraction of the cost that would otherwise be spent on employing accountants and lawyers. And The Marina Manual will save the owner’s team many months of work and headache.
It would be normal for one or more independent consultants to assist the owner with technical advice and training during the 24-month pre-opening period, but this expense will be relatively low.
By managing the marina himself the owner stays firmly in control and builds the value of his own brand, instead of the brand of the operator. And over a number of years the owner will save millions of dollars in fees.

 

Developed and proven over 20+ years across many countries, The Marina Manual is the world’s only comprehensive publication dealing with the administration, marketing, safe operation, and profitable ownership of marinas.
Lawyers, accountants, and marina industry experts have reviewed The Marina Manual. It contains almost every piece of information and every document needed for the day-to-day operation of a marina. It will save the owner’s team hundreds of hours of work and many thousands of dollars in professional fees.
A marina that adopts The Marina Manual will almost certainly enjoy a reduced insurance premium, and it will also have a sound basis for achieving ISO 9001 and ISO 14001.
The Marina Manual is written it in very clear and simple English (a Chinese translation will soon be available).
A marina director or manager can be personally liable in case of accidents on the marina. The procedures and systems in The Marina Manual are designed to protect the management team from legal liability.世聯(lián)翻譯公司完成帆艇宣傳內容英文翻譯
The Marina Manual is authored by Simon J Arrol, the “Marina Guru”, who was for many years Managing Director of Camper & Nicholsons Marinas, and was later a Director of Island Global Yachting Dubai.

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