Choosing the right parking operator can be difficult and time consuming. How do you find the right one for your specific needs? How much should you be paying a parking operator? What are the differences among various operators and payment models?
If you’re like most asset owners, you have a dozen other things on your plate and don’t have the time to spend weeks searching google and digging through endless ads, confusing websites, and long application forms before you can even speak to a real person, so you resort to what seems like the easiest option:
You see another parking lot near yours, and you call the operator they use.
This complexity has benefitted the largest parking operators for decades, allowing them to grow based on name recognition alone. Competing on cost or building meaningful relationships with owners has become an afterthought, and if an upstart operator notices this and begins to compete for, and win, business in their market based on superior pricing or better customer service, the large operators move quickly to purchase them and consolidate everything under their brand.
The largest parking companies have executed well on this growth-by-acquisition strategy, allowing them to establish nationwide coverage without building relationships at a local level. The most successful large operator using this strategy is Standard Parking (SP+), having made over a dozen acquisitions in the last 10 years.
SP+ is an operator that has been in business since 1929 - and because they’ve been so successful growing through acquisitions instead of growing through improving customer service and technology - you’d be hard pressed to identify many differences between their in-lot operations of a century ago and those of today.
When your business model is to monopolize the parking supply by purchasing all of the local competitors and then maintain your hold on the most profitable lots by locking overwhelmed owners into long-term contracts, there isn’t much incentive to spend money on updating your technology, or to put any focus on customer service (aside from the few weeks before a contract comes up for renewal, of course).
While we’ve begun to see some innovation in the parking industry, it pales in comparison to the innovation we’ve seen in nearly every other sector of the economy since the advent of the smartphone. Most of the new technology we’ve seen has been in third party payment processing or marketplace apps showing a list of all available parking in a given area, but at the operator level things have been stagnant as many lots still operate on a cash-only basis. From the perspective of owners, things have somehow progressed even slower, they receive a monthly lease payment - but with no transparency into how much money the operators have been making off of their property.
Large operators like SP+ have profited tremendously from this information asymmetry, and as a public company their share price depends on them not developing the tools to empower asset owners with actionable data around their lots or the knowledge to increase the profitability of their property beyond just parking cars. If operators were to provide this data, then their customers would see how bad a deal they’ve been getting.
This business model has been successful for SP+ and similar old school competitors for a very long time, but this year something nobody could have predicted happened. COVID-19 shut down most of the country, and between shelter-in-place orders and the forced closure of most public places, the parking industry grinded to a halt, with revenue in some cities dipping over 95%.
Suddenly, the lease payments to owners that were an unbelievable bargain for SP+ before March of this year became a liability. This left the executives at SP+ with a choice - to do right by their owner partners and continue to pay them despite the sudden, temporary downturn in revenue - or to cut costs any way possible through layoffs of support staff (the local teams that are supposed to be looking after your property) and through strong-arming owners into new arrangements that remove any financial risk for SP+.
“At the pandemic’s onset, we implemented substantial cost reductions, at the same time we are working with our clients to renegotiate, exit or otherwise modify contracts, and have been very successful converting fixed-rent contracts into fixed-fee or some other form of management contract structure. We believe this strategy should improve our gross profit over time” - Marc Baumann, SP+ CEO - Q2 Earnings Call -8/6/2020
Looking back to the growth strategy employed by SP+, it makes perfect sense why they would choose quarterly profits and share price over the relationships they have with their asset owners - because they never built those relationships in the first place. ‘Relationships’ were purchased through various acquisitions, so as soon as they became unprofitable, SP+ offered a new, even worse deal for the owners or simply cut ties completely, leaving owners hanging during an unprecedented crisis.
In the last few months we’ve heard from dozens of owners who were previously working with SP+, and they’ve all told us similar stories. Around May of this year, an SP+ representative reached out to them to inform them SP+ was cancelling their monthly lease payments, but they could renegotiate (to a less lucrative deal) if the owner wanted to avoid finding a new operator.
Some of these owners felt they had no choice and agreed to new terms, but other owners took advantage of the opportunity to get out of these long term leases with SP+ to find an operator that will work with them as a true partner, not one that’s only interested in working with them when they can capture all of the upside and leave them hanging at the first sign of a downturn. Those owners are signing up with AirGarage.
AirGarage offers the most owner-friendly service of any nationwide parking operator with completely transparent operations, a dashboard with occupancy and revenue data that updates in real time, advanced technology to increase your revenue, the easiest payment process to keep drivers happy, no long-term commitment or contract, and a pricing model that aligns incentives to ensure we only benefit if you do as well.
“The shift to management contracts will provide greater profit and less exposure to volume-related risks. We terminated, or converted to management contracts, 80 leases during the Q2. Gross profit in the second half of the year will benefit from no longer having these locations structured as leases. Also, there are about 100 additional leases that will come to their contractual expiration during the second half of the year.” - Marc Baumann, SP+ CEO - Q2 Earnings Call -8/6/2020
SP+ has already announced that they they fully intend to restructure all leases into deals less favorable for owners, these management contracts are structured to put all of the risk on owners, while ensuring all potential upside for themselves when demand for parking increases to new highs, as many industry analysts are predicting, in a post-COVID world.
Whether you are one of these lease holders, an asset owner unsure whether you’re getting the best deal from your current operator, or if you’re tired of receiving boilerplate proposals that tell you about an operators “history” and “experience” instead of how they’ll work tirelessly to create value for you - AirGarage would love to talk to you and show you what it’s like to work with a company that cares about you as a partner, giving you more control and earning you more revenue than any of our competitors.