Parking facilities are designed to help travelers access new destinations, and the industry is undoubtedly on the move. Air travel has rebounded smartly in the post-pandemic economy, and the need for easy, convenient parking at airports has risen along with it. According to the 2023 Airport Economics Report, parking represents roughly 37 percent of all non-aeronautical revenue in North America, growing as travel and consumer activity increases. In just one example, Minneapolis–Saint Paul International Airport recorded over $100 million in parking revenue throughout 2022, establishing parking as the airport’s number one source of revenue.
Parking is a critical source of revenue for airports. Yet, many operators rely on a one-size-fits-all approach to parking rates, voluntarily handing revenue over to public transportation and ride-sharing services. Global passenger air travel is expected to double from 2024 to 2042, and operators who plan for and adapt dynamic pricing to their parking strategy will be better positioned to fund their future while adapting to consumer behavior. There is an opportunity for airports to do just that by adopting artificial intelligence and data analytics technology to optimize their earning potential at a time when travel is again a priority for consumers.
While revenue optimization as a science might be unfamiliar in a parking setting, airports can benefit from viewing parking spots, like airline seats or hotel rooms, as perishable assets. If parking prices fail to align with consumer willingness to pay, these spaces go unfilled, and no revenue is generated. Furthermore, unsold spaces for that day cannot be sold again–their potential revenue is lost entirely.
However, if travelers encounter discounted prices at the right time, airports have the potential to gain additional revenue. Airports that have embraced “demand-based” dynamic pricing technology are earning more based on optimizing existing parking demand, attracting new customers, and driving travel based on price flexibility.
Revenue management as a discipline has existed in the parking industry for some time, but North American airports have been slow to adopt technology designed to support this strategic thinking. Airport parking closely resembles the hospitality industry regarding operation and opportunities when growing revenue. Both parking facilities and hotels benefit from demand-based dynamic pricing models–and both industries have ample runway to benefit from adopting these tools and capabilities.
Dynamic Parking
Access to dynamic pricing technology allows airports to forecast demand, track consumer purchasing behavior, and adjust parking rates in response to current parking supply, demand forecasts, and emerging trends. Revenue management technology also oversees a parking facility’s key data touchpoints. This technology adjusts parking rates daily and can track the results while deploying them to guests.
Many parking operators have traditionally relied on a static, linear pricing strategy, which requires little management but unnecessarily caps the property’s earning potential. Revenue management technology allows business owners to automatically optimize rates based on advance purchases and parking availability. Revenue management tools also allow operators to push discounts for advance purchases directly to guests, provide faster service with fewer delays, and even ensure a guest’s desired parking spot is available before arrival.
While revenue optimization seems idyllic, the travel industry is expected to increasingly rely on these strategies as the parking management market matures, and time to adapt is quickly running out. Revenue optimization innovations have already proven their value across the industry, and their further adoption will escalate the push for greater consistency and efficiency across the parking market.
Park and Ride
The most common concern airports have before adopting revenue optimization technology is the perception that such strategies take advantage of “surge pricing” trends. Surge pricing increases rates in response to demand, while effective dynamic pricing discounts rates within a preset minimum and maximum window. As a result, travelers benefit from the best possible rate without discouraging travel due to surge pricing. These trends are even more pronounced internationally, and it’s up to operators to decide if they are in the correct position to begin experimenting with parking rate flexibility.
It’s not just the technology that is new to the industry but the language used to discuss it. Some parking operators believe that by implementing a simple variable pricing scheme (e.g., adjusting rates by time of day or day of week), they’re already receiving the full benefits of revenue management. While this is a step in the right direction for improved revenue generation, these operations often miss out on additional revenue-generating opportunities driven by truly dynamic pricing that quickly adapts to demand and availability to find optimal rates.
Combined with a pre-book reservation system, a genuinely impactful parking revenue management system can leverage accurate data based on evolving market dynamics. Revenue management also allows parking facilities to monitor and evaluate drive-up and pre-booked business to understand the property’s business mix. Airports can leverage the value of individual parking spots to optimize revenue and attract more travelers, such as distinct rates for spaces located closer to the terminal, long-term parking, valet service, and more.
The post-pandemic era has been lucrative for the parking industry, driving more travelers to use personal vehicles rather than rideshare services when possible. This trend undid some of the firm grasp rideshare companies have had on parking market share. Traveler sentiment on this topic continues to favor parking over rideshares, and a recent study found ridesharing was more expensive when compared to parking at 36 of 50 analyzed U.S. airports.
Successful parking revenue management depends on access to reservation capabilities and data management tools. These services have already proven their value across the hospitality and travel spheres and are now elevating profitability in parking management. The best option for operators is to let technology and data-driven insights lead the way.
Ryan MacLagan oversees the parking industry vertical and is the revenue management evangelist for the IDeaS parking division. He partners with clients to understand their needs, assists them in developing their revenue roadmap, and recommends the appropriate solutions to achieve their goals. He has brought revenue management to many major airport car parks worldwide, including Heathrow, NYC/Port of Authority, and more.
