By William Dupley
Parking has become a never-ending frustration for commuters. These days, many would be more than happy to be picked up and dropped off by a drone to eliminate the headache of traffic and parking. As such, it’s no secret that significant technological trends on the horizon are about to put tremendous pressure on the parking industry.
There is a unique opportunity to increase revenue in the parking business based on this demand, one that is currently available to those who can optimize their parking assets. This begs the question: “how?”
How do you (as an organization) utilize data collected from smart parking systems to accomplish this?
First, we’ll address this topic with a discussion of the trends facing the parking industry. Then we will examine the smart parking value stream to uncover potential revenue.
By 2020, it is projected that the parking industry will be severely disrupted by driverless cars – although some say this is wishful thinking. Waymo began as the Google self-driving car project back in 2009. Today, they are an independent self-driving technology company invested in making it safe and easy for everyone to get around. Waymo is pushing the envelope and is already testing pricing and teaming up with public transit in the Phoenix area.
Without a doubt, driverless cars will significantly impact North America by 2030. The typical North American family owns 2.1 vehicles. As the need to transfer family members is still inarguably present, car ownership will continue. But by 2030 that number is expected to reduce to 1.2 vehicles, a reduction of 43% based on one self-driving household car.
With all that said, there is a bright light at the end of the tunnel for the parking industry: driverless cars still need to be parked. Think about this simple fact – four driverless vehicles can be parked in the space of three regular cars as the need to open doors is nonexistent after passengers exit. This can allow up to 25% additional vehicles to park in the same lot.
Michigan has found that subscription car services could result in a 51% reduction in car ownership. As a result, there will be roughly a 40% reduction in parking demand particularly in urban areas.
Undeniably, millennials prefer to live within walking distance of their work. As their families expand, they will favour locations where downtown centers and transit are easily accessible. In fact, it has been shown that some millennials aren’t even interested in obtaining a driver’s license as a result of public transit and self-driving car revolutions.
In addition to the increasing expenses of inner-city parking, cities like London, England, are now charging a congestion fee. This fee applies between 7:00 am and 6:00 pm Monday to Friday and excludes public holidays. This fee alone results in costs of generally 10 GBP (or $13 USD) per day. Additional charges such as these and other supplementary fees are making parking far too expensive and much less reasonable for your average motorist.
So, where are the opportunities in light of these changes? According to one report, there are four purposes for parking:
|4. Appointments/Private Business||31.8%|
What this shows is that the impact of a price change is particularly felt by those who use their cars for work. According to one report, if parking costs rose by 133%, 99% of commuters would use an alternative method of transit.
Initially, this may seem negative. However, a parking lot full of monthly paying customers does not produce the same amount of revenue as a parking lot which is 90% full of casual users. This is illustrated below. In this model, the financial predictions are based on the following assumptions:
|Number of spots||Parking Usage||Percentage of Users||Duration of Stay||Price Per Hour||Occupancy||Revenue|
|645||Other (recreation, Private business)||31.80%||8||$6.00||90.00%||$8,860.75|
|Total Daily Revenue||$25,278.85|
*Price is increased by 133%*
|Number of spots||Parking usage||Percentage of users||Duration of stay||Price Per Hour||Occupancy||Revenue|
|645||Other (recreation, Private business)||31.80%||8||$14.00||80.00%||$18,377.86|
|Total Daily Revenue||$47,620.61|
Although shopping users are sensitive to the cost of parking, business parking users are not. Consequently, the first target for increasing revenue is to focus on short-term parking customers.
Parking inefficiencies in the Gastown area of Vancouver are evident. One parking lot sells 100% of its spaces to monthly customers, yet when examined, the parking lot had 50% of spaces empty at any given time. After doing some analysis, they found that the business customers only used the parking spots during business hours and the residential customers only used spots during the evenings.
This meant that they could timeshare the same parking spots between business and residential users since they were not used at the same time. This effectively freed up a floor of parking for temporary customers at a higher price point.
The key to both of these new revenue opportunities is data. Knowing who is utilizing the spaces and their sensitivity to price is crucial to increasing revenue. A smart parking system is necessary to accomplish this.
A smart parking system is much more than a bunch of sensors. A truly intelligent system that drives decisions consists of the following capabilities:
In addition to the data collected from these smart parking systems, two new methods of increasing revenue will also be created.
Value chain analysis is an excellent way to identify how parking authorities can benefit from the new smart parking technology. In subsequent blogs, the following four areas of the smart parking value chain will be examined:
In last month’s blog, we discussed “Why do companies fail?” One of the key reasons was the firm’s inability to adjust their business model using new technologies. Over the next ten years, the parking industry will face significant challenges to its revenue model. However, parking will still be required, and there are opportunities for those who are willing to embrace the smart parking approach.
About the Author:
Bill is the Digital Strategist for FoxNet Solutions. Formerly the Cloud Chief Technologist for Hewlett-Packard Enterprise Canada, Bill has provided Hybrid IT and IoT Strategic Planning advisory and planning services to over fifty Private and Public sector clients to help them migrate to a Hybrid IT Cloud Operating model. These transformation plans have helped both government and industry reduce the cost of IT, re-engineer their IT governance models, and reduce the overall complexity of IT. Bill is also a member of the Open Alliance for Cloud Adoption Team and has co-authored several documents on Cloud Maturity and Hybrid IT implementation.