Back in Early October, I wrote a piece poo pooing disruption in our industry. At the Temecula Group, some took exception. It may have to do with definitions. Consider this one:
A disrupter creates new markets and value networks and eventually displaces existing market leading firms’ products and services.
Let’s look at the following:
On Street Technology: The most well-known single space meter companies are a shadow of their former selves both in size and also in industry influence. Duncan has been sold, Cale has been sold. Flowbird (Parkeon) has grown through acquisition of Cale and is now marketing itself as an “urban intelligence” business. Passport, Parkmobile and paybyPhone are taking a chunk of on street payments. If we consider Pay by Cell “M-commerce” it would seem the practice of drivers using M-Commerce is growing quickly. Although Australia is a small market it can be an example where the fundamentals found there could percolate up in the US market. In other words, it may be taking more time in the US but it’s happening, and it will accelerate.
Car Sharing: Car sharing has decimated the value proposition of taxi operators in many cities. The value network was predicated on a “license agreement” between taxi operators and local governments. The value network gave the city a decent franchise fee and gave the medallion owners capital appreciation. The community got a universal service obligation, which most of us took for granted, but try to arrange transport from the airport at 3:00am when there are no taxis. All of that has changed because of Uber/Lyft and other car sharing operators.
M-Commerce: What does not appear to be well understood is that the impact of M-commerce on the Parking industry has barely started. Its influence is going to be very much stronger over the next 5 years. Consider the following:
- The proliferation of smart phone and functional apps.
- The generally positive disposition to self- service.
- The value of the information that can be captured from the consumer.
- Out of pocket expenses for recovery from employers or for tax returns
- Recent and frequency information for municipalities.
- The ability to communicate with the actual driver
Once this is better understood, M-Commerce could decimate the on street tech industry and substantially change PARCS systems. Cash collection and all associated auditing and policing costs has been reduced because of M-commerce . Maintenance, vandalism and repairs are reduced. Municipalities have their money in their account next day and cities get enormous information on consumer behavior. Once this is understood the demise of on street tech will commence a steady but relentless decline.
City Government attitude: Local Governments across the globe have traditionally been an entry point for aspiring politicians and a platform for emerging political parties. There is an emerging negative disposition towards private vehicles in cities. Whether it be a congestion tax or the removal of on street parking spaces for green areas or bike lanes or whatever, city politicians across the western world are opposed to facilitating the use of private vehicles in cities. The ideological disposition is about a “green world” and the green political parties place extraordinary values on promoting alternate transportation options to the detriment of the vehicle. While it may not qualify as a disrupter, Council bylaws will foster competitors to traditional vendors within the parking industry.
Venture capital: Disruption in the parking industry will accelerate as more venture capital moves into the sector. Given the dramatic increase of urbanization across the globe, VC’s see the opportunity to bring capital and enterprise to an emerging problem. We have witnessed a series of early ‘unwise” investments in concessions in Chicago and in SF. However many of the larger players both on and off street are now VC funded.
So, what does this mean? Well in the first instance, VC’s are not interested in bootstrapping businesses. They don’t have the time. No longer will we have industry order that comes from a business making a profit and re-investing its profits to fund growth. VC’s will fund growth whether it be unprofitable or not and will seek to ramp up the growth trajectory to get a cash flow “break even”. We are going to see a lot more growth (for growth sake models) than we have ever seen before. This leaves the traditional market share holders with a for profit, fee for service model, vulnerable. UBER sold $1.5 billion coupons at 8% yield to be repaid in 8 years. In simple terms, they will invest $1.5 billion in their business and it will cost them $125 million a year to monster their competitors. There is no reason this type of thing can’t happen here.
The above discussion sees vast changes ahead for the Parking Industry. Call it disruption or not, its difficult to argue with the facts. Change isn’t coming, its here, call it what you may.
JVH
Thanks to Declan Ryan for his input.
