Yield management is a pricing strategy by which any business with a fixed number of products can optimise revenue. It is the process of selling the right product to the right customer at the right time. Already a familiar concept for businesses with limited resources such as hotel rooms, rental cars, train and plane tickets – most consumers are willing to pay different prices for the same product at peak times or out of season.
Uber’s ride-sharing ‘Request a Trip’ app uses flexible supply and demand pricing structures to manage revenue in peak times with surge pricing. Fare rates automatically increase as demand outstrips the supply of available drivers near the passenger’s location, ensuring a reliable service for those prepared to pay a premium. In addition, the app notifies those who choose to wait when the price drops again.
Could this flexible pricing strategy work for a car parking business like yours? Join us as we take a closer look.
Optimising parking revenue
Availability in parking is defined by the number of parking spaces in a facility. This fixed number represents the inventory of that parking lot. A space can be used multiple times per day with fees charged in minutes, hourly, daily or other designated time slots.
Traditionally there have been several ways to optimise revenue from car parking. For example, car parks are often built over multiple floors to maximise the use of real-estate space. Operators then carefully plan vehicle flow, mapping and controlling it to optimise revenue and allocate as much of the lot area as possible to parking.
Some operators offer ancillary services such as car wash or petrol pumps. Others hire out their facilities for makeshift commercial use like farmers’ markets, festivals and events. One Miami Beach car park even transformed into a wedding venue! As we said, there are all sorts of ways you can optimise your car park revenue, especially if you think outside the box and go digital.
Digital integrations for parking
Today, digital parking systems make it easier than ever before to optimise your space and revenue. A great example is the car park at Emirates Financial Towers in Dubai. This facility boasts one of the largest smart parking systems globally, with an automated vehicle stacker that can manage up to 360 cars per hour, moving as many as 6 vehicles in or out every minute. The facility’s total capacity is a massive 1,191 cars over 9 floors.
Digital parking software systems have opened up a whole host of opportunities. As car parks develop to integrate cutting-edge technology, two key pricing models exist:
Fixed Rate
The standard parking fee. Drivers pay the same price per hour to park whether demand is high or low.
To increase revenue, you can vary fixed rates with fixed incentives, such as early bird specials or event rates. A great example is the town centre car parks in Exmouth Devon. Out-of-season, they offer a special day rate of £2 – the normal charge for a 2-hour stay during the summer season, to attract more people to the local shops.
Dynamic Pricing
Dynamic pricing is a smart way of operating. Essentially, prices are adjusted based on real-time supply and demand.
When demand is low, cut the rates to attract more drivers to park at your facility. Doing this is likely to persuade those considering saving money by using a ride-share app or public transport to drive and park instead.
When demand is high during peak times, increase the prices. The people who need to park during peak times will more likely expect to pay a premium price. It’s a proven way to increase revenue from the same inventory, so why not consider it for your car park?
Here are five ways to implement dynamic pricing structures to drive revenue…
1. Forecast demand
The starting point for successful dynamic pricing is to forecast demand for parking. Look for daily, weekly and monthly patterns, identify when occupancy is at its lowest and when demand is high. While you can make reasonable assumptions about occupancy based on experience, accurate data enables you to see this information in real-time and predict future use.
Historical data will allow you to see rises and falls in use by the time of day, day of the week, seasonally, and around special events. You can collect data through a parking ecommerce platform like Rezcomm.
Using Rezcomm’s Parking Reservation Software and advanced yield management tools, operators can set flexible rates that can be switched instantly. What’s more, they can measure the success rate of changes in real-time with integrated reporting systems.
By working with an ecommerce partner like Rezcomm, parking operators can integrate an online parking booking system with their website, offering convenience and certainty for drivers. This improves customer service by enabling drivers to pre-book and guarantee a space while also making most of your car park’s available capacity.
Additionally, dynamic pricing can be paired with digital signage to enable operators to vary rates for drive-in customers and online users. Other digital integrations like mobile pay can increase convenience and improve the customer experience.
2. Understand and use data
Digital parking solutions are great for collecting customer data. But it’s how you use that data to create a robust and revenue-driven yield management strategy that will set you apart from other car park operators. Make sure you choose an intelligent parking solution that will enable you to:
- Identify certain customer behaviours and habits, i.e. entry/exit times, days, dates and duration of stay
- Quick and efficiently distribute available parking spaces
- Determine optimum pricing based on demand
- Assess performance and return on a daily, weekly, monthly & annual basis
- Accurately predict fluctuations in demand and determine corresponding price changes
Here at Rezcomm, we’ve built a solution that takes the guesswork out of pricing structures and makes the available data work for you.
3. Optimise demand
While it may seem counterintuitive to charge less when you’re making less profit, empty spaces equate to lost revenue. By lowering the rates when you have a lot of empty spaces, you’ll encourage more people to park, increasing your overall yield.
Of course, drivers are usually looking for convenience when it comes to parking. So, if your car park is in a prime location, it makes sense to offer parking spaces at a premium rate. However, If they are going to the theatre, and your car park is across town, you will never be able to compete with a car park right next to the venue. So, consider the local amenities to your car park and approach them with the idea of a parking package for their customers.
The same goes for car parks that have larger spaces. Suppose you find that your premium spaces are left empty. In that case, it’s worth considering offering them at a lower cost when all your standard spaces are full. Customers who expect to get a standard space will get a pleasant surprise and a sense of good customer satisfaction.
There may be times you want to offer special rates or employ strategic and tactical controls as far in advance as possible. For example, if your car park is near a major sports ground hosting a large-scale event in 2 years, it’s worth planning your pricing strategy as early as possible to maximise the revenue from each space. Be sure to market your prime location and consider packages that the event attendees can purchase from you. If it’s a big event, customers are likely to plan their journey and will be more likely to park with you if they can pre-book and get a guaranteed space.
As the event approaches, analyse the reports produced by your parking software to evaluate the results of your yield management strategies. And remember, it pays to be flexible. Be prepared to make adjustments based on both the success of your strategy and the success of your competitors.
4. Schedule regular reviews
It’s important to remember that yield management and dynamic pricing are not one-off tasks. They require consistency and commitment throughout the entire life of your parking business. Monitoring and reviewing your strategies will help ensure you’re making the most of every opportunity to improve revenue. It’s also a chance to forecast future demand too. Be clear about your goals and be honest about whether you have achieved them. Finally, consider what you could be doing differently to make even more revenue from your parking spaces and make the necessary tweaks to your pricing. With Rezcomm, it’s all within your control.
5. Keep customers happy
We’ve discussed the need to generate as much revenue as possible from your parking spaces with dynamic pricing but you also need to keep your customers happy. After all, it can be easy to forget that parking is a service and customers – especially repeat customers, appreciate pricing consistency. They won’t want to see your parking costs fluctuating too frequently or too excessively.
People like to know what to expect and to feel they are getting a good deal. Find a price point that gets drivers parking in your car park as consistently as is realistic. Then, design your dynamic pricing in a way that makes sense and seems fair to your customers. You may also want to consider offering regular, repeat customers a better deal in the form of a subscription. Rezcomm makes this possible with the opportunity to sell parking subscriptions with enticing monthly or annual rates and automate the entire process by linking our subscriptions module with your car park tech.
Once you’ve got the pricing down, it’s time to work on the aspects of your business that make the biggest impression, i.e. customer service and good quality, well-maintained facilities.
These are just a few ideas to get you thinking about dynamic pricing and yield management for your car park. Please get in touch if you are interested in hearing more about Rezcomm’s Reservations module for car parks and advanced yield management tools.
CEO at Rezcomm, Marc is a Transformational Executive specialising in the Travel, Parking, Technology and Leisure Industries.
