We're only off by 50%
Parking Industry Size Set at $11.8 Billion
Ever since Parking Today has been in existence, and for a few years before, we, and other members of the parking industry, have been touting the size of the industry (total gross operating revenues) at somewhere between $20 billion and $26 billion. It appears that number is off, by at least a factor of two.
Reporting at the Parking Industry Exhibition in Philadelphia last month, Parking Market Research Company Head of Research Dale Denda said that using Department of Commerce data, and adjusting for obvious errors and other issues, that the gross revenues of the parking industry, public and private, could drop back to approximately $11.8 billion in 2003. This is off from a high of $12.16 billion in 2000. This is a 40 percent increase over revenues ten years earlier, but a more than 50 percent decrease in the "conventional wisdom" held by
According to Denda, unless the Department of Commerce is missing a lot in their surveys (which include what is known as 'Administrative Source' verification at something like a rate of 17 to 30 percent -- a euphemism for crossing checking IRS records), then the PMRC composite number is not far off the actual declared income by firms and public agencies in the industry.
PMRC has isolated the three variables that require adjustment (which is reflected in the PMRC number) given Commerce Department methodology to arrive at a gross estimate for all industry operating revenue. These variables include small-commercial operator revenue estimate, private educational and hospital revenue estimate (non-commercially managed), and valet parking revenue estimate (pre-1998).
"One would have to assign some very large numbers to these variables (in addition to our adjustment) in order to bounce the total up significantly," Denda said.
It was also noted that the private sector reports between four and five times the revenue of the public sector (before the adjustments mentioned above are factored in). This means, contrary to popular belief, the private parking sector is approximately four times the size of the public sector. The numbers do include on street revenues, as well as parking fines and other penalties.
Although it may come as a shock to the public sector to discover that their piece of the parking pie is so much smaller that the private, it shouldn't. Consider that in Los Angeles, there are more than 2,200 private parking facilities (at an average of say, 150 spaces) giving a total of 330,000 spaces under private control. There are approximately 50,000 parking meters in the city, and even if there is a like number of spaces in city-owned garages and lots, which is doubtful, the number is still less than a third in spaces covered. It should also be pointed out that in the majority of cases, when garages operate longer hours and on weekend, and therefore generate more revenue, they are private sector.
The numbers above are gross operating revenues for the industry. Often people take the gross revenues and then add in construction, salaries, equipment sales, repair, maintenance and the like. That would inflate the number considerably. This approach is the equivalent of saying that General Motors generated $10 billion dollars in sales and then spent $9 billion in salaries, steel, advertising, etc., making the automaker a $19 billion company.
Is parking profitable?
In the majority of cities, airports and other public entities, the parking revenue actually funds many other activities in the organization, "as long as capital repair costs, mainly associated with parking garages, are not included," Denda told Parking Today.
However, to compute the true profit, one must take into consideration the long-term costs of a parking facility and associated costs that might be included in other budgets. For instance, when a city builds a parking garage, the related infrastructure changes (roads, curbs, etc) may be included in different budgets. When a development figures the cost of a garage, many costs may be included in the overall project, and not prorated to the garage.
The operating of garages and parking facilities are typically profitable, but whether the overall parking project (including garage maintenance and debt retirement) is profitable is more problematic. When public entities build garages, the cost of land (many times already owned by the entity), loss of property tax revenue or the true cost of the money borrowed for the project are seldom included in the "profitability" of the facility.
In the private sector, garages can be built as part of another project (an office building or shopping mall) and a portion of the garage costs is carried by the entire project. In these cases, the garage is considered a necessary part of the project, like restrooms or elevators, the cost of the garage being covered in part or sometimes completely by rents in the project. Additional profits are generated when the parking operation is expanded beyond the project to offer parking to those who need to park, but aren't necessarily parking for the project itself (visiting nearby stores, restaurants, theaters, events, etc).
Garages built solely for parking revenue generating (like those in off-airport operations for instance) can be marginally profitable in the early years. However, in many cases, the garages were first built by company "A," it went broke, was then purchased (or leased) at fire sale prices by company "B" and "B" was successful. Many such operations are surface locations, or share their garages with other facilitates (hotels, office buildings, etc.) and therefore aren't burdened with the debt of new construction.
Side Bar 1
'How Did the Numbers
Get So Far Off?'
The size of the industry has become almost an urban legend, with the $20 billion number bandied about easily. However the source of the number is difficult to determine. It has just been taken as fact.
One industry wag explained it this way.
It seems that a number of years ago the Wall Street Journal called a spokesperson for one of the major parking organizations and asked the approximate size of the parking industry. The answer given was "approximately $20 billion." A short time later, the New York Times called the same person and asked the same question. The same answer was given. When the Times asked the source, they were told that it was taken from the Wall Street Journal.
That probably is as good a guess as any.