Selling parking spaces is kind of like airlines selling seats, or hotels selling room-nights. The supply of parking is pretty much a fixed quantity: it's not like new parking spaces are made available every day (or planes suddenly fly with more seats, or hotels suddenly have a new wing of rooms to sell).
Because the quantity is fixed you want to maximize the usage of the spaces (or seats or rooms) by filling those spaces every day. A day that a parking space remains empty generates no revenue - just like an empty seat on a plane that has taken off.
What's interesting about selling out the spaces - but not overselling them - is that it serves two purposes: (1) it maximizes revenue at the current price, and (2) it maximizes the number of satisfied customers. Oversell may generate more revenue but it dissatisfies some parkers who can't find space. Underselling generates less revenue and potentially fewer total satisfied customers.
In the case where your supply of parking spaces or airplane seats or hotel rooms is mostly constant you have to use pricing to try to manage the demand. Having a number of parking spaces is actually irrelevant, what you want to do is create a
scarcity of available spaces. The key is to find the price at which all the spaces sell, but no more than all of them. Economically speaking, this matches the supply and the demand in a way that satisfies the most people at the highest price. Making the price higher will drive away customers, and making the price lower will result in a shortage of spaces.
Airlines realized this a long time ago, and have come up with many ways of trying to fine tune pricing so that the passenger
load factor (the ratio of full seats to available seats on a given flight) is as close to 100% as possible. Pricing for a seat on a particular flight can be revised or altered several times a day by computer systems trying to sell out the plane.
In what ways to airlines use creative pricing? We're all familiar with these.
Probably the most common pricing differentiator is by using a "class" system - first class, business class and coach class are three differentiators. The parking equivalent could be the garage near the building versus the economy lot further away.
Additionally, seats within a class might be priced differently. In coach the airline passenger has the option of paying a premium for an exit-row seat, or for a seat with extra legroom. The parking equivalent here could be reserved spaces near a door, or perhaps parking in a nested area on a given floor of a facility.
Airlines also set their pricing based on the desirability of the flight. Morning and evening flights are more popular than afternoons, so these are priced higher.
Wednesday is unpopular for flying so it's cheaper, while Friday and Sunday are the most traveled and subsequently higher priced. Parking does the same thing: early bird specials encourage parking before the rush hour; while special events might cause prices to spike on a weekend.
What is a little more unusual about the airline seat-pricing model is that the airline is aggressive at selling out the seats. The airline computer systems and predictive modeling will change the price of a seat multiple times, even in the same day. If the flight looks like it will sell-out then the remaining seats (the scarce ones) increase in value. Now imagine if parking operations did this - varied the price of the stall based on the number of remaining stalls!
There is a parking operation attempting to do this. The
SF park project in San Francisco has received a lot of parking press lately on their goal of adjusting meter prices monthly so as to create a small amount of empty spaces on each block-face. The idea is that parking should be mostly full most of the time. The City plans to combine parking management software, space detection equipment, and a variety of metered parking devices to create gather sufficient data to price spaces monthly. Too much availability? Drop the price. Parking too scarce? Raise the price. It's the free market at work!
It's a simple concept but requires a complex implementation. Many eyes in our industry are watching to see how this works. In terms of the airline's sophisticated daily pricing adjustments, these monthly parking updates are as close as we'll get for a while. But rest assured that if this experiment is a success then you'll see more and more parking operations pricing like airlines.
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