About a month ago I offered the first in a series, Questions That Are Rarely Asked. (Why do flight attendants have to collect pre-departure beverage cups, but you’re allowed to keep the beverage you brought onboard yourself?)
Today’s entry concerns airport parking: why are there always so many empty spaces, and more specifically why don’t parking lots adjust pricing because of this?
Casino hotels are the extreme, where historically they’ve adjusted their rates downward — even close to zero — to ensure they are as close as possible to full every night. If it takes a $9 rate to get there, so be it. But they earn incremental revenue from gambling.
But other hotels discount unsold rooms, such as though opaque channels like Hotwire and Priceline. Every room that stays empty is revenue they cannot ever get back. And the marginal cost of an additional hotel guest in an otherwise empty room is very low.
Airlines discount seats, virtually any revenue from a seat that would have taken off empty is cash positive for an airline.
But airport parking? Parking lots have the same characteristics as airplane seats and hotel rooms. They already exist, which means the costs have been incurred, and each day a space is empty that’s revenue that can never be earned back.
So why don’t airport parking lots discount their spaces? Here I’m talking about the official daily lots, not private off-airport parking. Interestingly, those lots do discount. They offer coupons. They offer frequent renter credits. They market aggressively to fill up. But generally speaking airport lots do not.
- The want to remain empty on purpose. Part of what they’re charging for is the reliability of finding a space whenever you need it, their mission isn’t to make money for the airport authority it’s to provide convenience to support the airport operation. So when you ‘overpay’ for a space you’re paying not just for your own space but for empty spaces as well, the convenience of knowing you’ll be able to park when you show up.
- Then why don’t airport lots raise price over Thanksgiving and Christmas? Peak holidays are the only times they do seem to truly fill up. If their mission is to ensure parking is always available, overcharging to accomplish that, shouldn’t they increase price in order to make sure that happens when demand outstrips supply at their usual price?
- Are the just insufficient incentives for airports to care? Or perhaps there are barriers that make it not worth prioritizing, since airport authorities are political environments and a controversial pricing model like discounting and surge pricing would have to be explained and perhaps voted on — why should an bureaucratic entrepreneur stick their neck out?
Every day plenty of spaces go empty, which means lost revenue for airports. That means either airports aren’t getting the funding they need, or they’re raising fees on flights — pushing away discount airlines, increasing ticket prices.
So isn’t this a real lost opportunity?
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To be honest, I think the lost opportunity cost is quite small. Very few airports are close enough to built up area to compete on convenience. If you are not in a position to compete with non-air customers, then you are left with surge pricing at busy times. We have all seen how Uber’s surge pricing has been received. I don’t think that is an option for publicly owned operations.
@Carsten I don’t think they are failing to compete with office parking, but with off airport parking (for passengers traveling that day) and with public transport (high parking prices encourage people to get to the airport a different way)
What airport are you flying out of that its lots always have a ton of empty spaces? Logan in Boston is regularly packed.
Could it be that airport municipal bonds were issued to pay for construction and those bonds have revenue covenants prohibiting discounting?
Something similar occured in NY at the Tappan Zee bridge where the frequent user discounting scheme ran into objections and maybe legal obstacles because the bondholders were guaranteed the cash flow and discounting threatened that.
I fly in and out of Portland (PDX)… being able to find a parking place is unreliable. I either book a park and fly hotel in advance, or take the light rail.
I think in this case the simplest explanation is the best one. You don’t want people being afraid there won’t be a spot when they show up (imagine driving from Front Royal to Dulles or such), and you don’t want people being afraid that there is going to be pricing funny business going on. So you keep extra spots and fixed prices.
I spent twenty years in the parking business and have operated several airports. The reasons for this static parking is several fold:
1. In the examples that you cite,the lower pricing will attract additional people – lower price = more demand. This does NOT work for airports, no one says “Hey Ohare has a sale on parking,lets go park there.”
The examples (casinos, airports) WILL see greater demand when they lower their pricing. Even the off-airport lots are driving demand – vs. official onsite. Off-airport compete to steal demand from on-site via lower prices, but these coupons etc are not dynamic pricing – good all the time.
2. Simpler to 1, but slightly different. Most people do not check the price of parking in advance. they either drive and park on-site, park off-site, or take cab/limo. The last they you flew I can promise you check price and I doubt you check the airport parking price.
3. Most (all?) airports are controlled by local governments. They are slow to change.
@john if you argue that off airport lots take cars away from on-airport through lower pricing, why wouldn’t discounting on-airport parking bring those cars back and increase demand for on-airport/fill those empty spaces?
I used to run AboutAirportParking.com and have a little insight into this.
1) On-airport parking operations are normally outsourced to some of the big parking companies (Impark, Standard Parking, etc.). These are relatively political and long-duration contracts and entrepreneurial go-gettedness is not usually the most important criteria.
2) Having said that, revenue from airport parking is very important to most airports. I heard the guy from DFW once and I think he said it contributed $80M to the airport a year. Landing fees and parking are the two biggest sources of revenue for a lot of airports.
3) Airports have sort of a dual role with off-airport operators. As a public service, they need the off-airport folks to provide spots in most markets (DIA is one exception). Yet they also want to keep much of the business for themselves. It’s a bit of a ying-yang. For example, SFO really needed extra parking space and then they build a massive lot themselves and suddenly got more competitive. The dynamics vary a lot by market.
4) As John sort of referred to, much of the on-airport demand is “captive”. People don’t actively pick it, they just drive up either out of ignorance or price insensitivity. Introducing discounting may not change behavior dramatically enough to make up for the lost profit margins on people that would go there anyway. Highly related is that a lot of business customers are just expensing it and don’t really care while parking is too small a line item for companies to crack down on cost in many cases.
Gary:
At a given airport there is a universe of parking (sort term, on-site long term, off-site long term). I believe (hope, assume) you see that pricing does not impact demand overall. Among the options, people make the decision where to park on several factors (price, easy in/out, buses, etc). On dynamic pricing you would try to increase behavior by raising/lowering pricing. In your particular example, if the airport on-site LOWERED their pricing,the most likely response is the off-airport would lower by the same amount to keep their competitive advantage. Then only the customer wins and not parking overall.
You must not park in CLT – most parking areas are full until the weekend. They cannot (and are not) building new parking areas fast enough!
PHX (Phoenix in Airport) offers about 50% off parking when booked on-line in advance. It’s even cancelable up to 48 hours before the date with a refund.
Fox Auto Parks at LAX, an off-airport part of Fox Rent-A-Car, has variable pricing depending on the date and travel load, i.e.Thanksgiving weekend is more expensive than their usual rate. Their on-line booking rate is lower than their drive-in rate.
I’m not normal, but I ONLY park at the airport if I’m running very late; otherwise, I use public transit. I am price sensitive, but I am also time-conscious, and I WOULD respond to variable pricing.
Seems like a number of people suggest variably altering the price down wouldn’t be helpful, but that logic is flawed if they can see that variably raising the price may be. Sounds like several airports haven’t managed their inventory to match to demand, which is what market pricing would solve. Efficiency isn’t just a win for the consumer, it’s also a win for supplier (people are NOT captive, they will fly more or less in response to total cost).
The answer is corruption and govt BS.
The two closest lots off airport at DTW are owned by the same person I was told. So much for competition.
I find it hard to believe that all players aren’t making an absolute killing off the parking at DTW.
And i bet the same is true at most airports.
Parking in general in low density cities is still outrageously priced because it is an unfair protected marketplace…. just how the govt likes it.
Disgusting.
Land of the free??
I like AUA airport. They have parking, but when driving back from Baby beach once, we took back road by the airport and saw 10’s of cars parked ostensibly for long term right on the shoulder = free. Can you imagine what the Romulus MI cops would do if they saw a bunch of cars parked on DTW’s back road across from the fence? They’d probably call in whatever fascist tanks and SWAT teams the police departments have nowadays and Monster Car Demolish the parked cars.
Land of the Free?