U.S. Gas Station & Convenience Store Update Q2 2023

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Artificial intelligence (AI) has made startling progressions and has started to make its presence felt in various sectors. Gas station & c-store sector is no exception. AI can bring significant benefits to gas stations and convenience stores in the US by optimizing operations, enhancing customer experience, and improving decision-making. Here are some ways AI can help:

Inventory Management: AI can predict demand for various products based on historical data, weather forecasts, and other factors. This can help gas stations and c-stores optimize their inventory levels, reduce overstocking or understocking, and minimize waste.

Price Optimization: AI algorithms can analyze market trends, competitor prices, and customer behavior to optimize fuel and product pricing. This helps maximize revenue and maintain competitiveness.

Customer Insights: AI can analyze customer data to identify patterns and preferences. This information can be used to personalize promotions, recommend products, and enhance the overall customer experience.

Predictive Maintenance: For equipment like fuel pumps and refrigeration systems, AI can predict maintenance needs based on usage patterns and sensor data. This helps prevent unexpected breakdowns and reduces downtime.

Energy Efficiency: AI can monitor energy consumption patterns and suggest ways to optimize energy usage, thereby reducing operational costs and environmental impact.

Supply Chain Management: AI can provide insights into supply chain disruptions and help optimize logistics for timely product deliveries.

Personalized Marketing: By analyzing customer data, AI can help create targeted marketing campaigns that resonate with specific customer segments, boosting engagement and loyalty.

Payment Processing: AI-powered payment systems can streamline transactions, offer mobile payment options, and improve the overall checkout experience.

Traffic Flow Management: AI can analyze real-time traffic data to predict peak hours and manage customer flow, ensuring efficient service during busy times.

Fraud Detection: AI can analyze transaction data to detect fraudulent activities, such as credit card fraud or pump skimming, helping to protect both the business and customers.

Customer Service Chatbots: Implementing AI-powered chatbots can assist customers with inquiries, provide information about products and services, and even process transactions, improving customer service efficiency.

Security and Surveillance: AI-enabled cameras and sensors can monitor the premises for security breaches and unusual activities, enhancing the safety of the gas station and customers.

Data Analytics: AI can process large volumes of data to provide insights into customer behavior, purchasing trends, and operational efficiency, helping management make informed decisions.

Gas station brands which have successfully implemented AI: 

Sheetz: This convenience store chain has been known for its innovation in using technology to enhance customer experience. They’ve implemented touchscreen ordering systems, mobile app-based ordering and payment, as well as loyalty programs that leverage customer data for personalized offers and promotions.

7-Eleven: 7-Eleven has been employing AI-powered inventory management and supply chain optimization to ensure that their stores have the right products at the right time. They’ve also experimented with cashier-less stores and mobile checkout options.

 AI impact on gas station & c-store building valuation 

AI can have several indirect impacts on the valuation of gas station and convenience store buildings. While AI itself may not directly determine the value of these properties, it can influence various factors that contribute to their valuation. Here’s how AI might impact the valuation process:

Operational Efficiency: Implementing AI solutions can lead to improved operational efficiency, reduced costs, and increased revenue. For instance, AI can optimize inventory management, pricing strategies, and energy consumption. These improvements can positively affect the overall profitability of the business, which in turn can impact the property’s valuation.

Customer Experience and Revenue: AI-powered tools can enhance customer experience by offering personalized promotions, seamless transactions, and improved service. Satisfied customers are more likely to frequent the establishment, leading to increased revenue. A consistent revenue stream can positively influence property valuation.

Predictive Maintenance: AI can help in predicting and preventing equipment failures, reducing downtime and maintenance costs. This can indirectly contribute to cost savings and business continuity, factors that are considered when valuing a property.

Q2 2023 Cap Rates  

Average cap rates for U.S. gas stations & c-stores decreased by 12 basis points in Q2 2023 as compared to Q1 2023. The following table illustrates minimum, maximum and average cap rates for gas stations & c-stores in Q2 2023 & Q1 2023.

Analytical Summary

Source: RealtyRates.com

Cap Rates	Q2 2023	Q1 2023	Difference (bps)
Minimum	6.33%	6.37%	-4
Maximum	13.46%	13.62%	-16
Average	8.29%	8.41%	-12

Q2 2023 – Transaction in focus

In Q2 2023, BP Products North America Inc. completed its $1.3 billion acquisition of TravelCenters of America Inc. This acquisition marks “a milestone for the U.S. in the growth of BP’s strategic convenience and mobility business,” according to BP.

The transaction will add a network of about 280 travel centers, located on major highways across United States

It will almost double BP’s global convenience gross margin. Additionally, it will bring growth opportunities for four of BP’s five transition growth engines, including EV charging via BP pulse, convenience, biofuels/ renewable natural gas (RNG) and, later, hydrogen. EBITDA is expected to grow to around $800 million by 2025.

(Source: CSP Magazine)

Outlook

65% of consumers are worried about rising gas prices according to a survey conducted by NACS. After hitting a four-decade high of 9.1% in June 2022, inflation has slipped each month over the past year. Despite the downward trend, inflation’s ripple effects will be felt for months and even years to come. But the gas station & convenience store industry is strong and fluid, having adapted to a changing consumer as well as technological interventions like AI, and some industry experts see a light at the end of the inflation tunnel.