The Time Has Come for Dynamic Parking Pricing

Dale Fowler

Parking is a vital revenue source for airports. On average, it’s the second biggest money-maker, trailing only gate fees; and at some airports, parking even surpasses gate fees. Yet, as important as parking is to the bottom line, most airports don’t earn nearly as much as they should. 

Dale Fowler 

Dale Fowler is president of INDECT USA. INDECT has provided parking
guidance systems to airports across the globe, including Dallas/Fort Worth International Airport, Dallas Love Field, Tampa International Airport and San Diego International Airport.

The problem is that unlike other products and services, it has always been difficult to apply market-driven pricing to parking. Whereas, the price of such commodities as food, clothing, or even entertainment can be adjusted based on demand, cost and other market factors, the price of parking remains relatively static. Until recently, there hasn’t been a good way to constantly measure parking demand and adjust prices as demand rises and falls. The best airports have been able to do was to look at historical data to predict future behavior, and then set prices accordingly. Pricing is based on little more than guesswork, because no matter how much data you have about past parking demand, it’s impossible to know for certain how much demand there will be in the future.

The good news is that these challenges have finally been conquered. Modern parking guidance technology and access and revenue control equipment now make dynamic pricing possible. In recent years, many airports have installed parking guidance systems to monitor spaces and guide drivers to those that are available. The software that runs the technology also analyzes utilization and can be customized to continuously monitor occupancy levels and automatically modify pricing in real-time. If occupancy rises above a certain level, the price is raised accordingly; if it falls again, the price is dropped. The appropriate pricing information is transmitted to the access control equipment, which charges the appropriate rate when the traveler exits the facility. For the first time, airports can base their pricing on utilization, rather than on guesses about how full or empty their facility will be. 

Of course, as with guidance, communication is required for the system to work. Just as the sensors communicate in real-time to tell parkers how many open spaces are available on each floor or aisle, the system must also communicate how much parking costs at that exact moment. You can’t have drivers entering a parking lot or garage expecting to pay one amount, only to be charged more when they leave.

With dynamic pricing, airports can finally earn the actual value of their parking assets. Experience shows that dynamic pricing can increase parking revenues by as much as 35%, and if you factor in decreased labor and associated costs permitted by the system, increased profits can actually reach 50% per month. 

One concern airport administrators may have is that market-based pricing will drive away business. However, experience shows that business actually tends to increase because parkers seem to appreciate knowing that the rates they are being charged are based on the actual value of the space, and not some arbitrary number. Of course, the sensors that are managing the system also continue to guide drivers into open spaces, which makes the entire parking experience more convenient and pleasant—and attractive—to travelers. It also gets travelers into the terminal more quickly, where they can patronize restaurants and shops.

Not all sensor systems can manage dynamic pricing, though. While accuracy is essential in any type of parking guidance system, it’s particularly important when the price of parking is being adjusted on the fly. Inaccurate systems can cost airports thousands of dollars by improperly dropping prices when occupancy is too low. With dynamic pricing, anything below 99%+ accuracy is unacceptable. 

Dynamic pricing can provide extraordinary benefits to airports. It’s a concept whose time has come, and we finally have the technology at our disposal to make it a reality. 

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