If there’s anything in the world all right-thinking people can agree on, it’s that death is inevitable, and finding and paying for parking is horrible—so horrible, we may long for the former in search of the latter. While there are an estimated 100 to 200 million commercial parking spots in the U.S., plus about 10% to 20% of that number in on-street metered spaces, fitting cars that need a space into available slots seems intractable, like a physics experiment gone awry.
Parking is inefficient all around. A global survey conducted by IBM in 2011 found that “drivers have spent an average of nearly 20 minutes in pursuit of a coveted spot,” although it varies widely by city. That wastes productivity, burns fuel, and worsens air quality, as well as contributes to traffic congestion. IBM found that more than half of the drivers in 16 of the 20 cities covered by the survey drove off after giving up in frustration. “Cruising is a disguised source of congestion,” wrote parking expert Donald Shoup, an urban planning professor at UCLA, in a report, “Cruising for Parking” (PDF).
A number of mobile apps have set out to solve this problem. The aim is to arbitrage prices to both make a profit and reduce the typical price paid to park when compared to most metered on-street and commercial lots. There are so many inefficiencies and so much imperfect knowledge in the industry that all parties may be able to benefit with a layer of technology inserted into the mix.
A high density of smartphone ownership coupled with less sexy—but absolutely necessary—back-office logistics and integration mojo make it all possible. “The consumer app is really a small part of the operation. Really, a lot of the hard work for all of those companies happens behind the scenes,” says Sean Behr, founder and CEO of Zirx, an on-demand valet parking app firm.
The market isn’t tiny: Research and Markets estimated in an April 2015 report that 2,600 companies operate over 12,500 parking venues and gross over $9 billion a year. That’s $1 billion higher than its 2012 estimate. Other research firms put the total number of lots and other facilities at 25,000, and Frost & Sullivan pegs U.S. revenue in 2013 at $25 billion when including city meters.
San Francisco’s 2010 census of parking
There’s often a focus on meters when talking about city parking in dense areas. Meter-based spots turn over in relatively short periods of time, and are desirable for transient use, both because they’re usually cheaper by the hour and can be paid for very short periods. Cities have gotten wise and adjusted rates upwards, and sometimes even have dynamic pricing, as in an ongoing pilot program in San Francisco.
Cities have also connected with app firms, like PayByPhone, to make it easier to pay without carrying coins or dealing with credit-card authorization, while also getting the benefit of text-message warnings when your time is about to expire, and the option to extend if you haven’t exhausted the allowable time at the spot.
Parking lot operators engage in yield management, just like airlines and hotels.
But metered spaces make up a fraction of paid parking. San Francisco’s 2010 census of parking found over 440,000 spaces. Over 280,000 were on-street spots, but only 25,000 of those were metered, typically in business and retail districts; the free spots cluster in residential areas, often with time-of-day limits. As tax revenue has shrunk, cities have installed more meters, too. The remaining 160,000 San Francisco locations were in paid lots.
Thus people will wind up in a garage or outdoor space, where knowing a price in advance can be difficult, and no one company controls enough parking for most of us to choose an outfit preferentially. While pricing is sometimes algorithmically determined or set by a home office, it’s mostly based on local factors.
Lot operators engage in yield management, just like airlines and hotels. Every moment a parking spot is empty, potential revenue evaporates and can never be recovered. The companies have to balance consistent income from monthly or early-bird parking rates against higher fees they could charge but can’t depend on. Most lot expenses are fixed, and thus every additional parked car is almost purely net revenue, giving an incentive to work with other parties to fill spaces.
This provides an opening for apps. While there are many, many kinds of parking apps, two categories have the most direct impact: valet parking apps and parking-lot booking apps. (Other kinds of apps include those tailored to restaurant and hotel valet stands, airport parking, meters, and validated parking.)
Valet pickup apps are dominated by Luxe and Zirx, which offer service in many cities and have expanded with service areas and services offered while this article was in preparation. Competitors are gearing up, including Caarbon, still in an invitation-only trial in San Francisco.
Space booking and prepayment apps are dominated by SpotHero, which has contracted with larger parking-lot operators and thousands of individual locations to allow online booking.
A Luxe valet (at right, in blue jacket with folding scooter at his feet) at work in San FranciscoPhoto: Glenn Fleishman
Valet parking apps act like the inverse of Uber or Lyft. Rather than have a car come to you and take you to where you want to go, you drive to a spot you specify in a service area—typically a large area around a downtown—and a valet meets you and drives your car off to a secured lot under contract to the app operator. When you want the car back, the valet meets you. Payment is through the app, though cash tipping is allowed; Luxe allows tipping in-app and Zirx will add it.
While you can arrive at a location and request a pickup when you get there, the app makers encourage you to request one before you leave your current location. Tapping a destination starts the gears turning on the back end. Behind the scenes, Zirx and Luxe track their valets, who work as on-demand contractors, and the inventory available at lots where they’ve purchased blocks of parking spaces. They also contract for burst capacity at churches, schools, and “untraditional” locations when demand may be high.
The companies can estimate your arrival time through GPS tracking and current traffic and match a valet who can arrive at approximately the same moment. I tested this feature recently in the San Francisco Bay Area using Luxe. When I was about to leave Cupertino, I tapped my destination in Luxe’s app. Then I got mired in a late-afternoon traffic jam. It took 90 minutes to get to the restaurant I was aiming for; Luxe’s valet arrived less than five minutes after I pulled up.
“I know how many minutes you are from where you want parking,” says Zirx’s Behr. “I can use that to make sure the agent is there when you arrive.” Zirx, Luxe, and others have data-science groups that optimize a version of the classic traveling-salesman problem: with many potential paths and destinations involving multiple parties, the companies will thrive when their predictions of time, space (or spaces), and staffing levels all intersect. Luxe has had the option to schedule delivery of your car at a time and location you provide in the app, which adds more predictability; Zirx just added a similar feature.
Both companies offer on-demand service that’s about $15 for a full day during their working hours and $10 or $15 for overnight parking. Monthly unlimited service is $300 at both firms. Prices vary by city, while Luxe sometimes engages in peak pricing when demand is tight during major events. Zirx announced on July 6 that after months of analysis, it’s rejected surge pricing in favor of variable pricing based on time of day and location. Its two examples are dropping a car off at 9 a.m. in a less-busy part of San Francisco for $12 for the remainder of the day versus $18 near the San Francisco Giants ballpark.
In Seattle, both outfits are cheaper than lots in the core downtown area they serve, and obviate an enormous amount of driving around. I’ve had to find parking in the last few years several times in downtown D.C., parts of Brooklyn, Los Angeles, San Francisco, and Seattle, and Behr confirms, “Seattle is among the most difficult of all cities.” It’s not just my imagination.
The employees’ relationship to the company is different than Uber, Postmates, and other app-based delivery and livery businesses. Zirx and Luxe contract for their drivers (who are vetted as if they were driving for a car service), but the drivers need zero equipment. They wear a branded shirt and, in some cities, use skateboards or folding scooters to speed their way between pickups and deliveries. Both firms say contractors are paid a base fee to be on duty, then receive per-assignment payments.
Unlike Uber, the companies don’t operate at arm’s length from their drivers, but consider them a core part of operations. Zirx stresses a path from on-demand to staff employment as a trainer or a dispatcher, among other positions.
While there’s money in the parking part, both companies see the real gold in extra services, which both already offer. This includes filling a tank, washing a car, performing an oil change, and electric charging. Luxe’s CEO and founder Curtis Lee says that such add-ons are “already a significant portion of our business.”
And as Sidecar and other car services are testing, the valet-app firms want to be involved in logistics as well—but personalized to the owner of a car. Luxe is offering a fascinating “drive-home” option for people who have had a night on the town. Rather than bringing back your car and departing, the driver picks you up and takes you home—assuming it’s within a 50-mile radius of the service area—for $25 per trip and $3 per mile. Zirx is looking into handling dry cleaning and groceries.
Both companies are expanding rapidly into new cities. Luxe and Zirx both operate in San Francisco, Seattle, and Los Angeles. Zirx is also in D.C. and San Diego, and just added Brooklyn. Luxe also has Chicago and Boston, and will be adding Austin and Philadelphia this summer, and bringing competition to New York (all of it) and D.C. Zirx, which was founded in early 2014 and parked its first car that June, has raised $36.4 million in two rounds; Luxe, founded in 2013, has raised $25.5 million, with $20 million of it in March.
SpotHero tries to heal a different pain point: figuring out all the options of where to park from price to in/out privileges to payment. CEO Mark Lawrence says his service works on a reservation basis, and is complementary to valet and other parking options.
While the company started with peer-to-peer parking, matching drivers to privately owned empty spots at homes, schools, and the like, it found that there was plenty of conventional parking that was just hidden through a lack of knowledge. Lawrence says, “What we quickly realized: It’s not that there’s not enough parking. You just don’t know where it is.”
SpotHero-ready parking lots let you scan your phone to exit.
SpotHero has contracted with thousands of lots, negotiating fees to allow drivers to prepay. These rates are sometimes lower than posted rates, and they cover a pre-set time. Garages and lots are increasingly equipped with 2-D code readers, and the app can provide a code for scanning. This allows in/out privileges at some lots, something that’s normally difficult to arrange or pay for.
Lawrence points out, too, that a surprising number of lots are cash-only, especially in New York, Chicago, and San Francisco. As smartphone owners in particular go increasingly cashless—I discovered that I had a single dollar bill in my wallet after a recent trip—paying via app removes the pain of finding an ATM at the most difficult time. It benefits garages, too. Lawrence says cash-only operations can lose up to 20% of revenue due to theft.
SpotHero integrates with the back end of many different systems. While there are industry providers who create lot-management software, Lawrence says they quickly found that there’s almost no two companies (or even lots) that configure their setup the same way.
People are willing to pay 50% more because they know there’s 100% certainty they’re guaranteed space.
To use SpotHero, you search for a date and starting and ending time near an address. The smartphone app and web app show a list of matches for supported cities on a map. Tap a match, and there are often substantial details to review, such as the working hours of the garage and how to check out when a 2-D code reader isn’t available. Garages that work with SpotHero guarantee a space once it’s reserved, which gives the company some pricing leeway. “People are willing to pay 50% more because they know there’s 100% certainty they’re guaranteed space,” Lawrence says.
This may include, as in my test of SpotHero recently, calling an attendant to have them meet me. I wasn’t able to find an intercom the garage employee told me to use, and I paid a fee to exit. It’s not surprising to have teething pains, and customer support jumped on the problem, refunding me the fee I paid through the app and even offering to reimburse me for what I paid to exit. (I did not identify myself as a journalist.)
SpotHero provides data back to the parking firms it works with, such as suggestions about adjusting price. New garages often suffer, Lawrence says, because there’s little opportunity for them to market themselves, except for hiring people to stand outside with flags or signs. “We’ve presold entire garages,” he says, shortly after they open.
The company can also influence where lots are opened. Lawrence says based on patterns, they can tell a parking company where demand is key, and where they might be able to deliver, say, $5,000 or even $20,000 in monthly revenue. SpotHero has raised a modest $7 million in two rounds of investment, most recently a year ago; because it’s not leasing spaces, it has much a much lower cost structure than the valet apps.
It’s rare to find an area of the app economy that intersects with on-demand services in which someone isn’t getting the short end of the stick. And the inefficiencies of the parking business rarely benefit any one party, even garages that like to jack up rates for events.
These parking apps could buck both of these situations. They have the potential to improve parking companies’ yield while providing consistent revenue, reduce urban congestion, save drivers money, and make the app firms a few bucks as well. Which means that they’re about far more than finding a space for your car.
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This article was written by Glenn Fleishman from Fast Company and was legally licensed through the NewsCred publisher network.