Today we are sitting down with Justin Ferrara, our Senior Data & BizOps Analyst, to discuss how he thinks about setting parking rates across our portfolio of parking garages.
Starting from square one, how should a parking lot owner approach pricing? Let’s say they just acquired a new property.
Justin: Pricing should reflect local supply and demand. If there’s abundant free or low-cost parking nearby, you’ll likely need lower prices. Conversely, a constrained market allows you to charge more.
Beyond supply and demand, we consider factors that impact the driver experience like convenience, security, proximity to their destination, and even familiarity with the operator. A data-driven approach is key. Collect and analyze as many data points as possible to avoid relying solely on gut instinct. At AirGarage, we collect driver reviews and measure things like how often drivers return to make sure pricing isn’t interfering with an otherwise nice experience.
How do you decide when to use hourly, daily, or flat rates?
Justin: Start by understanding your property’s goals and your driver base. Are you maximizing revenue, optimizing for guest experience, or trying to cater to a specific type of driver? We segment drivers into personas that inform pricing decisions - for example transient tourists who are willing to pay a premium or price sensitive monthly employees who work at nearby businesses.
Think of a matrix:
• Long-term vs. short-term drivers.
• Public (transients) vs. private (affiliated) drivers.
If the goal is simply maximizing revenue, start with hourly pricing—it’s granular and adaptable. Then group rates into larger buckets if driver demand justifies it. If you have repeat users parking for multiple days, monthly or multi-day rates might work best.
When should you set flat rates versus hourly rates?
Justin: Flat rates make sense when driver behavior clusters around a specific duration. If most parkers stay a similar amount of time, a flat rate is a simpler, more predictable experience that can maximize revenue.
On the other hand, if there’s a wide range of behaviors—some staying an hour, others all day—hourly pricing captures those differences. We’ve taken over parking facilities that were using flat rates and found it encouraged drivers to stay all day. After switching to hourly, we saw more turnover that increased revenue and provided more open space to prospective parkers.
What about event pricing? How do you determine the best pricing strategy?
Justin: For events, flat rates are common and effective, especially if you know the lot will fill up. They provide transparency for drivers, who often price-shop for events.
When demand is less predictable, dynamic pricing is a better option. It lets you adjust rates in real time based on actual occupancy, so you don’t miss out on revenue opportunities or overprice and scare off drivers.
Dynamic pricing seems to be a buzzword in the parking industry. How does AirGarage approach it differently?
Justin: AirGarage takes a more holistic and experimental approach. We use data points like local supply, demand, property features, and proximity to attractions.
We find many other operators manually set a rate for an event and call it dynamic pricing. The issue with that is it does not cover things like a busy summer weekend where the weather is perfect, or events that may not be publicly listed online.
Through live A/B testing, we optimize pricing strategies in real time. Unlike others who rely on preset schedules or manual changes, our system updates dynamically—down to the minute—based on occupancy. If a lot is filling up rapidly, prices adjust immediately, ensuring fairness and maximizing revenue.
How do you ensure dynamic pricing doesn’t scare off drivers?
Justin: Our mindset is prioritizing the long-term property value over short-term revenue. By tracking bounce rates (drivers leaving without parking), violation rates, retention rates, and reviews, we ensure drivers feel pricing is fair.
Dynamic pricing also aligns with real-time demand, so it often feels intuitive to drivers. For example, we’ve found that lower rates when lots are empty and higher rates when they’re nearly full is reasonable to most people.
What common pricing mistakes have you seen in the wild?
Justin: Many owners set flat rates for convenience or don’t update prices frequently enough. After we start operating a property, we test a variety of rates and notice that those who haven’t changed rates in years often see immediate revenue gains just by adjusting the baseline.
Additionally, failing to test pricing models is a missed opportunity. For example, experimenting with hourly versus flat rates or implementing surge pricing can uncover valuable insights.
Do you have any success stories from properties where pricing experimentation paid off?
Justin: One example is a highly transient lot we operate in South Carolina. Initially, it had an hourly rate of $5 with a $30 daily max. Through testing, we discovered the lot was underpriced for its location. We raised the baseline hourly rate and then began flexing prices according to real-time demand.
Prices at the lot ranged from $6 to $12 per hour based on occupancy. This led to a 30-40% revenue increase without negatively impacting driver satisfaction.
In another case—a commuter-heavy garage in Philadelphia—we tested flat rates versus demand-based dynamic pricing. While commuters are price-sensitive, we still achieved a 15-20% revenue lift by fine-tuning rate structures.
What’s next for innovation in parking pricing?
Justin: The future lies in predictive and proactive pricing. By combining historical data, local trends, and macro conditions, we can anticipate demand shifts even more accurately.
For example, knowing a lot’s historical occupancy and factoring in area growth, we could adjust prices preemptively for seasonal spikes or redevelopment projects that reduce local parking supply.
