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Aligning airport parking profits with strategic goals

At airports worldwide, and from small airports to the largest international hubs, car parks are contributing strongly to airport revenues.

Lufthansa Consulting has found that the precise share depends on factors such as airport type and size, and respective country. However, car parks contribute an average of 18% of total revenue at small airports, 9% at medium-sized airports and 6% at large airports. Looking at only non-aeronautical revenues, car parking typically contributes one of the largest shares.

Car parking income can far exceed car park capital and running costs, with some sites achieving up to medium two-digit margins. Airports usually use these funds to renew and expand their facilities, improve operations, and cap and cut airline fees – helping to generate more air traffic and parking revenue.

It’s an overall trend that car parking operation is constantly increasing at airports. One reason for growing short-term parking demand is that airports now often charge for, restrict ban vehicle access to their terminal forecourt drop-off areas. In some countries, new national and local security regulations have exacerbated this trend. This has raised demand for short-term parking, typically of less than an hour, which is lucrative for airports.        

Limits to growth
Airports are introducing environmental policies that commit them to minimizing noise, CO2 emissions and other pollution. Measures include subsidized public transport airport access and operating shuttle buses that run on alternative fuels.

More airports are balancing and reconciling car parking profits with their environmental objectives. For example, in its environmental policy, East Midlands Airport states: ‘We acknowledge our duty to protect the environment … and will seek to minimize the environmental impact of our operations.’ The policy list numerous measures including developing ‘a surface access strategy that promotes a modal change away from the private car to less environmentally damaging forms of travel’.   

When implementing transport modal shift policies, airports should tread carefully: ease of parking is a sensitive consumer issue and they must avoid discouraging or deterring passengers.

Off-airport car parking has targeted leisure and other price-sensitive passengers for a long time already. Airports must compete by offering attractive parking pricing and services. Many airports, however, do not have a clear strategy in this regard yet.

Expert support
Lufthansa Consulting has the experience, expertise and innovative solutions to support airport managements in optimizing their parking business model.  

“Airports need to balance and bring together their profit maximization, environmental objectives, service quality and regulatory compliance,” says Thomas Niehaus, Associate Partner at Lufthansa Consulting. “With all the profits, challenges and even conflicts involved, airports must decide how to align their parking performance with their strategic goals.”

At one major airport with approx. 20 million passengers, Lufthansa Consulting recommended car parking cost and revenue improvements that are generating an additional EUR 7 million profit a year.      

In-house or outsource?
Airports also need to decide whether to manage their car parks in-house, or outsource.

There are two main ways of outsourcing. In the concession contract, the car park operator keeps parking revenue but pays a concession fee to the airport. Models include pure concession, profit share concession, and pure concession with a minimum guaranteed income to the airport. Within these models there are numerous derivatives.  

In the management contract, of which there are many types, most or all parking revenue goes to the airport, which pays the concessionaire its costs and a management fee.

Lufthansa Consulting can help airport managements to review their existing operations and, where appropriate, to implement new and more profitable models – be it outsource or in-house of its operation.

Raising revenue, cutting costs
Airports are increasing parking revenue by introducing or enhancing automated forecasting and yield management, as are widely used in the airline and hotel industries, and innovating at every opportunity.

These initiatives ensure that prices reflect: reservation method (with much higher rates for ‘turn-up’ traffic than for booking online in advance); parking convenience; the parking service chosen; frequency of use and ‘loyalty’; and overall demand by time of day and length of stay.

A premium parking package might offer wider spaces for: the drivers of SUVs (sport utility vehicles) and other large vehicles; or families to unload and load pushchairs and large amounts of baggage.

At one north-western German airport, a new business-oriented service enables travelers to leave their cars with a forklift-like robot, which then places the car in one of 250 dedicated, high-density parking spaces.
 
Similarly, ‘bumper to bumper’ valet parking is an attractive option near airport terminals, where land and space are so valuable.

As in all other areas in the airport-airline-relationship, also in regards to parking there is unleashed potential. Combination of distribution channels is one option, where the car park can be booked straight in the airline ticket booking.

Other profit-related measures include: optimizing personnel and maintenance costs; introducing the combined booking of flights and parking; installing energy-efficient solar and LED lighting; and charging off-airport parking operators.

Car park investment
Investment in airport car parking depends on factors such as current and projected occupancy and revenue, operational and maintenance costs, airline activities and plans, and local restrictions on development.

Airport investment in car parks centers on new and additional parking capacity, security (such as passenger alarm and help points) and systems (such as automatic number plate recognition, barcode readers, space counters and space finders).

Passengers already have high expectations of airport car parks, which must be at least: easy to enter, navigate and leave; and clean, well maintained and lit, and safe. They are paying more than at off-airport car parks and expect the facilities and service to match.

Unleashing potential profits
Thomas Niehaus of Lufthansa Consulting concludes: “With so much at stake, airport managements need to optimize their car parking operations and performance – and sooner rather than later.”

To find out more about Lufthansa Consulting’s support services, please contact Mail@LHConsulting.com.