Debunking common myths about revenue management for parking

Pauline Oliver, Head of Global Business Development, Parking, IDeaS: “An experienced revenue management partner can help determine the right data to utilise in a vast sea of complex information from PARCS systems, online reservation systems, and other areas that can inform predictive analytics.”

An interview with Pauline Oliver, Head of Global Business Development, Parking, IDeaS. By Ross Falconer

A parking space, like an airline seat, is perishable inventory. If the parking space isn’t filled, it doesn’t generate any revenue. If it’s priced too low, the car park is likely to fill up and run out of space. If it’s too expensive, the risk is spaces will remain vacant and the opportunity is lost.

“This is very simplistic,” says Pauline Oliver, Head of Global Business Development, Parking, IDeaS. “The reality is demand changes over time, and price sensitivity varies by customer segment and by length of stay. Automation, advanced analytics and dynamic pricing are key for airports wishing to maximise revenue and optimise capacity across multiple car parks, customer segments and sales channels.”

With that in mind, Oliver here dispels some of the “common myths” about revenue management and dynamic pricing for parking:

Why bother with revenue management when parking is dying? Everyone is using rideshare.

“It is true that rideshare is extremely popular and has forever changed consumer travel behaviour. Digital transformation in the mobility space is moving at a rapid pace, and how we plan for and organise our journeys is becoming increasingly connected and personal. People haven’t stopped travelling, and global airport passenger traffic is expected to double in the next 15 years. A large percentage of those travellers will continue to arrive at the airport in a car they wish to park. Revenue management gives consumers greater choice and provides airports a reliable toolset to make data-driven decisions today that will maximise parking revenue while providing insight and analytics to determine strategies that will take advantage of future parking demand. Significant revenue potential exists for those airports prepared to adapt.”

My car parks are busy. I’ll just increase the prices and build more parking facilities.

“No matter how busy your facility is, you simply cannot continue to increase price without reaching a tipping point. The relationship between price and demand means that the higher the price, the less you will sell. With a busy car park understanding the optimal price is important, but just as important is understanding how to optimise the inventory. A good business practise is using price to balance demand across all of your available car parks today for optimal utilisation and revenue return. Once that is done, predictive analytics can help determine the need for additional capacity.”

I have plenty of capacity, and some of my car parks are not busy. I don’t need it.

“Plenty of space represents plenty of opportunity. Revenue management is critical for not only optimising space-constrained car parks but also selling excess capacity. An analytically derived forecast of true demand puts an airport in a position of strength to know when to run targeted marketing campaigns and by how much to discount to attract travellers on the less than busy days.”

My parking reservation system provides my yield management needs.

“Reservation systems and online booking tools are essential technology for any airport wishing to improve their parking revenue stream. These solution providers are tuned to the airport’s needs providing customised buying journeys, real-time transactional e-commerce, and integration to payment gateways and your parking equipment. They also provide a range of pricing tools that will allow, even automate, variable pricing. Yet these tools are largely reactionary and rules-based in nature. If the goal is to optimise revenue, then it is essential to also invest in an automated revenue management solution that uses predictive analytics to accurately match price with demand for optimal revenue performance.”

Most of my business is drive-up. What’s the point?

“Even if 100% of your business today is drive-up, the balance will begin to shift when online booking is introduced. Knowing how to effectively price your online channel not only ensures that it continues to grow and contribute higher revenues per available space, it will also protect the premium pricing of your existing drive-up channel. Discounting too deeply online can damage your drive-up revenue by cannibalising revenue, even when the majority of business is still drive-up.”

It won’t work, you can’t just apply surge pricing at an airport.

“Surge pricing, thanks to Uber, has a negative connotation and can come across to the consumer as price gouging. Yet dynamic pricing is not to be confused with this overused buzzword. Rather than raising prices, most airports that offer online booking have been discounting their parking spots since they went online.

“Airports that offer online parking reservations discount in various ways, and variation from the ‘gate-price’ is expected. Demand-based, dynamic pricing presents no differently to the online buyer – the price is the price. What lies behind it – the data science – means that the price points are carefully tuned to customer demand and buying behaviour.”

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