A Decade of Parking Rates

December, 2007

I have been reading my favorite magazine and blog and find a discussion going on, perhaps tangentially, about garage pricing, or the lack of it. I have noticed that many of the garages I audit have rate signs that are so rusty you can hardly read them. They haven’t been changed in years.
I know, I know -- we live in a time of almost zero inflation, so it’s hard to justify a rate increase. I beg to differ. Many garages raise rates regularly, even if it’s only a few cents.
Let us take for example a location I know in the Midwest. It’s a city-owned garage and hasn’t raised rates in more than a decade. The other garages in the neighborhood have increased their charges, and this facility is lagging behind.
I pressed the owner and he felt his customers “couldn’t stand” an increase. I didn’t understand. They certainly could stand an increase across the street or down the block. The real problem was that this fellow realized that to come up to market rates, he would have to raise his rates nearly 50%. Now that’s a hike.
He was charging 50 cents an hour with a $4.50 maximum. His competitors were charging $.75 and $75 cents an hour with a $6 maximum, and getting it. He was leaving a lot of money on the table.
But what to do.
First of all, let’s look at how he got where he was. Quite simply, his neighbors raised their rates slowly, perhaps a nickel every year or so. The customers didn’t even notice, but the charges kept up with increases in personnel, utilities, taxes and other costs. So, at a nickel every two years, in 10 years the price was up a quarter with no complaints. Our hero was stuck. Now he had to bump it a full 25 cents just to remain even.
There are a few alternatives.
First, he could begin an aggressive program of raising the rates a dime a year.
Second, and my personal favorite, he could change the rate structure. Instead of charging 50 cents a half hour, he could change the rates to 50 cents every 20 minutes, with a $6 maximum. The sign would still say 50 cents, but at minute 41, folks would be paying $1.50, rather than a $1.
This type of rate increase makes a lot of sense, particularly when you have a lot of tickets that don’t hit the daily maximum.
You can easily see how much more an “increment” change can generate by finding every ticket that is between 40 and 60 minutes (add 50 cents per ticket), 70 and 100 minutes (add $1 per ticket) and so forth. This is a huge increase in rates, but it is not a marketing disaster.
I might also raise the maximum substantially, but that would be up to you. Take a look at how long most stay in the garage. Set your maximum based on your average stay. If everyone stays all day, it makes little difference. But if most stay three hours, your maximum should be, say, four hours.
Maximize the income. But look out – check those signs across the street. Folks can read and they will follow the lower price, particularly after paying your rate and realizing it’s much higher than your competitor’s. Let the market set the rates. The maximum may be the same, but when you hit it could make a huge difference.
The other day I parked in a lot near a medical building and the doc said he would “validate” my parking. So he stamped my ticket “Dr. Jones, Parking Validation, $2.” Do you have any clue what that means?
I thought it meant $2 off the parking charge. But no, it meant, I was told at the exit gate, that the maximum charge for parking would be $2. Huh!
The face value of the ticket was $3. I expected to pay a buck. When they told me $2, my heart rate increased and I considered going back inside for another treatment.
The rates were $1 a half hour and I was there 70 minutes, so I understood the $3. But it was still confusing. For someone who was going to be there for, say, three hours, then it was a good deal. But for most, who spent less than an hour, it was no validation at all.
This could have been solved by changing the stamp to read: “Dr. Jones Parking Validation, Maximum Charge $2.”
Anyone see a problem here?
As I drove off, I wondered if there were any tickets in that cashier’s drawer that were not validated, at least any who stayed more than an hour. There were tons of doctors in the medical building, and many didn’t validate. Think maybe someone went down to the local rubber-stamp store and had a nice little money-maker made up?
I wonder how much the revenue in that lot would increase if they changed to validation stamps or valometers.
What do you think?

Woof!!