The Significant Cost of Free Parking: Learnings from the City of Santa Monica
Updated: May 8
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.
Figure 1: Rate of Year-Over-Year Transactions Loss
The Impact of Free Parking on the Parkers’ Duration
To assess the impact of free parking on parkers' duration, Smarking compared the YoY change in the number of transactions per duration range, as shown in Table 1:
Table 2: Proportions of Parker Transactions by Duration
Compared to 2019, there was a 16% increase in the proportion of transactions for 90 minute parking, which would have been free regardless of the holiday parking program. However, there was a decline in the proportion of parkers that stayed from 90 minutes up to the daily maximum rate of 5.5 hours. While there was a slight increase in transactions over 5 hours, it can not be attributed to the program since there was an increase of construction workers from nearby projects.
“If you’re a Parking Manager being pressured to reduce rates or to allow free parking, use this data and our learnings. In communities that already have an attractive draw, people will park for convenience not price.” - Henry Servin, Parking Manager at the City of Santa Monica
The Impact of Free Parking on Visitation
Despite offering free parking at structures 1-6, the paid structures, 7-8, retained approximately 10% more transactions YoY. This indicates that parker behavior is largely driven by the nearby amenities and attractions, as well as the parker experience. Throughout the duration of this program, the city lost approximately $128,000.
Smarking recommends that the City of Santa Monica maintains paid parking. In addition to providing a better experience for visitors, paid parking:
Helps the City to recover revenue lost throughout the pandemic
Can provide funding to accelerate the process of rehiring staff and promote job recovery
Protects residents and visitors by allocating resources to maintain the safety and cleanliness of the facilities
The City of Santa Monica has followed the recommendations and is reinstated paid parking for all lots. To learn more about the City of Santa Monica’s parking programs, visit https://www.santamonica.gov/
See how Smarking supports and partners with municipalities to enable data-driven policies: https://www.smarking.com/municipalities. Schedule a meeting for a free consultation with our team: https://calendly.com/smarking-sarah/smarking-consultation
City of Santa Monica and Smarking Partnership
Since 2017, the City of Santa Monica and Smarking have partnered to enable data-driven policies that serve visitors and residents. See more of our work together: