Demand-Based Parking is Smart Parking

ryanHeadShotBWRyan Sullivan is the CEO and co-founder of Parkifi, a real-time parking spot occupancy platform, providing real-time data to parking lot operators, cities, and mobile applications.




If your facility is at full capacity when demand is high, you may think there’s nothing else you can do to increase revenue. But did you know that you can use periods of high and low demand to your advantage by adjusting pricing dynamically? This approach to demand-based parking can help you maximize your revenue.

Think about how demand affects both pricing and supply. For example, when baseball fans buy tickets for a game, a significant majority of fans would prefer to sit directly behind home plate to have the best view of the entire field. Of course, these high-valued seats are the most expensive, based on customer demand. As you move up into the bleachers, where the view becomes less desirable, prices for seats go down.

We have seen a similar phenomenon in the transportation space, with ride-hailing apps like Uber. They calculate how many app users in a given vicinity are seeking rides, while taking into account real-time traffic conditions. Then, pricing is set through what amounts to an auction process, calculating specific fares based on what the market will bear.

When it comes to parking, the same type of demand curve exists in a given city or neighborhood: certain spaces are highly coveted, based on their location, ease of access, and even space size. Time is an additional factor to consider. On certain days and times, the quantity of drivers competing for a given parking space can jump significantly, increasing demand. As an operator, you should take all of these factors into account when determining rates.

But how do you measure demand in order to set prices accordingly? An ever-expanding wireless sensor network and the widespread use of smartphones makes it easier than ever to gauge demand and take advantage of dynamic pricing.

If you’re thinking about implementing dynamic pricing to maximize revenue at your facility, here are four things to know:


Parking Prices Affect Many Stakeholders in the Community

Parking prices trickle down and have an impact on many different areas of the city–not just drivers. If parking prices are too high, people may avoid parking altogether. The result is that many spaces remain open, and in some situations local businesses can even lose customers. This decrease in business can result in the loss of employee jobs, and even less local tax revenue for the government. If prices are too low, few spaces are available and drivers cruise to find an open space, wasting time and fuel, congesting traffic, and polluting the air.  This is a lose-lose for everyone.

Some urban parking planners have discovered the value of utilizing a trial-and-error method of observation to fine-tune pricing in response to occupancy rates. By shifting from reaction to prediction when adjusting prices, operators can get closer to their target parking occupancy percentage.


Several Cities Have Already Seen Success with Demand-Based Pricing

Several cities around the U.S. recently have experimented with demand-based pricing systems for on-street parking, leveraging the growing capabilities of technology.

In San Francisco, the SFpark pilot program, launched in 2011, found that demand-based pricing resulted in drivers spending less time searching for a parking space: the average time decreased from 11 minutes to 6 minutes – a 43% decrease.  This also meant a significant reduction in the amount of traffic, making the area safer for pedestrians.

Parking facility managers in the San Francisco program met a target occupancy of 60-80% on weekdays between 9 a.m. and 6 p.m. Blocks that previously sat relatively empty when parking cost a flat rate between $2.00-$3.50 per hour experienced much higher demand with parking as low as $0.25 per hour in some locations, thus distributing demand more evenly and bringing in more revenue.

More recently, parking operators in smaller urban areas like the City of Boulder and Park Cedar Rapids, IA have installed single space sensors to monitor parking utilization, occupancy, and payments. Access to spot-by-spot data has transformed their understanding of their garages and lots. It has allowed them to generate real-time enforcement notifications, while driving additional revenue and increasing parking compliance.

Washington D.C. just implemented demand pricing for on-street parking to reduce roadway congestion and raise additional revenue. Prices on traffic meters in the city fluctuate based on current demand for parking spaces, using data from curbside sensors. In one downtown area with 1,000 spaces, prices now range from $2 an hour to $8 an hour, based on real-time demand.

The success experienced by municipalities with on-street parking shows what’s possible with demand-based pricing. As a private operator, you can take a cue from their playbook and experiment with pricing in order to maximum revenue.


The Political Concerns Around Demand-Based Pricing

Detractors of demand-based pricing argue it could result in exorbitant rates that make downtown areas less accessible to lower-income drivers. Consequently, San Francisco has had demand pricing in some neighborhoods since 2011, but political opposition has kept it out of others. Nonetheless, SFpark managers claim to charge the lowest prices possible without creating a parking shortage.

Supporters of demand-based pricing claim that because true demand dictates prices, politicians cannot raise rates solely to gain more revenue for the government. The process of setting the price for parking is based on a higher degree of transparency.

Despite political arguments on both sides of the issue, demand-based pricing ultimately offers consumers more choice. In an ideal scenario, where buyers can see the entire universe of available parking spaces and their various price levels, customers can choose their particular preference point, where value and cost meet.


Maximize Revenue with Demand-Based Pricing

For parking operators looking to maximize their revenue, adding a dynamic pricing capability can open up new market segments. During popular events, weekend nights or other times when demand is high, an increase in prices can help control occupancy in order to earn the most from these peak opportunities.

On the flip side, during times when demand is low, the ability to easily lower prices in order to attract additional customers to empty spaces just makes sense – not unlike a grocer lowering the price of produce which would otherwise spoil.

New technology innovations are enabling private parking operators to increase their flexibility in order to find that “Goldilocks” price point at any given time and yield the greatest return on their fixed-cost investments.

Thanks to sensors, Wi-Fi networks and automated systems, hitting that price point without the need for manual adjustments is now possible. Explore a variety of platforms and solutions to determine would ones can help you maximize revenue through demand-based pricing today.


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