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The Significant Cost of Free Parking: Learnings from the City of Santa Monica

Updated: May 8, 2022

The City of Santa Monica Tests the Impact of Free Parking During the Holiday Season

Amid COVID-19, municipalities and businesses across the country were facing a 50-70% drop in commuter parking activity and visitation. This severely impacted the economic activity in the area and local businesses.

As the City of Santa Monica entered the holiday season, the city was looking for a way to stimulate economic activity and to increase visitation in the downtown area. In December 2020, the City of Santa Monica decided to test the impact of free parking on economic activity downtown.

Their goal was to alleviate any financial barriers for residents and visitors to shop in the area. Their Parking Operations Team was asked to participate in a program to encourage visitor traffic by selectively offering extended free parking at several downtown parking facilities. To test this, the city kept their gates active and each visitor was required to pull a ticket for entry and return upon exit, Allowing the collection of occupancy and duration data throughout the program’s period, as well as to measure the effectiveness of offering free parking to promote visitation.

The City of Santa Monica’s Top Priorities:

  • Residents and visitor’s satisfaction: Improve parkers experience and increase visitation

  • Support local businesses: Stimulate economic activity by removing financial barriers

  • Enable data-driven policy decisions: Leverage the results to support policy decisions

The Holiday Parking Program:

  • Free parking was enabled at parking structures 1-6 and paid parking was maintained at structures 7-8 to see if parkers shift to take advantage of the offer

  • The impact of the program was continuously tracked through Smarking’s business intelligence and measured by Smarking’s team

  • The program was active between December 10th and December 25th

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Did Free Parking Increase Visitation or Did Parkers Just Shift from Paid Lots?

To determine whether the program encouraged visitation, Smarking performed a year-over-year (YoY) transaction analysis. Jannette Choi, Account and Customer Success Manager at Smarking, analyzed the transactions in structures 1-6 to assess if the increase was due to a decline at the paid structures, 7-8. The results indicated:

  • There was insignificant change in YoY loss in transactions from Dec 10- 22

  • Between Dec 23-25, parking structures 1-6 suffered a YoY loss in transactions of 64.94%, while Parking Structures 7-8 observed a loss of 55.36%

This indicates that the program did not encourage parkers to shift from paid to free garages. Parker behavior may be driven by accessibility to the amenities by the parking facility and less so on the benefit of free parking.

“Free parking devalues the inventory. Parkers are more location sensitive than price sensitive. Paid parking helps to manage the supply and to maintain effective turnover for nearby businesses. When merchants say that there isn’t enough parking, that it’s always full, re-evaluate your rates to create turnover.” - Henry Servin, Parking Manager at the City of Santa Monica

Assessing Year-Over-Year Change in Parking Transactions by Location

To assess the impact of the program on overall visitation, Jannette analyzed the YOY change in transactions before, during, and after the program was active. If the program was effective, there would be higher transactions throughout the duration of the program across structures 1-8.

Table 1: Before, During, and After Analysis of Transactions by Location - Year-Over-Year

In Table 1 above, a downward trajectory of YoY transaction loss is observed throughout the three periods. In Figure 1 below, the rate of YoY transactions loss accelerated at an average rate of -9.80% before and during the parking program. During and after the program, the rate of loss declined to -3.43%. Given the increase in COVID-19 cases during the holiday season, it is inconclusive whether the parking program increased activity.