The Impact of Online Parking Sales to Transient Traffic: Cannibalization or Market Growth?
Updated: Jun 24, 2020
See key takeaways from our webinar, "Digital Parking Sales: Market Cannibalization or Growth?" Featuring Todd Tucker, SVP of Market Development at Arrive and Andrew Sachs, President of Gateway Parking Solutions. Hosted by Wen Sang, CEO of Smarking.
Todd, why did you decide to focus your dissertation on online-offline sales in parking?
Todd Tucker: I worked on both sides of parking, both operations and technology, and needed to know if I was taking traffic away from my existing channels by enabling a 3rd party online sales channels.
"Am I just spreading the same amount of money around? If I'm going to spend time and effort on revenue channels, I need to know that we're actually going to make more money than what we started with, not just move it around." - Todd T.
As an operator it was a topic of concern, and with Arrive, I would often hear cannibalization as an objection to using online sales channels. And there were a lot anecdotal perceptions of what was going on, and assumptions such as, "well here's what it did in this location, it will probably do this in other locations too". But no one had any data on it. So, I wanted to use academic rigor and data to perform regressions and really understand the impact.
Andrew, what motivated you to dig into the relationship of offline-online sales?
Andrew Sachs: The line between offline and online has blurred. Todd is focused on the macro, I'm hyper-focused on the micro. It started when people started to use their phones in their car and Google and search results of my garages was impacting business. Google and online search disrupted everything, especially parking and we need to pay attention to it.
Connecting your online business to your offline operations
Andrew Sachs: We are in a period of massive disruption. It's not because of COVID-19, it's accelerated by it. Let's look at the data, as you can see below, in 2012, 99.97% of my revenue came from transient, offline parkers. But by 2019, ParkWhiz and SpotHero made up almost 10% of my revenue, and my revenue grew. My revenue jumped back up largely because of the offline work I was doing.
"You can see below that 2014 revenue was down YOY, and it jumped back up in 2015. The difference here is that we started to focus on our online presence. It's imperative to connect your offline business to online." - Andrew S.
Here's what we did:
Focused on SEO (search engine optimization), this is not paid advertising. This is a strategy to help Google show your garages first, at the top.
Claimed my Google My Business profile - this is free to do.
Focused on my reviews and made sure to respond to each one, this helps with your rank on Google, responsiveness helps.
Make sure that the 'Direction' button takes users to your garage, and not your office mailing address
These are not people using online reservation apps. Everyone that clicked 'Directions' and transient parkers who came and pulled a ticket, but if I didn't have my online presence, they wouldn't have found my garage.
If I didn't focus on the online strategies and my online presence, it would impact my offline traffic.The internet is changing, people are searching before they go, and aggregators help us sell right then and there- and get them to your location. - Andrew S.
Why is online search important?
86.4% of people do an online search to learn about a company or product
82.9% read customer reviews
86.4% of my transient traffic found my garage through Google
The internet is changing, people are searching before they go, and aggregators help us sell right then and there- and get them to your location. Too many people haven't done this, it's free and impacts my market share significantly. I went from $2.1 million in 2015 to $2.7 million in 2019.
The impact of online sales to offline traffic
Dependent variables were 3 measures of daily sales figures: total revenue, offline revenue, and online revenue
Independent variables: ParkWhiz online channel, # of facilities selling in the same zip code, total # of facilities existing in the same zip code, total online search for parking (ParkWhiz and Google)
30 locations - 15 intervention sites and 15 controlled sites: 5,400 total observations (180 days)
The core of the study is simply: does the addition of online channels to existing offline channels produce net new revenue gains? - Todd T.
Results indicated strongly that online channel is significant revenue contributor; beneficial operator of any brick-and-mortar facility
Results suggest significant positive interaction effect occurring between number of online competitors and online intervention
Search demand appeared to have negative moderating effect to online intervention
No evidence of cannibalization
Improvement in revenue per space
Different groups/user base on parking reservation apps, attracted new people
The results show resounding evidence that online channels grew the pie, it didn't just move money from one channel to the other. - Todd T.
Leveraging online sales for COVID-19 recovery
Todd T: My recommendation to my peers is to get out of your comfort zone. Take chances, explore, and try new things. But before you do, make sure you have the right tools in place, like Smarking, to measure the impact to your business. To get to where you want to go, you have to have the right tools and technology to fully recover and move forward.
Andrew S: What I'm seeing today, is that this a slow recovery, it's going to take time. But the traffic increase that we have seen, is driven by AYM (Smarking's Automated Yield Management system) its' driving initial sales for me, people are looking for a deal.
These are not people that I would've gotten otherwise. The other side of it, is making the garage a positive experience.
You will get cannibalized if you don't open yourself up to all of these channels. Prevent the cannibalization, be proactive with your online search (Google) and reservation (online sales channels). Little by little, your competitors will take your parkers by improving their online presence. Consumer behaviors are changing, they are searching.
COVID was a massive accelerator. It was like pouring lighter fluid on what was already happening. Focus on 6 months and 12 months ahead, get the right tools in place now, such as automation. - Andrew S.
Get accurate information out there, claim your business for each garage. The more time they spend online, the less they spend driving around, they get right to where they want to go which reduces traffic and congestion. Very important for schools and municipalities.
Need real-time data for your parking locations? Get Smarking's leading Business Intelligence solution free for 3-months. No risk, no commitment.
Questions from attendees & panelist responses
Dennis Cunning, "The revenue went up over 7 years (12 - 19), but how much of that was rate increases? the better answer is how many more vehicles did you park over base years?"
Andrew S: Great question. Thanks to Smarking, I can easily track both revenue and traffic. The two are closely correlated at a high level. Showing revenue allows us to focus on the value derived from the many channels that encompass Search Marketing. We can price target to both the value shopper and the convenience/premium parker at the same time. The key to this success lies in capturing opportunities by marketing to people where they are looking. Indeed some of the revenue increases are due to price decreases. For example, when a customer is searching for Aquarium parking, we can market a $15 rate to them on the search result page, which is a $10 savings over the standard day rate. The key was to get the price in front of the customer at the point they are searching. Google does this for free because we made it easy for them to steal our information. Doing so allowed us to increase our market share of Aquarium customers significantly. As such, both revenue and traffic increased for that hyper-targeted segment because we were able to capture the value shopper looking for a discount. We also see that some convenience shoppers who are much less price-sensitive enter our address into their GPS and do not take advantage of the discount. We can determine these values by looking at revenues. If we focus on vehicle counts, we lose the distinction between value shoppers and convenience shoppers.
At the same moment, we were able to raise the rate for concert goers. Why? Because when ParkWhiz implemented the TicketMaster deal, our exclusive arrangement with the concert venue meant that we were getting preferential access to the customer at the moment of the ticket purchase, often months before the actual concert. We aren't the first choice; we are the only choice. As such, we can charge $12 at that advance purchase point instead of $10, which is the typical concert discount rate. Even though the consumer could technically cancel the ParkWhiz and pull a ticket on the day of the concert, they don't. They are premium shoppers who enjoy the added convenience of having everything set in advance and no worries about getting validated at the box office. The value shopper waits to book parking and makes the extra effort to validate in order to save $2.
The top-level rate structure was not changed until 2018. Thanks to a deep focus on each segment of the garage's traffic, we were able to tailor and adjust prices to each audience niche and target both the value and the premium parker in each segment. With search marketing, we can trick Google into displaying the price for each specific segment only to the audience for that segment that is looking for the price. The concertgoer gets one discount, while the museum guest is shown a different discounted price, and the restaurant patron receives a completely different deal. Each customer is happy with the deal they got, and they have no knowledge of the deal the person parking next to them received.
Premium shoppers, by comparison, are simply looking for an address near where they are going. As such we can focus on different keywords that are going to appeal to them and tailor the message into the “get directions” call to action.
All of this is to say that revenue is the critical metric for tracking success. The number of vehicles parked is simply a driver of the revenue. In once case, we raised the children's museum discounted price from $7 to $15. The number of cars decreased, but revenue went up. In that scenario, we determined that the benefit of the premium segment for museum parkers exceeded the benefit of also targeting the value parkers. Fewer cars lead to more revenue.
Dennis Cunning, "How are parking taxes calculated after taking your fee for marketing/collections?"
Todd T: All metrics are based on the gross revenue net of aggregators fees where appropriate. The marketing-related costs are not included in the scope of this discussion.
Dennis Cunning, "Does the revenue get deposited daily or on a monthly basis?"
Todd T: We count the income in the month it is booked and not on an accrual basis. Accountants hate it, but this method allows for cleaner data and helps in making informed decisions.
Joel Nunez, "To get directions to the entrance to the garage on Google, are you able to input GPS coordinates instead of the "mailing" address?"
Andrew S: You need to enter a street address. If Google does not have the address in their database, they will allow you to enter it subject to verification.
Adam Kaufman, "Will Arrive provide 3rd party conversion tracking?"
Todd T: We manage PPC for locations that convert through Arrive, but cant get conversion tracking. We can discuss with my marketing department a way to disseminate this but would need to understand your use case. With a better understanding, we could likely do an NDA with you and share in an agreed upon format. We are sensitive to consumer privacy laws which are on the sharp rise and expanding rapidly nationwide (CCPA, GDPR, etc).
Adam Kaufman, "Why does the Google listing for Harbor Park Garage link to an appointment for ParkingPanda, that does not work?"
Andrew S: You caught me with my fly down. How embarrassing. One of the tools we are building is an automated link checker. Clearly, the link has expired, and I need to get a new one. On my aggregator wishlist is the ability to make my own links for the many channels I am chasing. How about it, Todd?
Adam Kaufman, "How can you compare 180 days? Don't forget seasonality… YOY is what matters."
Todd T: Thanks for your question. We didn't have time to get into the 117 pages of the entire study yesterday. We controlled for previous years and results stayed the same largely. In a natural world experiment, you have to set a “treatment window” in order to make the study manageable within a reasonable time window. Also controlled were seasonality, S&P 500, weather, local area events, and many others.
David Sharrar, "For Andrew... did you feel agnostic about the widget used for reservations that was presented for the Google search or did the vendor make all the difference? (My own experience as an operator after using a variety of reservation services is that it didn't matter until the TM partnership came into play & then sky was the limit.)"
Andrew S: Great question, David. I am entirely agnostic. Both SpotHero and Arrive have proven to be valued partners. That said, I find it best to use the provider who has a more significant market share in a given town, as it means the customer will more likely already have an account. Conversion rates go down with the added steps that sign up requires. I want the consumer to have the cleanest experience possible. We are rebuilding the website for Harbor Park, and I want to feature both prominently. That way the consumer can choose what is easiest for them, and I can count on a higher conversion rate..
Michael Rescigno, "If I had the garage across the street from Andrew and did the exact same things as him, how would we not have a race to the bottom as we lower the rates?"
Andrew S: I mentioned this on the webinar, but it is important to understand that competition is not necessarily a race to the bottom. In my experience two gas stations near a freeway exit and across the street from each other have higher prices and do more business than a lone gas station four blocks from the main artery. That lone gas station gets the value shopper who will go out of their way for a bargain and the two gas stations by the freeway target the convenience shoppers who are willing to pay extra.
The same is true for parking garages. If the garage across the street starts to focus on search marketing we are naturally going to find an equilibrium point. For example, I may charge more and provide a clean full service garage and the other garage may go for volume with cheaper prices and less service. The net result in that scenario is that we are both stronger because of the competition. We split the market between value shoppers and premium shoppers and each brand strengthens the clarity of their value proposition to the marketplace.
We both get return customers because the customers know which garage services their interest. It is difficult to track this knock-on effect of search marketing in direct analytics. But what we have seen in significant year over year growth in consumers conducting direct searches on our brand name, Harbor Park Garage. I interpret that to consumers saying “Give me the address of that Garage I went to before where I got the service I got before.” My competitor will get the same result for the value shopper and as such the marketplace that much more efficient. We all win.
Meet our panelists
Todd Tucker Andrew Sachs Wen Sang
SVP of Market Development President CEO