Located in the heart of Charleston is a 150-space parking lot whose proximity to city attractions makes it a popular destination for both tourists and locals. The property was making decent profit every year, but the owner felt there was an opportunity to improve operations. In early 2023, AirGarage began operating the lot after identifying opportunities to increase revenue through pricing optimizations.
Charleston, SC, USA
This parking lot had always been busy – so busy that drivers often could not find any open spaces – so increasing revenue by driving additional traffic wouldn't have worked. It was obvious that the only way to increase revenue was by optimizing rates.
Despite this fact, pricing had remained unchanged for years. Since revenue was already high, it was risky to change prices, especially without being able to measure how drivers would react.
- How would we know if rates were too high or too low?
- Should drivers be charged an hourly rate or a flat daily rate?
- Would customers be upset about higher prices and never return?
Property owners and parking managers have to consider these questions every time they change rates. If they're too aggressive, then their short-term revenue boost may end in a long-term loss when upset drivers refuse to return. If they aren't aggressive enough, then they’d be leaving money on the table every month. Despite the importance of pricing decisions, other parking management companies lack the tools to answer these questions with confidence.
AirGarage is the only parking operator that has built a sophisticated, real-time pricing optimization engine.AirGarage's pricing optimization is a part of our full-stack of parking technology. AirGarage manages pricing, enforcement, payments, and more in a single system that provides the industry's best data on occupancy and driver behavior. This data advantage allows dozens of rate experiments to be run to find the ideal pricing strategy at any parking facility.
At this Charleston location, AirGarage introduced a series of rate experiments including tests of different base rates, dynamic pricing models, and hourly v. flat-rate formats. Before AirGarage, parking cost drivers a static $6 per hour.
AirGarage began by split testing different base rates like $6/hr v. $6.50/hr v. $7/hr. AirGarage identified the optimal base rate by monitoring how drivers reacted to the different prices.
This ‘winning’ rate was then paired with a first dynamic pricing model that surged prices up to double the base rate based on demand. When the lot was most in demand, prices could reach up to $12/hr but when the lot was less in demand, rates would stay at or near the $6/hr base rate. This demand-based dynamic pricing increases revenue and helps keeps turnover high so that spaces free up for new parkers.
AirGarage then continued to tweak aspects of the dynamic pricing model like what the max rate could be or how quickly prices could increase with demand. One test pitted a $6/hr - $12/hr surge model v. a $6/hr - $10/hr surge model. Another test explored a $6/hr-$10/hr surge model that scaled evenly with demand v. a $6/hr - $10/hr surge model that scaled unevenly with demand.
AirGarage measured revenue impact and health metrics like short- and long-term driver retention for each of these pricing experiments. Driver sentiment from online ratings and reviews were also closely tracked. Informed by this data, AirGarage was able to iterate through each experiment until an optimal pricing solution was achieved.
After 20 weeks of testing, AirGarage confidently concluded that a $6.50/hr base rate paired with a surge model that increases prices up to $10/hr is the pricing strategy that maximizes revenue while maintaining strong driver satisfaction at this location.
As described above, AirGarage tested dozens of rates and pricing strategies over several months at this location and, since rolling out a customized dynamic pricing model, the average parking transaction has increased by $4.
Best of all, revenue gains came at no cost to driver satisfaction. Driver retention remained consistent, feedback ratings improved, and sentiment from online reviews has been more positive than ever.
Overall, AirGarage’s pricing optimization has been a huge success. Since taking over operations in February 2023, AirGarage has increased the property’s monthly revenue by 44% compared to pre-COVID highs.
"AirGarage has materially exceeded their projected revenues when we converted our parking lot operations from traditional gate arms to license plate recognition and algorithm based dynamic pricing. The depth of analytics and ability to influence revenues has been a game changer for our operations. We are looking forward to further expanding our relationship with AirGarage on future acquisitions and implement wherever possible within our existing portfolio.”
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