Strategies for Reducing Parking Costs

Parking costs can mean both big money and big headaches. Learn how to manage both.

Parking costs are closely tied to demand.
The key is to find the perfect balance.

Parking lots are so ubiquitous that drivers of single-occupancy vehicles tend to take them for granted. Most companies provide free or reduced-cost parking to employees. Retail and service-oriented businesses tend to suffer if they don’t have ample, easily accessible parking for their customers. Drivers pay high rates to park in municipally or privately owned lots in high-traffic urban areas. In every case, the bottom line is the same: parking can mean big money. This is a universal fact that employers know very well.

The annualized average cost of a parking spot varies considerably, depending on its location. About ten years ago, when researchers first began to analyze parking spot usage patterns in the context of the digital age, annual costs ranged anywhere from about $250 to $2,250 (or more, depending on demand). Today, those costs have gone up sharply. Extreme examples can be seen in London and New York, where buyers have now paid a staggering $1 million for ownership of a single parking spot. While this is far from the norm, it does speak to the urgent demand for employers to keep their parking costs under control at a time when they are following a continuous upward trend.

Yet, at the same time, businesses and organizations also want to keep barriers to parking to an absolute minimum. Employers risk severely limiting their hiring options if they aren’t able to provide free or low-cost parking to commuters. Businesses often try to provide free parking to their customers, either by offering it outright or by maintaining validation policies that absolve customers of parking costs if they make a purchase. Organizations of all types and sizes also tend to provide free visitor parking.

In the case of regular parking, users with direct connections to the organization providing the parking facilities are typically offered priority access at advantageous rates. Colleges and universities, for example, will offer parking passes to students, faculty, and staff. In the case of students, these fees may be paid along with tuition, user fees, lab fees, and so on, and are thus effectively “hidden.” Faculty and staff may be offered parking spots as part of their compensation packages. Municipalities often regulate street parking by making it available exclusively to residents on a specific district or neighborhood using a monthly or annual pass system. Similarly, high-density apartment complexes may provide tenants with optional on-site parking for a fixed monthly cost, or “hide” it in the unit rental price.

Regardless of the strategy, providing parking is always an incredibly costly undertaking. Businesses, organizations, and cities attract more people as they grow, which almost always leads to an accompanying spike in the demand for parking. Meeting these costs can be crippling. Large enterprises face huge capital expenditures as they strive to meet parking demand, and organizations like universities and municipalities have to come up with millions of dollars if they want to solve their parking woes by building multi-level garages.

It has become increasingly obvious that the single most effective way for businesses and organizations to control their parking costs is to reduce demand. While this was far more difficult in the years that preceded increased awareness of the negative impacts of single-occupancy vehicles, the idea is catching on more and more. Smart commuter management policies have helped both public and private organizations change user behavior, encouraging them to adopt greener and less taxing modes of transportation. The most widely used commuting modes that reduce demand for parking include ridesharing, cycling, and public transit. For organizations, the key is to encourage as many people as possible to adopt these alternatives.

Parking cash-out programs

Parking cash-out programs have proven to be one of the most effective and attractive way for businesses and organizations to reduce parking demand, thereby lowering parking costs. These programs are built on a simple principle: people are more likely to willingly give up their parking spots if they are given a direct cash incentive to do so.

Most such cash-out programs are used by larger businesses and organizations that are struggling to cope with ever-increasing demand for parking. They present employees and organization members with a choice: continue to keep using an assigned parking spot, or accept a monthly cash payment in exchange for giving up the spot. The amount of the monthly cash payment should be carefully calculated to provide a tantalizing, direct financial benefit for the end user. While some businesses elect to break even on the deal, others choose to use parking cash-out programs to reduce expenses by offering employees slightly less than the monthly cost of leasing or maintaining the parking spot.

One of the most attractive ancillary benefits of parking cash-out programs is that they directly encourage employees and organization members to embrace greener, smarter modes of transportation. Since they will no longer be using single-occupancy vehicles to get to and from work, they’ll adopt a mode like public transit, ridesharing, or cycling by default. Thus, the organization makes tangible contributions to community and environmental betterment in addition to reducing its parking costs.

Earn-a-bike programs

Sonos, Inc. recently introduced an innovative program that allows employees to earn money towards a new bike by reducing or eliminating parking space usage. As discussed during our recent CommuteCon 2017 transportation demand management conference, Sonos created a program that gives employees the option to participate as “fast-cash commuters” or “flexible commuters.” Fast-cash commuters are given $600 towards a free bike, along with guaranteed payments of $5 per day, paid out quarterly, and a free bus pass. To earn the bike, participants must log 60 bicycle commutes per year. Flexible commuters retain their parking permits, but receive financial benefits on days when they choose sustainable commuting options. They are also offered $600 towards a bike, but must log 80 rides per year to earn it. Flexible commuters also receive payments of $2 per day and a free bus pass.

To encourage participation, Sonos required participants to earn their bikes by making 60 or 80 cycle commuters per year before becoming eligible for the daily cash payments. The company also adopted a “guaranteed ride home” strategy, providing employees with taxi rides to cover emergencies and rainy days.

The University of Louisville also used a similar strategy to great success. The school allowed community members to trade in their parking permits in exchange for bicycle vouchers. As with traditional parking cash-out programs, these forward-thinking strategies also have additional benefits. They get people moving, boosting their health while reducing the pollution caused by vehicle exhaust and fuel consumption.

Create carpooling and ridesharing incentive programs

Carpooling and ridesharing incentive programs have a lengthy track record of success. They generally take one of two main forms:

First, they turn using alternative modes of transit into a game. Participants can take part individually, or align themselves into teams. Every time a participant or team logs a commute using an alternative mode of transportation, they earn points. At the end of the competition, the participant with the most points wins a grand prize. Secondary prizes can also be offered to lower-placing leaders, encouraging wider participation.

Alternately, organizations can offer preferred parking spots to vehicles that are used in rideshare programs. Commuters can be matched based on location and/or similar work schedules, and take turns sharing driving responsibilities. Emphasizing benefits like reduced fuel, insurance, and vehicle maintenance costs is a great way to get people excited about taking part.

Introduce mode-based challenges

A popular variation of the gamification of alternative commuting is to introduce a mode-based challenge. Popular examples include Bike to Work Week, which is already an annual fixture in communities throughout the United States. Organizations may also encourage the adoption of other alternative modes by, for example, instituting a one-month rideshare or carpooling challenge program. Again, participants who rack up the most miles or log the most trips can qualify for prizes.

Case studies have shown that these types of challenge programs have the potential to encourage long-term or permanent culture change. These strategies also double as excellent branding opportunities, allowing businesses and organizations to broadcast their alignment with forward-thinking goals. This, in turn, can help improve the organization’s standing among members of the public and help it attract higher-quality employees who share the same values. These benefits are particularly important to businesses and organizations looking to attract younger employees. Members of the millennial generation are well-known for wanting to be a part of an organization that shares their social values.

Leverage the power of technology

Next-generation technological and software solutions are critical for businesses and organizations that want to get organized as part of a program to reduce parking costs using the aforementioned strategies. The RideAmigos software platform is ideal for a comprehensive range of commuter management applications, helping users make easier and more convenient connections with alternative modes of transportation. The platform is also an indispensable tool for commuter program managers and administrators looking to publicize their initiatives, encourage participation, and track results.

Get started with RideAmigos for further information, a personalized consultation with one of our TDM professionals, or a free analysis of your existing commuter programs.