OC’s Beach Rental Stand Revenue Increases In Auction

OC’s Beach Rental Stand Revenue Increases In Auction
File photo by Chris Parypa

OCEAN CITY – The beach equipment rental business remains lucrative judging by the results of a recent auction of the parcels in the downtown area.

During Tuesday’s meeting, City Clerk Diana Chavis announced the results of an auction for the downtown beach rental franchise parcels in the downtown area south of 27th Street. The town’s beach equipment rental franchise parcels, or informally beach stands, are auctioned in a three-year cycle with geographic areas including the north end, the middle and the south end.

The latter were either auctioned to new operators or saw their options for renewal picked up. There was one midtown parcel including three blocks from 57th to 59th streets that was also auctioned because the previous successful bidder defaulted on his payment arrangements to the town.

The south section up for grabs last month included 34 parcels, of which 14 were auctioned. On the other 20 parcels, the prior successful bidder exercised his or her right for renewal. All in all, the December auction resulted in $418,500 for the downtown section, representing an increase from the $337,580 collected when the section was last auctioned three years ago.

In some cases, the new successful bids increased considerably from when the parcels were last auctioned three years ago. For example, the parcel at the Inlet increased by 61%, while the parcel at 3rd Street increased by 63% and the parcel at 12th Street went up by 47%. There were some parcels that saw their successful bids decline this time around by about 22% or 23%, but in most cases the values continued to increase. Incidentally, the three-block parcel from 57th to 59th streets went to the successful bidder at $17,000, representing an increase over the $10,000 previous bid on which the operator eventually defaulted.

Various market forces are at play in the bids for beach stands. Some are influenced by new real estate developments such as a new hotel or condo project. For years, the traditional beach equipment rental franchise business has been challenged by the proliferation of cheap, practically disposable umbrellas and chairs from deep-discount rental stores. All in all, however, the bids for the south-end parcels indicate that area remains lucrative.

There are complicated market forces at play in the beach rental franchise business. In some cases, operators bid overly high on a parcel adjacent to one of his or her best performers day in and day out during the summer to insulate a strong parcel from direct competition from a neighboring operator. In that example, an operator attempts to obtain blocks of adjacent parcels from an economic and practical standpoint.

Of the 28 south-end parcels that went up for auction in December, one operator obtained 16 alone, while another obtained seven. Most of the rest obtained one or two scattered parcels. The single-highest bid for one parcel was the Inlet, which went for $82,000, representing a 61% increase. The second-highest single parcel was the 3rd Street, which was among those renewed for a second three-year term at $70,000, or a 63% increase from the prior year.

Overall, the south end new contracts or renewals represent over $1 million in revenue for the town. All in all, the town’s entire beach equipment rental franchises bring in about $1.4 million annually.

“These are impressive numbers,” Council Secretary Tony DeLuca said. “Thank you for exceeding expectations year after year.”

The council voted 5-0, with Councilman Will Savage absent and Councilman Peter Buas recusing himself, to approve the beach rental franchise bids as presented.

About The Author: Shawn Soper

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Shawn Soper has been with The Dispatch since 2000. He began as a staff writer covering various local government beats and general stories. His current positions include managing editor and sports editor. Growing up in Baltimore before moving to Ocean City full time three decades ago, Soper graduated from Loch Raven High School in 1981 and from Towson University in 1985 with degrees in mass communications with a journalism concentration and history.