Webinar On Demand: The Recovery of China's Parking Market, Learnings and Early Indicators
Updated: Apr 30, 2020
Featuring Yan Liang, CEO of SunSea, Tony Jiang, President of SunSea, Henry Lu, COO of Tingjiandan. Hosted by Dr. Wen Sang, CEO, Smarking.
00:00-08:00: Introduction to SunSea's and Tingiandan's business, market size and operations
06:40-09:17: An update on the impact of COVID-19 on commuter parking, off-street and on-street in the U.S. as of April 28th
10:09-23:15: The timeline and impact of COVID-19 to China's parking market
24:00-31:15 When it comes to the earlier impact, when China was at the peak of the pandemic, what were things you saw from your peers?
32:24-35:37: While you were in the middle of the pandemic, what did you anticipate in terms of recovery?
36:33-41:44: What are things that you did during the peak of the pandemic to prepare for recovery?
43:59-48:36: What do you anticipate in the coming months? Where do you think parking volume and revenue will be by the end of the year?
48:51-50:22: What are your recommendations to your American peers?
The state of China's parking industry during COVID-19
During the second week of February, at the peak of the pandemic, parking activity was at its lowest. Parking activity was at 5% compared to 2019 volume.
There were differences in volume based on the region but on a weekly basis, it started to increase, and now it's between 60-70% of normal traffic.
Wuhan, which was at only 5% of volume during the peak of the pandemic, is now at 40% of parking activity.
By April, commercial businesses might re-open but consumer behaviors are still in the recovery stages.
On the left is the current volume per China region, on the right is what the volume was during the peak of the pandemic, in February. Very encouraging indicators! For example, Wuhan went from 5% of normal volume in February, to 40% by the end of April.
Recovery by Regions
Proportion of regional contributions before and after the epidemic.
(All data is benchmarked against Dec 2019 daily parking demand/vehicle traffic) Note: East China includes Hangzhou, Suzhou, Nanjing, Yangzhou; Central China (except Wuhan) includes Changsha and Shiyan. Other cities include Hefei, Xi'an, Chengdu, Baoding, Dalian, Fuzhou, Guiyang, Wuwei, Zhengzhou, Chongqing, etc.
Currently, the regions with good recovery include Central China, which have reached 92% in vehicle traffic. In addition, East China has recovered to close to 90%. The recovery in Wuhan has been rather rapid, averaging 10%+ increases per week, and reaching 40% this week and surpassing the Shandong area. Due to the increased COVID-19 cases from overseas, the recovery rate of traffic in South China has shown a downward trend in the past two weeks.
Recovery by Industry Sectors
With the domestic epidemic situation under control and the gradual resumption of production in all regions, parking in the scenic parks/tourism is the most recovered sector compared to all others, reaching 111% compared to Dec 2019. Due to weather, the recovery slowed down this week.
The recovery rate of parking near supermarkets has reached 97%, and the recovery rate of office buildings, hospitals and commercial complexes is over 70%. Hospitals have begun to treat inpatients and surgical patients, and Wuhan office buildings and commercial complexes have begun to operate.
The industries affected the most by the epidemic are hotels, schools, public transportation hubs and others. At present, school opening is delayed for colleges. Hotel occupancy, conferences, and banquet activities are low. The overall recovery of public transportation hubs is not optimistic.
Response and action during the early stages of the pandemic
"We were shocked. We had never had to deal with such little revenue and we needed to secure back up options to ensure our business kept running. We talked to owners, investors and financial institutions for solutions. There was no government support." - Tony Jiang
Tony: We talked to our customers but many of them were unfortunately in a worse position than we were. We immediately talked to investors and sought out backup options. There was no time to waste, we needed to make sure we could keep our company running. We closed a few levels of the garage at malls, since only certain sections were open, among other cost savings measures at an operational level.
We also focused on protecting the health of our employees. We sent them masks, sanitation supplies, and we were extremely careful. We all know that if one person gets sick, it can start a domino effect quickly. We had 0 infections out of 4,000 employees.
Henry: We connected with our employees, made sure they were okay, provided face masks and focused on keeping up to date with the governments response. The largest impact to us was that our new projects were fully stopped, one of the projects was on the Wuhan highway. However, our online cloud-based platform was still running and operators could check on their locations digitally.
Early projections vs. the actual outcome
Tony: I went through the SARS outbreak in 2003, so at the beginning of this, I used that experience to forecast. That was a pretty quick recovery actually, so I initially thought this would last a month or two.
I expected a quick recovery but it's been very slow, gradual and regional. I think the impact of government restrictions and new policies will last for awhile. For example, theaters and schools are still closed. But overall, we anticipate volume will continue to rise and we'll reach 80-90% in the next few months, so we're pretty happy with the results.
Henry: Similar to Tony, we thought it was going to last 1 to 1 1/2 months before everything was back to normal. But by the end of February, when the pandemic became world-wide, our projections changed. We realized the impact would be much deeper, due to global trading and such.
Staying afloat during the pandemic, opportunities and silver linings
Tony: First of all, we had to make sure we had enough cash to make it through this. All employees took a reduction in compensation to help the company. Fortunately, that allowed us to avoid a reduction in staff.
An interesting outcome I'd like to share, was that there were new opportunities with landlords. Guys that wouldn't talk to us before, now wanted to talk to us. Primarily because they needed short-term cash as a cushion, and secondly, they were now seeking automation. They wanted less people in their car parks and they needed automated systems, such as cameras and contactless payment options.
Work with your landlords in a rational way. We needed to be mindful that their loss was much higher than ours so we needed to work together to find a new arrangement that is acceptable for both parties. - Tony Jiang
Henry: Besides the negative impacts and the possible long-term changes in consumers behaviors, there were some positive silver linings we saw. Such as with the advancement of technology.
The demand for mobile solutions actually increased as the need to reduce manual processes became more vital. Mobile and digital solutions helped to automate operations and allowed for more efficient and accurate management. Especially cities, they were looking for a more advanced technology infrastructure to better manage the city.
Before the pandemic, we had been working with the automobile industry to implement more smart cars solutions, but it was hit very hard. So we saw the investment of technology from the auto industry decreased and the advancement may be delayed.
Overall, there was new consumer demand for advanced technology, which helps accelerates adoption. However, there were financial and operational disruptions for operators to able to implement new technology quickly. We had to be aware of both situations. - Henry Lu
Looking ahead: changes in consumer behaviors, anticipation of a second wave, and parking activity projections
Tony: My expectation is very simple, I think we will continue to see the traffic go up because people are preferring their own private vehicles to public transportation options out of precaution. Also, our pipeline is stronger now, as I mentioned before, so we anticipate new business. We're also focusing on improving the efficiency of our operations so we may reduce our workforce by about 20%.
Henry: I think the probability of a second wave is very low, since the entire nation in very cautious and the government is willing to take extreme measures to prevent it. I estimate that for parking business, it will continue to go up because you have to travel to suffice your basic needs here.
I anticipate that mobile penetration of our platform will go up even more. Before this pandemic, it was at about 50-55% and it's now above 65%. More people will use mobile payments to reduce human contact. Other than that, there's still a lot of unknowns, but we're very optimistic and determined to adjust quickly as needed.
Recommendations to American parking industry peers
Tony & Henry: First of all, hang in there! Try to find resources as much as you can to stay afloat, do everything you can to survive. Since the situation in the U.S. is very different, I really think that you guys need to stay conscious and alert, plan for the worst and wish for the best. Be flexible and adjust quickly.
Questions from the audience
What is the % of public transportation compared to driving for commuting before the virus? What do you thin the effect will be short-term/long-term? - Michael Prussian
Henry: In Beijing, before pandemic I would estimate 60-70% of people used public transportation, and 30% used private cars. The data differs based on the city and the penetration of the cars but in general, more and more people are using private cars and less use public transportation. Also, the government has temporarily adjusted policies. Before, you could only use private transportation 4 days a week, but right now thats cancelled for the month.
In the short term, revenue for office buildings is growing since people are driving themselves, but I don't think it will have a long term affect, I think the volume will normalize again after this ends.
How has your valet operations performed during the recovery? Major changes? - Tommy Diaz
Tony: In China, valet is a very, very small market, it's only used at hotels. And the hotel business is very bad right now, it hasn't recovered past 30%. The biggest problem with hotels right now is that there are policy restrictions which monitors whether or not you're allowed to check in. But once those restrictions are lifted, I think it will recovery very quickly.
Do you anticipate recovery for US to be slower or concurrent with pace of recovery as China? - Tommy Diaz
Tony: I read the news everyday from the U.S and it's important to consider that the reception to this pandemic is very different in the U.S. It's not as straightforward and there are differing opinions on how to approach recovery. So, I do think it will be slower in the U.S.
Henry: I also think it will depend on how businesses react, their communication to consumers, and how they adjust their environment based on the situation.
Is tourism part of your parking revenue? If so, has that market started to show any increase? -Shalini Diaz Yes, depending on the level of restrictions, businesses are recovering very quickly. The scenery parks we manage in low risk cities show significant improvements after policy relaxation, some even exceed last year’s results. Thank you Wen, Tony and Henry. Aside from the mobile penetration increase has there been any increase in contactless/ NFC (near field communication) payments? - Shaun Donaghey In all car parks Sunsea manages, the past mobile payment penetration has always been very high (more than 70%). Yes we did observe another increase of about 10% in the past two months. What have you changed in your parking operations to protect employees and customers? Are you providing hand sanitizers, masks etc? If so, what has the addition of these items been on your expense budget? - Bruno Lopes We offer masks and sanitizers to our employees only, our landlords offer the same protection tools to customers. The additional costs are minimal to our budget. Do you believe commuters have shifted from public transportation or uber to private vehicles, perhaps temporarily. Is there a segment that at some point will shift back to public transportation or uber, etc? - Leslie Marshall
Yes we believe white-collared employees in large cities are shifting to private cars only temporarily, and will shift back to using public transportations once they feel safe because of high parking cost. Another interesting trend is that car ownership is expected to grow due to this event. Rideshare business has been hit very badly during the pandemic and I believe there will be a sizable drop even after life gets normal.
In the US and Europe, business opinions often mention the fact that mobility-driven industries such as yours will never be the same. According to your experience, that is not true. Do you believe that the US and Europe will actually recover the April 2019 figures in a short time? - Andrea Saccani No I do not think so. Western countries are still debating what the right policies are, and have not come up with consensus view on level of restrictions. I think the impact will last a lot longer than what we have experienced here in China. What are strategies you employed to accelerate/expedite domestic parking operations? Such as educational marketing campaigns or PR? - Carey Redd
Push for more car park automation to reduce staff cost.
Leverage business development opportunities driven by short term cash needs from landlords, and needs for reducing human to human interface in car parks.
Invest in PR campaigns targeting city governments to introduce our City Level Smart Parking platform, which can better monitor traffic, and improve public safety.