E-hailing and COVID-19 Depress Parking Revenues for South Africa Airports
South Africa’s fast-growing ride-hailing market is crowding out the country’s metered taxi service, especially in major urban areas. It’s also depressing revenue earnings for the country’s airport management entity, the Airports Company of South Africa Limited (ACSA).
The company, which has since 2014 been reporting fluctuating revenues from its parking bays at all its nine airports across South Africa, including the three main ones of international gateways of O.R. Tambo International, Cape Town International and King Shaka International Airports, recently announced a 16 percent dip in parking earnings for 2020. That is US$42 million down from the US$50 million earned for a similar period the previous year “due to multiple days of zero-trading.”
Long before the COVID-19 pandemic, parking services at the airports had started experiencing pressure from ride-hailing services.
“The growth in e-hailing, the use of the Gautrain (rail system) and lower levels of corporate and government spending has impacted our parking and car rental business,” said Siphamandla Mthethwa, ACSA’s Chief Financial Officer.
Closely linked to the declining parking business at South Africa’s airports is the reduction in the number of departing passengers from South Africa’s airports in 2020 by 65.8 percent to 7.4 million, compared to 21.6 million in 2019 due to the outbreak of COVID-19, according to Mr. Mthethwa.
But long before the COVID-19 pandemic, parking services at the airports had started experiencing pressure from a buoyed ride-hailing service with the launch of Uber in 2013 and taxify, later renamed Bolt, in 2016.
ACSA reported a 6 percent increase in parking revenues at US$35 million in 2014 due to increasing passenger volumes, a low tariff structure that was, by then, below the country’s consumer price index, and plenty of parking bays. Previously, in 2013, the revenue from South Africa’s airport parking bays generated US$33 million.
Subsequent years of 2015, 2016, 2017, 2018 and 2019 saw ACSA report parking revenues increase of 5 percent, 17 percent, 1 percent, 2 percent and 8 percent growth, respectively.
ACSA responded to the apparent demand for parking services by carrying out additional parking configuration and offering car drivers additional payment options while maintaining the same number of parking bays.
Furthermore, ACSA embarked on a successful marketing campaign to attract more cab drivers to utilize the company’s parking facilities and improve the efficiency in the management of the airports’ parking system.
By 2017, ACSA had started feeling effects of the increasing drop‑offs at its airports, emergence of multi-story car parks, and the never waning popularity of ride-hailing service that was still dominated by Uber and Bolt. A new operator, inDriver was launched in the market in 2019 after local startups such as SnappCab, Ryda, Scoop a Cab and Cabbie closed shop for failing to attract enough customers.
As the ride-hailing service gained traction in South Africa, a paradigm shift was inevitable for ACSA’s parking services with the company proposing towards the end of 2017 the adoption of a yield management model for its parking segment. The company said the move “will seek to adjust car parking tariffs relative to traffic volumes to address and offset non-peak revenues to provide greater long-term revenue stability.”
When the company reported a mere 2 percent increase in car parking revenues in 2018 of US$40 million, the management realized it was time to implement further measures to its parking business model to avert further revenue losses.
Actions taken included an increase in parking fees ending a five-year price review freeze, introduction of a yield management model that made it possible to adjust parking tariffs in tandem with traffic volumes, and forging partnerships with public transport providers “to introduce park-and-ride services between Central Business Districts (CBDs) and airports.”
In the meantime, ACSA’s management reached out to Uber to negotiate a revenue-generating partnership so as to “accommodate its (Uber’s) drivers in dedicated parking areas and users in mini-lounges in airport terminals.”
For ACSA, there is an emerging reality that the disruptive transport technology is taking root in South Africa and the company has to fast-track its plan to discard the existing term parking management model for curb management option.
Policy and Pricing Changes
The company announced in December 2020 its intention to introduce an access-controlled pick-up and drop-off facility for e-hailing platform operators at all ACSA airports in South Africa.
All participating e-hailing platform operators are to “share the same facilities, on the same terms and conditions of participation, provided that those operators which require parking bays in the facilities will have exclusive use of the allocated parking bays,” according to ACSA.
The airport managing company proposes to provide an access-controlled facility for use by all ride-hailing platform operators to enable their drivers to pick-up or drop off passengers. This will effectively replace the parking revenues the company has been collecting from its parking bays at the respective airports.
Access for dropping off a passenger will attract a fee of US$0.8 while drivers will pay US$1.6 when picking up a passenger.
ACSA will also charge US$363 annually for all ride-hailing platform operators who would be assigned a dedicated bay within the airport for use as a seating area for their customers.
The operators can also have access to a staging area at a rate of US$36 per bay per month, subject to availability.
Meanwhile, ACSA will invoice each ride-hailing platform operator on a monthly basis in arrears, payable within 30 days “based on data of all movements to and from the airport provided by the e-hailing platform operator.”
“The e-hailing platform operator will report on a monthly basis, in arrears, to ACSA, the total count of Drop-off and Pick-up Transactions for that month,” the company said.
For a ride-hailing operator to qualify to sign the operation agreement with ACSA one has to a registered legal entity in South Africa, tax compliant in South Africa, and a holder of a valid South African bank account.
“Participating e-hailing platform operators will be required to conclude a participation agreement with ACSA regulating the detailed terms and conditions of participation, and to adhere to ACSA’s management rules.”
For ACSA, the partnership with e-hailing platform operators could as well be one way the company has been “forced to re-think our approach to revenue generation through diversifying our portfolio,” as expressed by company CEO Ms. Mpumi Z. Mpofu in her latest performance update for shareholders.
Shem Oirere is Parking Today’s on the ground reporter in Africa. He can be reached at email@example.com.