Dynamic Parking Prices & Online Reservations Prove Popular at Ontario Int’l

Dynamic Parking Prices & Online Reservations Prove Popular at Ontario Int’l
Author: 
Kristin Vanderhey Shaw
Published in: 
May-June
2019

Ontario International (ONT) wasn’t looking for a digital parking upgrade. In fact, the Southern California airport was focused on adding a new lounge. In the end, it got both by issuing a request for proposals with intentionally wide parameters.  

“I wanted to accomplish two goals,” explains ONT Chief Executive Officer Mark Thorpe. “We needed a new lounge for China Airlines, but we were open to other creative business proposals, too. MAG USA offered to build an Escape Lounge and also help us grow our parking revenue. It was a double victory in that sense.”

Parking is a key issue at ONT due to rising enplanements driven by continual expansion in the area. Located about 40 miles east of Los Angeles and 20 miles west of San Bernardino, ONT is in the heart of one of the fastest growing population centers in the U.S.—an area also plagued by notorious roadway congestion. Moreover, the airport draws steady tourist traffic from Disneyland in Anaheim. Last year, ONT served more than 5 million passengers. 

facts&figures

Project: Online Parking Reservations
With Dynamic Pricing

Location: Ontario (CA) Int’l Airport

Development & System Design: MAG USA

Completed: Dec. 2018

Financial Implications: No upfront investment from airport; airport shares revenue from online bookings with system developer 

Key Benefits: New discounts for customers based on demand & availability; ability for airport to recapture parking business from longer-duration parkers; more predicable revenue models 

When vying for customers, ONT stresses an easy in-and-out experience compared to nearby alternatives. It is also able to operate 24/7, without the curfew restrictions that many airports in Southern California must observe. Offering customers the chance to save money by reserving a parking spot through the airport’s website may prove to be a competitive advantage, too. 

In total, ONT has five parking lots plus valet service, and officials actively work to attract passengers to on-site parking. Typically, the airport collects more than $17 million per year for parking despite a plethora of off-site competitors. 

With the new system operating since December 2018, the airport is enthusiastic about making the change to online booking and dynamic pricing. 

“Airports, like airlines, never want to be the first one to try something,” says Thorpe. “But for us, the reward was totally worth the risk. I couldn’t be more pleased with how this is starting off.”

Beyond Online Booking 

After the airport signed an agreement with MAG USA, it took the company about six months to implement the new system. The modern online booking option is designed to make reserving a parking spot at ONT as easy as booking a hotel or flight. Dynamic pricing and yield management result in better efficiency and revenue maximization for the airport, explains MAG USA President and Chief Executive Officer Martin Jones. By pairing the reservation system and data analytics with search engine optimization, social media, third-party distribution and advertising, the new program is driving more traffic to the site, reports Thorpe. 

The system is administered by MAG-O (short for MAG online), a division the company established two years ago that has since grown exponentially. What initially required four employees now requires about 150. Essentially, the group packaged MAG USA’s capabilities into a system that resembles a software-as-a-service (SaaS) solution with four main components: a booking engine; marketing services to help drive demand; capabilities that allow customers to book via various methods on multiple channels; and an umbrella trading module. 

The system sells parking the same way Hotwire and Priceline sell hotel rooms, car rentals and airfares—offering discounts for capacity that might otherwise go unused. At ONT, it’s helping fill parking spots that previously remained empty. As Thorpe explains it, the airport is recapturing parking revenue by selling a great deal of inventory that in the past “spoiled.”  

Jones explains the genesis for the program this way: “Ten years ago or so in the U.K., everybody was taking a ticket and paying the equivalent of $20 per day to park. It was difficult to plan because we didn’t know who was going to park at the airports, nor could we stimulate demand. So we really couldn’t compete with other travel options.”

The company consequently developed a system that provides customers with dynamic pricing driven by more than 3 million machine learning algorithms and 3,000 predictive models. By reserving their parking in advance, passengers gain peace of mind and sometimes a lower rate. The algorithms can be changed on a dime to offer right-sized pricing based on demand. The result is more satisfied customers and a better revenue source for the airport, says Jones.

“The vast majority of U.S. airports work on a price-per-day model,” he explains. “Typically, passengers will park for an average of two days. After that, it becomes more advantageous for them to take a train or taxi. We can match the parking price based on what length stay a passenger is looking for.” 

Thorpe agrees, noting that ONT’s biggest competitors for parking revenue aren’t other airports, they’re off-site lots and other transportation options to the airport. 

John Wildman, vice president of parking for MAG USA, says that ONT is the first airport to execute true dynamic pricing by offering parking options at the right time to the right customers. He believes it’s important to keep up with companies like Amazon, which offers customers a streamlined experience; so MAG USA monitors its software and changes with the market. 

“There are a number of airports that take reservations online,” he says. “But it’s managing the whole approach holistically that creates value. It requires a real culture change because, innately, airports are not technology companies. They might purchase a product and they think they’re done for a while. In this case, constantly harnessing data analytics and thousands of forecasting models integrates parking into as many channels as possible for long-term growth.” 

The new system at ONT approaches airport parking the same way airlines have priced seats for decades, adds Thorpe. 

“The great thing about dynamic pricing is that usually, the price is less for the customer,” he says. “Those who are more price-sensitive can find a better rate than customers who roll up willing to pay the posted price.”

 

Enthusiastic Reception

Jones says the biggest surprise was how many passengers chose to pre-book online. “There was a kind of pent-up demand,” he explains. “Customers are parking longer, which has been pleasing to see. Now people are staying for four, five, even 10 days or up to a month. And that’s good, because that means we’re touching the market of people who would not have parked here before.”

Thorpe appreciates that the new online system did not require up-front investment from the airport. Instead, it struck a revenue-sharing agreement with MAG USA that is based on incremental growth. If parking revenue increases more dramatically, MAG USA does not receive a windfall; the agreement is designed to favor ONT in such circumstances.  

“We earn the incremental revenue, and MAG USA’s algorithms protect the existing rollup revenue, which allows us to maintain our premium parking income,” explains Thorpe. “They get a share of what they sell, not of all parking revenue. If you think about how much airports pay to bring in buses and parking systems, making parking more attractive to customers is much more efficient.”

Other Possible Developments

An on-site parking lot that was closed by Los Angeles World Airports in 2006 (when it still owned and operated ONT) is being eyed for possible redevelopment or alternate use. By offering competitive pricing and valet service in the lot, the airport could produce more revenue and possibly buy back that real estate and grow the airport, explains Thorpe. 

Offering valet service would present the opportunity to bundle parking services with lounge access, which in turn brings in more food and beverage revenue. “Valet service is particularly interesting for us, because we have 50 acres dedicated to parking that I hope we can eventually use for other purposes,” says Thorpe. “Something like terminal space or commercial development would generate even more revenue than parking. 

“Additionally, we can look at the break-even point and figure out what the best price point is. The roll-up fee might be $25 per day; but for those who pre-book, it might be $15 or $20. Not only is it a great service, but you can keep the valet folks much busier and customers more satisfied.”

Subcategory: 
Parking

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