Parking providers hold many false impressions about the potential for online reservations to increase revenue. We’ve debunked the myths.
Online parking reservation companies are baffled.
‘Our products should sell themselves!’, they cry. ‘Why don’t car park operators understand? Why don’t hotel managers understand? After all, they’re on Booking.com, LateRooms, Expedia and more. We’re exactly the same, but for parking spaces!’
The reality is that many misconceptions are held about the value online bookings can add to a car park’s revenue stream.
Meet Carl Parker. We speak to him over the phone and via email every day. He is the everyman of parking asset management. He sounds a bit like this:
'I keep hearing that selling parking spaces through online reservation companies can boost revenue for car park operators.
I just don’t know how the operator will recover the commission charged by these companies!
YourParkingSpace is supposed to be the top online company for pre-book parking in Britain. But they charge 20% on every booking, so I pay £2 for each £10 transaction. They won’t shift the cost to the customer, so how do I make up for this expense?
Most businesses work to recoup their expenses and make a profit. That’s the whole idea of doing business! These online companies expect parking operators to eat the cost of using their service – or, to shift the expense to drive-up customers.
How on earth do online reservation companies think they’re increasing our profits? They’re making thousands of pounds a year from operators like me.
For every expense we can’t recover, our employees are hit the hardest by lower salaries and reduced benefits. Do online companies know they’re stealing from our hard-working staff?'
His mindset is defensive; he thinks you have a product to sell, so he will need to pay for it. How can you address his misgivings and explain that a future partnership can be a win-win scenario?
The truth is that an online reservation strategy stands to serve car park operators in two key ways. Carefully setting parking rates and availability of inventory will allow the landlord to maximise revenue. Consequently, the landlord can measure the impact of partnering with a reservation platform against their parking profit targets, in order to fully understand the partnership’s success.
Sales through online reservation platforms ought to pay for themselves from day one: they bring incremental revenue to the car park facility, without incurring net costs.
Let’s take a look at two potential situations in Carl’s parking facility and unpack the possibilities for adding value.
Carl’s car park has empty spaces
Listing his car parks online would expose empty spaces to a fresh audience and prevent Carl from losing money.
Parking spaces are perishable goods. They have fixed, sunk costs. Their value cannot be stored so you can re-sell them later. Like hotel rooms and airline seats, parking spaces must be sold within a limited time period, else their value to the landlord will simply disappear. Therefore, selling your spaces at any price will secure income which is preferable to nothing at all.
If your car park has any number of empty spaces at any time of day, it makes sense to list them online to recoup revenue which would otherwise be lost. Even if you have to adjust your rates to stay competitive with other online providers, it’s an obvious decision.
Imagine your fixed rate is £10 per day. Any space that remains empty will not generate any income. By partnering with a reservation website which takes 20% in commission, you can attract a much wider audience of drivers from the online community and earn an easy £8 – which is evidently better than nothing!
Carl’s car park is already full
Online reservation platforms have the power to secure additional revenue for Carl, even when his car parks appear to be full.
It’s simple to reach the conclusion that filling your facility means you have successfully maximised its potential to generate revenue. This is a mistake which could be costing you a great deal.
In fact, online reservations hold the key to helping you raise the revenue ceiling. You might have tried raising your day rate from £10 to £15, but found that this higher charge has re-routed some customers to cheaper facilities elsewhere. £10 seems like the maximum rate you can demand whilst maintaining a fully-occupied car park.
This is where you can leverage an online sales strategy. Experimenting with price and availability of spaces for the drive-up and online markets can boost income from a ‘full’ car park.
Say your £10-per-day car park has 20 spaces to fill. When you raise the drive-up cost to £15, you may still sell 15 of those. Try listing the remaining 5 spaces online at your original rate – or something less than £15. This should mean your facility is full once more, with 15 drive-up and 5 online customers. Here’s how the revenue breaks down:
- £225 from 15 x £15 drive-up payments
- £40 from 5 x £10 online payments, minus 20% commission
In total, that’s £265 from a car park which could previously earn you a maximum of £200 per day. Over a year, that’s £23,725 in additional revenue from just one small car park!
By experimenting with variables, you could earn even more. You could try raising drive-up rates further and listing more spaces online; perhaps your online spaces would sell at a higher price still. You may wish to experiment with different online reservation partners. They will charge varying commission, attract different audiences of motorists and have contrasting marketing tactics to bring you more revenue.
How to build the right strategy for you
In the real world, most car park operators will fluctuate between the first and second scenarios. Sometimes they have an excess of empty spaces and other times their facilities will be full. A whole host of environmental factors may contribute: local events, holiday seasons, decisions made by competing parking providers. The business of car park management must be dynamic. Operators will succeed in unlocking their full potential of their facilities by closely monitoring trends in occupancy. Adjusting price and availability in response to the current situation will ensure that you maximise income all year round.
For those who aren’t sure where to begin, remember that online reservation partners have years of expertise. In order to flourish, their businesses must provide added value to their clients! ParkMaven provides a smart dashboard to communicate occupancy, booking and revenue data in one place, designed to help operators make the pricing and marketing decisions outlined in this article. But even if you’re not ready to implement a software-based solution, online partners can work with you to ascertain goals, develop strategies to meet them and measure the impact of online sales.
Ultimately, online reservation companies can only ever earn you additional income from parking spaces that would otherwise have perished. Partnering with one is the simplest way to get ahead of tech-sceptical competitors like Carl.