December 2008, TruckingInfo.com - Cover Story
There has not been a new truck parking space built within 50 miles of a major U.S. city in the past 10 years. Over that same time, several major truckstops once located in or near these major centers have been bulldozed and turned into shopping malls or big-box retail centers. A similar fate could soon befall others. That would be devastating for truckers needing space to park in these areas, but you could hardly blame the owners and operators of these facilities for pulling the plug. The losses reported by some truckstop chains are remarkable, and one could only conclude, are ultimately unsustainable.
TravelCenters of America reported a loss of $101.3 million during the 11 months of 2007 after it went public, and 2008 isn't looking much better. For the first nine months of the year, TA experienced a 15.3 percent decline in fuel volumes over 2007 numbers and posted a $41.56 million net loss. Citing thinning traffic through its locations due to the recent economic decline, higher fuel prices, tighter margins, increased competition from "pumper-type" fuel stops, and other factors, TA's annual report for 2007 suggests the second-largest chain of full-service travel centers in the country may be sitting on a bubble.
Speaking at the recent Oil Price Information Service annual conference in Atlanta, Brian McClain, CEO of the Oklahoma-based Choctaw Nation Travel Plaza chain, noted that more than 900 independent truckstops shut down in 2007, "mainly because of a lack of cash flow."
Those attempting to stave off closure are turning to alternate sources of revenue - the traveling public, RV-ers, even bus tours. Others are talking openly about parceling off bits of land for a quick and profitable sale, or charging a la carte for services such as showers, check cashing and parking.
It's all part of a very disturbing trend of truckstop closures, business failures, and land-use reallocation that could significantly reduce the number of parking spaces available to truckers. The problem is particularly acute in urban areas, where demand for commercial real estate is strong, and land values exceed the ability of the properties to provide a return on operating costs.
In short, motor carriers concerned about parking space for their trucks had better start thinking about building terminals, or banding together to build terminals, because the truckstop chains aren't going to build where the trucking companies want them built, says truckstop operator Fred Kirschner.
"It's just too expensive, and you can't get the permits anymore," explains Kirschner, who operates a 30-acre, 285-space Petro Stopping Center in Scranton, Penn.
Many truckstops - particularly, though not exclusively, the smaller independents - have experienced a triple-whammy over the past 18 months. The stalling economy has reduced freight volumes considerably, resulting in declining fuel sales. The credit crunch saw many oil companies and fuel wholesalers restricting credit to even their better customers, tightening payment cycles from 10-15 days to 6-8 days, and fuel suppliers that have been unwilling to adjust available trade credit to accommodate the increased fuel costs.
For example, a $5 million trade credit would have allowed a retailer to purchase 2.5 million gallons of fuel at $2.00 per gallon With fuel at $3.00 per gallon, they could buy only 1.6 million gallons. That situation worsened as the price of fuel rose.
If some of the supply problems experienced around the country this past summer and fall weren't enough of a strain on their ability to survive, many other truckstops closed, or limited business to the restaurant and C-store, because they had used up their trade credit for fuel or got behind on payables because of the restricted credit terms.
THE RISE OF TRUCKSTOP AMENITIES
The truckstop business model has changed a lot in the past 40 years, as have the ways motor carriers do business. But for some reason, the expectations of fleets and drivers as they relate to truckstops haven't.
The truckstop industry started with Union 76 back in the late 1960s as a way to market diesel fuel. Most of the pioneers came from the petroleum industry. Restaurants began sprouting up around these place because they had a captive market. Drivers became instrumental in the fuel-buying decision, so truckstop operators began adding amenities like their own restaurants, showers, paved parking, and the like, to get drivers' business. Competition drove the truckstops to start offering perks like "cash back," free check cashing and green stamps to keep the drivers coming back.
Those driver perks were sustainable back in the 1970s because sufficient margins existed on the fuel sold. That's no longer the case. Two truckstop operators we spoke with suggest it would take a margin of about 10-20 cents per gallon to support the free services drivers have come to expect from truckstops.
WHO PAYS FOR PARKING?
Jim Miller of Sacramento's 49er Truckstop charges $12 per day to park if the customer hasn't purchased a minimum amount of fuel or paid for some other service offered on site. He gets complaints, of course, but only from those who don't buy fuel. The 49er is the only truckstop on California's share of I-80 west of Reno, save for a few mom-and-pop locations. He's levied the charge since 1991.
"We have to charge for the parking, and we make money on it," Miller says. "It's enough to cover our costs (lighting, repair, security, etc.), but we could never develop a facility today at that rate. The reason there are no truckstops on I-80 in California is land values. You're approaching a million dollars an acre in some areas, and that's just to pencil one in. Add the development cost, the environmental assessments, etc. - you just couldn't do it today."
The drivers who complain the most are often the ones who took on fuel somewhere else for a nickel a gallon less than the 49er charges. But do the math on an average 100- to 120-gallon fill, and you'll see the whole transaction, (fueling and parking) would actually be cheaper at the 49er.
If paid parking becomes a more popular revenue stream for truckstop operators, as some are saying it should be, the next question is, who pays for what? The fleet buys the less-expensive fuel at locations with few amenities; the drivers pay to park the truck at a location offering more of the creature comforts they prefer.
That arrangement will never fly, says Joe Rajkovacz, the Owner Operator Independent Drivers Association regulatory affairs specialist.
"Fleets can't keep downloading cost to drivers," he says. "We're past the breaking point already. It's getting expensive enough to eat on the road without adding parking to the burden. At $12 a day for parking, a driver would be looking at $25 a day to eat, shower and park at a truckstop. The money's not there, but even if it was, it's not the driver's responsibility to pay to park a fleet's truck overnight while complying with hours of service. That's part of the cost of moving freight."
NO ROOM AT THE INN
Certain parts of the country are plagued by parking problems, while it's not that bad in others. Metropolitan areas are clearly the worst. Available spaces are often full by 5 or 6 p.m. The 49er is jammed by 6:30 every night except Fridays and Saturdays, Miller says. Meanwhile, Rajkovacz claims that drivers who pull into a full-service truckstop looking for fuel and parking often come away with one, but not the other.
"You fuel up, you pay, and then you park," he says. "Once you've paid for the fuel, it's too late to discover the lot is full. If I saw truckstops making some effort to reserve parking - keeping space open for the trucks that they know, historically, will arrive throughout the night - for fueling customers, I might have a little more sympathy for them."
Fuel stops that offer minimal or no parking, but sell fuel at discount prices, have for years been eroding the fuel volumes at full-service facilities. Kirschner says it's coming to a head now that the buying patterns of drivers are changing too.
"They're not spending like they used to. They eat in their trucks rather than at the restaurants, and they buy little more than their morning coffee from us before leaving," he says. "The pumpers even give that away free. We [full-service stops] can't make it on coffee sales."
Miller notes there's another wrinkle in the deal: Comdata. He's an independent, and the fees Comdata charges the independents are far higher than the arrangements the chains have, he claims.
"The fees charged to the chains are somewhere between 30-65 cents per transaction," he says. "Comdata and others charge the independents a percentage that could run as high as 3 percent."
At 3 percent on $4 fuel, that's 12 cents a gallon transaction fee, or $12 on a 100-gal fill-up - the same amount Miller charges for 24 hours of parking. The situation has become so difficult that a coalition of independent truckstops has filed suit to resolve the issue.
Truckstop association NATSO's position on the transaction fees (finding themselves representing members on both sides of that particular fence) is that the fees are too high. Period.
"For years NATSO has been extremely concerned about the high costs imposed by third-party billing companies to process their proprietary fuel cards," spokesperson Christine Schoessler told us via e-mail. "These excessive charges result in higher than needed fuel costs for the truckstop industry's customers - including professional drivers. NATSO has repeatedly urged Comdata and other fuel card companies to lower their fees, most recently during this summer's fuel price spike. Our members are keenly interested in the outcome of this litigation, and we will continue to provide them with timely information and updates." Comdata declined requests for an interview, saying only that, "it is Comdata's corporate policy not to make statements on subjects where there is pending litigation involved."
So, with the so-called pumpers offering discounted fuel, having little overhead to cover, and getting a considerable cost advantage in the transaction fees, the truckstops that do provide parking will soon be faced with a few choices: price themselves out of the market trying to maintain the suite of services drivers and fleets depend on; continue offering the services at a loss; or close and sell off the real estate holdings to recover their investment.
One of the truckstop owners we interviewed for this story, who declined to be named, recalled a meeting he attended about parking that took place several years ago between NATSO and the Truckload Carriers Association.
"One of the TCA members had shortly before been hit with a $19 million judgment because one of his trucks had been struck by a passing car while it was parked on the side of the road," he says. "The trucking companies wanted to know when the truckstop industry was going to build more parking. The truckstop industry wanted to know when the carriers were going to ease up on the cost cutting and leave a little profit for the truckstops. That was the end of that meeting. There hasn't been a follow up."
Nothing will change if there's no cost to the status quo. If and when the truckstops start charging for parking to cover their costs - or their losses on fuel sales - there would be a cost to fleets, and thus an incentive to more carefully consider the best value in the fuel/parking transaction. Drivers won't be happy about paying to park your truck for the night, and would most certainly resist.
And then there's the out-of-route miles to consider. If truckstops start disappearing, drivers will be hunting far and wide for a legal place to park. And once a truckstop is gone, it's gone for good. "You couldn't possibly develop a new property near any major city these days," Miller points out.
Consider the example of the two TA travel centers located in Ontario, Calif. They sit on 80 or 90 acres of land adjacent to the intersection of two of the busiest Interstates in the country, I-10 and I-15. What's your guess as to the value of that property? TA is owned by Hospitality Properties Trust, a public company accountable to no one at the end of the day but its shareholders. HPT leaves the operation of the properties to TA in return for a fixed rent. If TA doesn't make the rent, your drivers could be driving to Barstow or Blythe to find a parking spot.