Until recent years, airport parking had effortlessly been the number one or two source of revenue for airports, second only to aeronautic revenue. But a combination of factors such as an economic downturn resulting in loss of airline fees and the growth of ridesharing services such as Uber and Lyft, have resulted in loss of parking revenue share for airports of all sizes, leaving parking managers seeking solutions for regaining the loss. Out of this search, yield management has emerged as a popular approach used by airports to optimize parking revenue.
What is Yield Management?
To put it simply, yield management is selling the right product to the right customer at the right time for the right price. This is the same strategy first used by hotels and airlines for decades, spreading to car rental and advertising in the nineties, and is now proven to be profitable for airport parking. This strategy employs three elements that work together to drive revenue:
1. Demand Forecasting
Using historical customer data to predict customer demand based on past trends and events
2. Inventory Allocation:
Assigning parking spaces to specific price tiers, or channels, based on customer demand and dynamic pricing
3. Dynamic Pricing:
Making real-time price adjustments based on customer demand and available inventory
Dynamic Pricing is…well, dynamic!
While all three elements are important to successful yield management, perhaps the most critical piece is dynamic pricing. True to its name, dynamic pricing is “active” or flexible pricing. This type of pricing strategy allows for pricing adjustments based upon several factors:
- Inventory - the number of parking spaces available and how those are allocated at different price tiers
- Customer historical data – number of stays, length of stays, type of products purchased
- Customer demand level – highest and lowest demand levels specific to available inventory
- Price Setting - optimum price the customer is willing to pay
- Distribution channels/Variable pricing structure – different rates offered on unique channels such as drive-up, web, email offers, Facebook, promotions
- Environmental factors – knowing how time of day, day of week, holidays and seasonality impact sales
- Market data – knowing the competition and competitor pricing
In a comprehensive parking management system, most of this data is readily available to airports. However, further market research will be needed to gain the competitive data.
Using the Tools
Once the data has been gathered, an airport must have dedicated resources to utilize these assets for successful dynamic pricing strategy execution. Whether these resources are staffed in-house or a third party is contracted, analytics must first be conducted on consumer behavior, inventory, reservation trends, competitor pricing and other metrics using the available tools. Careful analysis of this valuable information equips the airport with the ability to make wise pricing decisions and to develop a full yield management strategy that, over time, will increase revenue.
This ongoing process requires continuous monitoring, analysis and price adjustment. However, within a sophisticated parking management software system, pricing and inventory allotments can be preset.
Below are examples showing how dynamic pricing can be used to increase parking revenue. Example 1 shows how inventory is allocated into different price tiers, or channels, and Example 2 is a comparison of a fixed daily rate (FDR) to an average daily rate (ADR) on multiple channels.
1. Inventory Allocation Using Pricing Tiers
|Channels||Rate Category||Rate Code||Rate Plan||Daily Rate||Space Inventory|
|Average Daily Rate (ADR)||$20|
2. Sample Fixed Daily Rate (FDR) vs Average Daily Rate (ADR)
|Total Spaces||80% Capacity||FDR $15/Day||FDR Monthly||FDR Annual||VS||ADR $20/Day||ADR Monthly||ADR Annual|
Only a select few parking management systems offer a comprehensive parking reservation system that includes dynamic pricing functions. When searching for the best parking solution, these features should be included:
- Real-time parking reservation system
- Omni-channel capability
- Real-time reporting
- Customer data
- Dynamic pricing
- Yield management
- Ongoing research and development
- 24/7/365 online support
RezPort offers a suite of cloud-based software services for the parking industry. Packaged neatly within RezPort’s enterprise central platform is the ability to offer white-label solutions including real-time reservations utilizing yield management logic, loyalty rewards, monthly parking and point-of-sale revenue management. RezPort is integrated into many credit card payment gateways and back-office PARCS systems. To learn more, please visit www.rezport.com or call 612.405.7795.