OCEAN CITY — Faced with declining revenue from the north-end beach stand parcels, resort officials this week considered increasing the maximum threshold for the number of parcels a single operator may hold in the interest of sparking competition.
The results of the auction for 18 beach equipment vendor parcels on the north end of Ocean City from 85th Street to the Delaware line were announced this week, revealing a sharp decline in most from the previous three-year bidding cycle. Overall, the bids for the 18 north-end parcels were down about 10 to 12 percent.
The bids for some parcels were down by as much as 81 percent, 77 percent and 71 percent with many others in the 40-50 percent range. There was one parcel on which the bid increased by 113 percent, but that was somewhat of an anomaly. Overall, the combined bids for the 18 parcels came in at $148,700, or roughly down $20,000 from the $168,100 in the last bidding cycle for the same section of beach.
Various market forces are at play in the bids for the beach stands. Some are influenced by new real estate developments such as a new hotel or condo project in the area. Overall, the beach equipment rental franchises have seen their values decline over the years with the proliferation of cheap, practically disposable umbrellas and chairs from deep discount retail stores.
By and large, however, the beach stand bids are influenced by competition. City Clerk Diana Chavis, who presented the auction results on Monday, said a clause in the city ordinance that limits one vendor to 50 percent of the total parcels up for bid has hurt competition in the bidding process somewhat.
Council Secretary Mark Knight said the 50-percent rule was influencing competition for the parcels up for bid and recommended reviewing the policy for future beach stand bids. “The beach equipment franchise bids are down 10 percent,” she said. “Part of that is we have an ordinance that allows a single vendor to only hold 50 percent of the parcels. I think we need to look at all of these policies. I’d like to see the beach equipment rentals come up for discussion. That is revenue we’re losing.”
Chavis said that theory appeared to hold up with the auction of the 18 parcels in the north end earlier this month.
“There was a single bidder for seven of the 16,” she said. “With little competition, there was a substantial decrease in the bids.”
Chavis said there has been interest from some in the beach stand vendor community to bid on more than 50 percent of the parcels and agreed the policy should be revisited.
“One operator wants to hold more than 50 percent,” she said. “My recommendation is to accept these bids, but I also recommend increasing that threshold from 50 percent to 60 percent. That would open the door for someone to competitively bid for these other parcels with just one bid.”
Councilman Matt James said the numbers related to the overall decline in the bids was somewhat deceptive because they were weighted on just a few parcels.
“Most of the parcels are down 40 percent,” he said. “One parcel is up 110 percent. That skews the numbers somewhat and I just wanted to point that out.”
Councilman Tony DeLuca moved the conversation to the town’s policy on pre-set umbrellas for the beach equipment vendors. For years, beach stand operators have placed pre-set umbrellas and other guest set-ups for renters in prime locations along the water’s edge. Chavis said the policy is five pre-sets per parcel and DeLuca questioned if that number should be altered.
“I would not recommend that,” she said. “It would reduce the value of the parcels. I do reach out to the operators any time we get a complaint.”
Mayor Rick Meehan said he often monitors the pre-set umbrellas on his morning bike rides in the summer and reports back to Chavis.
“You know when I ride my bike down the Boardwalk in the morning, I look out there and see that and my first stop is to see Diana,” he said.
Councilman Mark Paddack said the issue is more acute in the south end.
“This being the north end, I think it’s less of an issue,” he said. “The more valuable parcels are in the south end. Reducing the number of pre-set umbrellas would devalue the parcels. You could probably get away with a little less in the north end than on the south end. Those operators take full advantage of that. They are lined up at the towel line from the north side of the pier all the way up.”
DeLuca said he often sees pre-sets far exceeding the five allowed per parcel.
“Often there are eight or nine when there should be five,” he said. “Who monitors it really? The whole front of the beach is gone for a block.”
While the city clerk’s officer monitors the beach stands and handles complaints, Paddack said the police department is also involved.
“The police do a very good job of mediating those complaints in the field,” he said. “I know there were issues on our beaches in previous summers, especially in the southern district.”
The council voted unanimously to approve the bids from the recent auction for the north-end parcels. The council also decided to remand the discussion of increasing the maximum ownership figure from 50 percent to 60 percent to spur competition in future years.