Setting the scene
Over the past few decades, airports have evolved from mere infrastructure providers to hubs of commercial activities. The continuous growth in passenger traffic and coverage of destinations, coming from the hub strategy of legacy airlines as well as from the rise of low-cost airlines, has transformed the airport landscape. Airports now compete for passengers with multiple other airports in the same catchment area. They have realized that commercial success will come from offering a broad portfolio of destinations, airlines and supporting services and by focusing on customer experience in all aspects. Many airports have therefore extended their service offerings, focusing increasingly on providing a holistic customer experience with the passenger central to both strategic and commercial decisions (Figure 1).
Figure 1: Extension of airport business model
Proper management of airport parking activities has a defining impact on the customer experience, as the parking premises form the first physical point of contact at the airport for pointto-point passengers. Real-time information screens, cleanliness and a consistent look and feel to the pathway to the terminal will contribute to a feeling of safety for the passenger, as well as allow for a carefree start to his trip.
Moreover, airport parking activities represent one of the more important shares in the commercial revenue streams of airports. Typically, revenues from airport parking represent between 5% and 15% of total airport revenue and up to 30% of nonaeronautical revenues, depending on the size of the airport, the proximity to the city center and the availability of public transport alternatives. At the same time, given the relatively low capitaland operational expenditures, airport parking activities typically generate significant operational margins and cash flow.
Many airports have witnessed continuous growth of parking activities, despite development of public transport alternatives. These alternatives are often supported by national and local mobility policies that have been adopted to shift the access modal split of airport passengers towards public transport. However, absolute growth in airport passenger traffic often offsets the impact of these policies. (See Figure 2.) Moreover, parking management practices such as yield management, flexible capacity and restricted access to the curbside at the terminal result in increased parking activity in terms of both volume and revenue.
Figure 2: Correlation of parking sales, modal split evolution and O&D pax growth
In this context, airports need to address two strategic imperatives in order to maximize value creation from airport parking:
- Anticipate changes in demand and customer behavior to match future demand for parking with available capacity in the short, medium and long term
- Design attractive parking products to drive superior customer experience while maximizing value created from parking activities.
1. Strategic planning to anticipate demand and change in customer behavior
Anticipating growth of parking demand is important when making strategic decisions on parking infrastructure developments, which are long term by nature. When doing so, the ability to forecast evolution of customer profiles over time is critical. Customer profiles can be segmented, as in Figure 3, based on their trip details (i.e. purpose and length), price sensitivity and need for additional services (e.g. valet parking, carwash services, insurance). Customer behavior within a specific segment may evolve over time and lead to diverging demand for different parking offerings.
Airport parking activities are by nature cyclical, causing highs and lows in demand throughout the year. This volatile demand pattern is mainly related to the purpose of the airport passenger’s trip (i.e. business versus leisure). Often the lows in one segment level out the peaks in the other segment, resulting in a rather flat demand profile. Occasionally, however, peaks in both segments might overlap, coinciding with national holidays and special events in both the home country and in the most popular destination countries.
The combination of growth for parking demand, cyclicality of demand and changes in customer behavior at segment level requires careful demand forecasting and capacity planning in order to match capacity with future demand in a timely fashion while optimizing capital and operational expenditures. This has proven to be a challenging exercise for airports and parking operators, for the following reasons: To tackle the last mile delivery issue at system level, such an ecosystem may involve a combination of up to seven key actors that play different roles:
- Forecasts of future parking visitors are based on the historical evolution without making a distinction between different segments, due to lack of insight into the behavior and requirements per segment (e.g. preferred offering per segment).
- The impact of external trends on car usage is sometimes difficult to estimate (e.g. impact of economic cycle, development of public transport alternatives, development of access road infrastructure, impact of public mobility policies)
- Narrow understanding of the cyclicality of parking demand throughout the year and peak demand calculations (e.g. evolution of average length of stay per parking product throughout the year)
Figure 3: Segmentation of airport parking visitors
Due to this inability to precisely estimate the future parking demand and required capacity, many airport and parking operators heavily rely on temporary capacity solutions (e.g. capacity extensions to parking facilities, flexible capacity management and changing staff parking into pax parking).
To precisely model the evolution of visitors per parking offering and the resulting impact in terms of required capacity, it is important to start from the forecasted evolution of the different pax segments (i.e. total number of airport visitors), as they form the underlying driver of demand for parking (Figure 4). The evolution of these pax segments can then be translated into evolution of visitors per parking offering, based on the expected behavior and parking requirements for each pax segment. Cyclicality of demand and the required coverage of peak demand throughout the year further define the required number of parking spaces per offering.