Airport Parking Pricing Strategies (2022)

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12 As each airport is unique, when selecting and prioritizing their parking products, services, and parking rate strategy, the management of an airport consider the characteristics of their airport, their customers, and the market it serves. Management also consider the capacity of their parking facilities, the parking products offered, how these facilities are operated, and the technologies used to calculate and collect parking fees. 3.1 Influence of Airport Characteristics on Parking Rates Key airport characteristics that influence airport managements’ selection of a rate-making strategy are described as follows: • Physical size. Airports located on large sites have ample room for large surface parking lots, both in the terminal area or elsewhere, and are likely to be able to accommodate the needs of their customers. Airports located on small sites or with constrained terminal areas may require multi-level parking structures and/or remotely located parking facilities. • Number of locally originating enplanements. Passengers connecting between aircraft do not require parking. Out-of-town visitors (i.e., non-residents) who are dropped off or picked up by family or friends may create demand for parking, but the associated number of spaces and per-passenger revenues are significantly less than those associated with local passengers (i.e., residents). • Mix of legacy and low-cost carriers. Low-cost and ultra-low-cost airline passengers are likely to be more cost sensitive and less time sensitive, influencing their choice of parking facilities and willingness to pay higher parking rates. • Proportion of international passengers. Passengers flying overseas are more likely to park for longer durations than those flying domestically. As such, they are likely to be more sensitive to parking costs. In some communities, passengers flying overseas may be accompanied by many meeters/greeters and well-wishers, resulting in greater demand for convenient, close-in parking. • Geographic location. Paid parking is more common at activity centers and land uses in large metropolitan areas than in rural and smaller population centers. Passengers at airports located in large metropolitan areas are accustomed to having to pay for parking, and to paying high parking fees in certain cities. • Size of catchment area. Airports serving large geographical areas may find those customers traveling long distances to be less price sensitive than customers traveling from nearby loca- tions because of the higher costs of the alternative travel options available to them (e.g., TNCs or scheduled buses or vans). C H A P T E R 3 How Airports Operate Public Parking and Collect Revenues

How Airports Operate Public Parking and Collect Revenues 13   • Competition posed by the following: – Other airports. Some passengers have a choice of airports and may, in addition to available airline service and required travel time to the competing airport, consider parking facility quality, space availability, and cost when selecting their preferred airport. – Off-airport parking businesses. Off-airport parking businesses frequently offer competitive parking rates and services to attract airline passengers. Airports seeking to maximize market shares and revenues may be affected by the rates offered by off-airport businesses. Some air- ports, particularly those with limited parking capacity, consider these businesses “partners.” – TNCs. Customers, particularly those parking for multiple days, may find it less expensive to use TNCs than to park at the airport. TNC customers may adversely affect an airport’s market share and affect or limit the economy parking rates that an airport is willing to charge. • Type of airline business agreement. The management of airports with compensatory or hybrid agreements have greater latitude in the use of parking and other non-aeronautical revenues than those with residual agreements, and may be more willing to seek to maximize parking revenues. • Availability of other access modes. Reflecting the goals of the local community, the manage- ment of some airports encourage airline passenger use of public transit or high-occupancy vehicles and discourage motorists from dropping off or picking up passengers at the curbside to reduce vehicle miles traveled and vehicle emissions and promote sustainability. Parking customers’ choice of parking or use of an alternative access mode are influenced by differ- ences in cost, travel time, and convenience between parking and alternative access modes. 3.2 Influence of Customer Characteristics on Parking Rates The mix of business and non-business (leisure) passengers varies among airports, with the mix influencing parking-rate-making strategies and facility needs. Business travelers are typi- cally more time sensitive and less cost sensitive than non-business passengers. Each passenger’s willingness to select a specific parking facility or park in a given location reflects their perception of these and other convenience factors as well as their willingness to pay higher fees for additional levels of convenience. A customer’s willingness to pay higher fees is influenced by the following characteristics: • Household income. Passengers with higher discretionary incomes are typically less sensitive to parking costs. Conversely, the rates at an airport serving a customer base with less discre- tionary income may be more constrained. • Reimbursement of costs by others. Passengers (such as a business traveler) who will be reimbursed for their parking costs by an employer or others are likely to be less sensitive to parking costs. • Age. Older adult customers may be uncomfortable walking longer distances and prefer more convenient, close-in spaces. • Party size and amount of baggage. Family groups with several large pieces of luggage, such as strollers or car seats, may be uncomfortable using shuttle buses and negotiating stairs. • Length of stay. Motorists parking for short durations while dropping off or picking up airline passengers typically prefer spaces located near the terminal and are willing to pay higher park- ing fees for use of these convenient spaces. • Length of trip. The cost of leaving a vehicle at the airport for long durations (e.g., a week or more) may discourage some passengers from parking at the airport, or encourage use of the least expensive parking facilities. • Comfort with structured parking. Studies have reported that some customers have negative perceptions of parking structures, particularly with regard to their personal safety.

14 Airport Parking Pricing Strategies 3.3 Typical Airport Parking Facilities and Parking Products Most U.S. airports offer some combination of hourly, daily, economy, and/or valet parking. The availability of these products, customer preferences for these products, and the capacity of the individual facilities influences management’s choice of a parking-rate-making strategy. Airports typically offer customers a range of parking products at varying levels of cost and con- venience. Typically, product pricing is influenced by convenience factors as determined by the • Proximity to the terminal building (including unassisted walking distances, number of level changes, availability of weather-protected and grade-separated paths, and the need to cross active curbside or other roadways); • Ease of finding an empty space located in the customer’s preferred parking facility; • Availability of covered spaces or weather protection; • Availability of transportation, including scheduled shuttle buses or people movers, or on-demand trunk-to-trunk services; • Availability of valet parking at the terminal curbside or within a parking facility; • Ability to reserve a space or access a reserved area of the facility; and • Availability of spaces designated for customers with special needs (e.g., passengers with dis- abilities) or driving electric vehicles. ACRP Report 24: Guidebook for Evaluating Airport Parking Strategies and Supporting Tech- nologies (2009) and other sources listed in Appendix A report additional parking products and facilities. The parking products most commonly found at U.S. airports are described in the follow- ing paragraphs. 3.3.1 Hourly/Short-Term Parking Generally located close to the terminal area, these facilities are typically intended for meeters/ greeters and well-wishers. Meeters, greeters, and well-wishers are customers picking up or drop- ping off airline passengers either at the curb or in the parking facilities. These customers park for short durations (less than 4 hours). Prices for short-duration parking are usually set relatively low to encourage use of parking and alleviate congestion at the curb. To maintain space avail- ability for these shorter-duration transactions, daily rates, especially in areas intended for use by meeters/greeters and well-wishers, are higher than at facilities dedicated to long-term parking. 3.3.2 Daily or Close-In/Terminal Area Parking A parking facility is considered a close-in parking facility if it is located within a convenient walking distance of the terminal building entry and exit doors. At most large- and medium-hub airports, terminal area spaces are provided in a multi-level parking structure directly accessible from the terminal building through pedestrian walkways or elevated bridges. This self-park product is typically the most expensive parking option, reflecting the high level of convenience associated with the shorter walking distance to the terminal and the weather protection. These facilities are predominantly used by less cost-sensitive customers such as business travelers, and usually experience peak accumulations mid-week or on other weekdays. 3.3.3 Economy/Remote Parking Economy parking facilities are generally surface lots located further away from the terminal building than the daily products. Because of the long walking distances between the economy facilities and the terminal building found at larger airports, shuttle buses or automated people

How Airports Operate Public Parking and Collect Revenues 15   movers are normally provided by the airport to transport passengers. This self-park product is typically the least expensive option on the airport. To increase the level of convenience offered by these facilities, some airport operators also offer covered parking spaces and on-demand shuttle services. Economy parking facilities are predominantly used by cost-sensitive customers such as leisure travelers and usually experience peak accumulations on weekends. 3.3.4 Valet Parking In contrast to the aforementioned parking products, valet parking services do not require the customer to park their vehicle. This product offers the highest level of convenience, as the customer does not have to look for a parking space nor walk (or carry their luggage) between their parking location and the terminal building. Upon arrival at the airport, the customer drops off their vehicle at the departure curb (or other designated location), and the vehicle is then returned to them at the curb (or other designated location) upon the customer’s return. While valet parking is typically offered at an airport’s terminal curbside, some airports offer valet service in a remote parking facility. 3.4 Common Methods of Operating Airport Parking Facilities A range of operating methods is used by the airports surveyed, which influences their rate- making strategies. Airport owners commonly use one of three methods, or hybrids of these methods, for key elements of parking facility operations, including revenue collection, shuttle bus operations, traffic controls, and facility maintenance. As described in the following para- graphs, the three primary operating methods involve operating parking facilities using airport staff (i.e., self-operations), a management contractor, or a concessionaire. As illustrated in Figure 5, an airport operator’s ability to control customer experience, assure operational efficiencies, and enhance net revenues differs with each of the three operating methods. 3.4.1 Self-Operation With self-operation, all staff responsible for the day-to-day operation of the airport parking facilities are employees of the airport operator. On a day-to-day basis, airport staff define customer service standards and directly interact with the customers. Staff also establish and manage monthly and annual budgets, revenue control procedures, and all other aspects of parking operations. Source: Jacobs Consultancy 2009. Figure 5. Airport public parking operating model.

16 Airport Parking Pricing Strategies With self-operation, the airport owner retains all revenues but pays all capital and operating costs. Of the three primary methods, self-operation allows the airport owner to retain the greatest portion of gross revenues, assures the highest level of control of customer service, and provides the most oversight of daily operations. It also places full responsibility for rate-making decisions and analyses on airport staff. With self-operations, all parking staff are employees of the airport owner, and their salaries, benefits, and work rules are the same as those of other airport employees. The salaries and benefits of employees of a municipality or public agency such as an airport are generally higher than those of the comparable staff of private companies, such as the companies retained for the other two methods of airport parking operations. Since the majority of parking operations costs are related to staffing, the costs of self-operations are generally higher than the other two methods of operation. Self-operation also presents the airport owner with the highest level of risk exposure from unsatisfactory or improper revenue collection and controls, customer service levels, or facility operations and maintenance. Also, with self-operation, if there is a sudden, unanticipated change in parking demands and staffing needs, it is more difficult to reduce (or add) staff with self- management than with the other management options. 3.4.2 Parking Management Contractor With this option, the airport owner selects a parking management company or contractor who is responsible for all aspects of the day-to-day operation of the airport parking facilities and for providing, training, and supervising the necessary staff. The management agreement defining the contractor’s responsibilities is frequently augmented by local ordinances and standard operating procedures governing daily parking operations. The management contractor may provide every element of parking management—including shuttle bus operations—or just one element. Contractors are generally competitively selected based on their qualifications and those of the designated parking manager and key staff as well as their proposed fees. With this option, the airport owner retains all revenues less the approved direct costs of the management contractor and the agreed-upon management fee. Direct costs include staff salaries and benefits and other approved costs including overhead. Airport staff review and approve the management company’s annual budget, staff assign- ments, and labor schedule and establish standards for operation and revenue collection proce- dures. They also oversee the contractor’s compliance with the approved budget and compliance with the established standards and procedures. This review is performed to assure that the contractor is operating efficiently as well as fulfilling its contractual obligations. Airport opera- tors using management agreements typically employ one or more full-time staff with experience in parking operations to oversee the management contractor performance and budget. Management agreements allow airport operators to take full advantage of the professional services of specialized contractors—including advising on parking rates and rate-making strat- egies. These companies frequently have experience gained through operating airport facilities nationwide as well as operating other publicly and privately owned parking facilities. This expe- r ience, combined with the “private employer” status (i.e., salary/benefit costs that are lower than those for parking staff employed by the airport) often translate to lower costs and thus higher net revenues compared to self-operations and a concession contract, depending on the salary cost differentials. With this management method, a high degree of risk is contractually shifted away from the airport owner to the management contractor. While reducing costs and shifting risk, this method also lowers the airport operator’s level of direct control over daily operations. The airport owner

How Airports Operate Public Parking and Collect Revenues 17   retains all revenues less expenses but receives no income guarantee from the management con- tractor. As noted, experienced airport staff are required to oversee the parking management company, but fewer airport staff are required than with self-operations. 3.4.3 Parking Concession Contract All staff responsible for the day-to-day operation of the airport parking facilities are employees of a qualified parking company (or concessionaire). The concessionaire’s responsibilities are defined by a contract with the airport operator. Airport policies and local ordinances are aug- mented by the concession contract, which typically defines the minimum customer service stan- dards and other aspects of parking operations. The concessionaire may provide just one element of the parking operation, but frequently provides every element. Companies are generally competitively selected using a bid process based on a minimum annual guarantee (MAG) amount bid, with the percentage of gross revenues to be retained by the airport owner (e.g., 85%–95%) stated in the bid documents. The airport receives the higher of the agreed-upon percentage of gross revenues or the MAG. The concessionaire retains the remaining percentage of total annual gross revenues (e.g., 5%–15%) and pays for all direct costs of the operation. A concession contract requires that the airport operator regularly audit the reported revenues and revenue collection procedures and enforce compliance with the cus- tomer service standards and other contract provisions. As such, airport operators using conces- sions contracts require fewer staff resources and less experienced staff then a self-operation or a management agreement because the concessionaire frequently is responsible for every element of the parking operation. This management method allows an airport operator to maximize the experience and finan- cial strength of a professional parking company, including seeking advice on parking rates and rate-making strategies. A concession contract provides a MAG, minimizes the airport owner’s risk exposure, and requires the lowest number of airport staff positions and level of parking expertise while providing all of the benefits of a professional parking management company described in Section 3.4.2. Concession contracts may minimize the airport operator’s level of direct control of daily operations, but they maximize the entrepreneurial expertise of the private concession contractor. Concession contracts may create a risk of reduced customer service, if compliance with required customer service standards is not enforced, as the operator is incentiv- ized to minimize operating costs, as the fees they earn depend solely on the revenues collected. 3.4.4 Hybrid Operations While some airport operators use only one of the options described in Sections 3.4.1, 3.4.2, and 3.4.3 to operate all aspects of their parking operations, some airports operate their parking facilities using a combination of options. For example, some airports, including those that self- operate, retain a management company to operate and maintain their parking shuttle buses. Separate contracts are frequently used for valet parking operations, maintenance of specialized equipment (e.g., parking and access controls or elevators), security, and the transfer of cash. A few airport owners retain management contractors to operate their terminal area parking facilities but use concessionaires to operate remotely located parking facilities. Some airports self-operate employee parking while using one of the other options to operate public parking. 3.4.5 Implications for Rate-Making Strategies An airport’s parking rate strategy may be influenced by their operating method, willingness to accept risk (or test new strategies), and the qualifications and experience of the airport staff overseeing parking operations. Airports with fewer experienced parking staff are more likely to

18 Airport Parking Pricing Strategies rely on the experience of the selected parking concessionaire when evaluating parking rate strate- gies. Airports having experienced parking staff tend to be more willing to implement creative parking rate strategies and test innovative methods. 3.5 Parking Access and Revenue Control Systems Airport operators use parking access and revenue control systems (PARCS) of varying levels of sophistication and complexity. Basic systems issue customers paper tickets and collect them as customers exit. More sophisticated systems allow customers to enter and exit park- ing facilities using credit cards, toll tags (i.e., radio frequency identification cards), mobile phones, coupons, license plates, and/or Quick Response (QR) codes. Larger airports often purchase custom-designed PARCS, while smaller airports are more likely to rely on off-the- shelf components. An airport’s parking rates and parking rate strategy may be limited by the capability of their PARCS. With the simplest system, staff may be limited to the use of fixed rates (i.e., rates cal- culated based on the parking product, parking duration, and posted rate) and the manual acceptance of discount coupons. More sophisticated PARCS allow airport operators to offer customers the following: • Discounted parking rates—Customers are offered reduced parking rates for a specific parking facility or specific dates to attract new customers or encourage customers to use a higher (or lower) price product. Airports may issue customers coupons that allow them to park for a lower rate than is posted to encourage use of alternative products. Alternatively, participants in an airport’s frequent-parker program may be allowed, during specific dates, to park in a facility at a lower rate to introduce a product). • Reserved parking—Customers may reserve a space at a specific facility and pre-pay their costs of parking via an online booking system (OBS). At many airports, customers receive a discount if they reserve a space in advance. At other airports, customers pay a reservation fee in addition to the stated parking fee. At airports with constrained parking, such as those in Europe and a few U.S. cities, customers reserving a space may pay higher prices, but are guaranteed the availability of a space in their preferred parking facility. • Dynamic or variable rates—At airports with dynamic or variable parking rates, the parking rates offered to customers vary based on anticipated demands or other factors. To establish the dynamic rates or range of rates, parking operators review historic parking activity data and develop mathematical models to forecast parking demands, facility occupancy, and revenues. Using revenue management systems and other tools, airport parking operators can offer different rates to customers without reservations (i.e., drive-up parking rates) and to customers who reserve spaces online, and, using “yield management,” vary the rates offered customers making reservations by date, product, and facility in response to forecast demands. Yield management allows an airport to increase revenues by taking advantage of forecasts for periods of high (or low) parking demand and by shifting demand from high- or low-priced products depending on predicted space availability. It also recognizes that parking supply is a perishable product, as yesterday’s empty space is of no value. The combination of OBSs and yield management allows airport staff to increase revenues and optimize facility occupancies or utilization by influencing the parking product that customers select. It also can improve the customer’s experience by assuring the availability of a space in their preferred product or facility. Finally, these systems allow airport staff to gather the cus- tomer’s data, including email and home addresses and air travel patterns, and communicate directly with them regarding future discounts and product offerings, determine their use of the airport’s facilities, and identify their product preferences and price points.

How Airports Operate Public Parking and Collect Revenues 19   Because of the current cost and complexity of the PARCS required to support OBSs and yield management, these systems are now more likely to be found at large- and medium-hub airports. As of 2021, when this report was prepared, fewer than five U.S. airports had a yield man- agement system and none have had the system in place for more than a few years. As a result, there is insufficient data available from U.S. airports to allow a factual comparison of the costs of acquiring and operating online booking and yield management systems with the resulting change in revenues (accounting for growth of airline passenger volumes and changes in parking rates). The airport industry would benefit from research comparing the costs and change in revenues experienced at U.S. airports when these data are available.