Parking Apps Are BIG Business


Parking technology is a fairly big money business. Over the past four years, just three entrants in this business have raised $157 million of venture capital money. The companies are: Streetline (now controlled by Austria’s KapschTrafficCom AG), SpotHero and Luxe. We focused on these three not because they’ve been able to bathe in VC dough, but because they illustrate three differing approaches to bringing mobile cloud technology to bear on the parking problem.

The Parking Problem – Types of Solutions

First there is the definition of the market. We’re not talking about the operation of parking lots or curbside spaces; we’re talking about solutions that help drivers get their cars parked. While looking for a parking space in a crowded city is universally annoying, there have been a number of studies that document that it is also wasteful and costly.

A study by UCLA professor Donald Shoup cited data indicating that as much as 30% of cars in crowded urban traffic flows were simply looking for a place to park (“Cruising For Parking” D. Shoup.) This results in wasteful gas consumption as well as adding to air pollution.

The three solutions for parking that we examined can be summarized as follows:

  1. Streetline has developed sensor-based technology for analyzing actual parking locations and availability, which can encompass municipal and private parking locations.
  2. SpotHero deals with parking lots in major cities and offers an app that shows availability of spots and can reserve parking for the driver.
  3. Luxe offers a “valet” service, i.e., someone who will come and park the car for the driver, in busy urban locations and then later bring it to the driver.

Streetline’s Array of Capabilities

Streetline has probably been the most technologically ambitious of the three. From the consumer point of view, they offer a free app, Parker. In cities and other locations covered by the company, the app indicates open parking spots and pricing including meter rates. It also gives directions to the spot and will alert when a meter is going to expire.

The company has developed a good deal of technology around this app as well as additional apps that provide services for a range of players in the parking ecosystem. As for technology, a key to Streetline is its ability to read sensors that are in place at parking lots or on streets (think IoT).

Streetline can detect a car’s presence in a spot through a low power sensor located in the parking space. To gather this information for a given area, the company states, “A single sensor per block face is the ONLY infrastructure required for our Smart Parking solution.” This data is fused into the company’s Hybrid Smart Parking System. That system uses machine intelligence and data from a number of other sources – payments data, license plate recognition, cameras, GPS, and, in some cases, mobile phone data.

The Hybrid Smart Parking System supports a number of applications offered by Streetline. Their ParkEdge app allows parking lot and other facility owners to pro-actively publish information about availability, rates and other items. The company states that over 26,000 off-street locations in North America “are currently mapped in ParkEdge.”

Their Guided Enforcement app provides police or parking enforcement officers information on cars that are in violation of parking rules, reducing the amount of manual tracking needed to detect the violations. Streetline provides other analytic and data capabilities through its ParkSight Analytics and ParkingData apps, as well.

The company estimates the benefits from its family of services in terms of savings for drivers – over 700,000 hours and 3 million miles – as well as savings in terms of quality of life – 3 million less pounds of CO2 exhaust. The company claims to have monitored over 530 million parking events. It operates in about 40 cities and other locations, such as university campuses, primarily in the U.S., but also in Europe.

SpotHero’s Parking App

SpotHero concentrates on helping drivers park in parking lots in major cities. The company currently lists 15 U.S. cities. The app is free and seemingly easy to navigate. The driver is shown a selection of parking lots in their city, say a specific street location in Chicago, for example, with prices quoted and information about walking time to the user’s destination. They book a spot for a specified time period and pay in advance through the app. Their Parking Pass, which represents their payment receipt on their mobile device is then shown to the attendant at the lot. The app also features directions to the selected lot.

The company claims that users can enjoy savings of up to 50% on parking fees. The key to the system is obviously gathering and managing the information flow from the parking lots to know the availability and pricing that SpotHero can offer. The company, for example, boasts 1000 locations in New York City.

The company is putting increasing effort into the backend, which is data analytics and managing relationships with the operators. It has been adding to its technical staff and describes the parking lot operators as “partners.” As stated by one of their technical staff, “We believe in transcending the vendor paradigm and becoming an extension of their team.” Spot Hero believes that their information resources can help the lots operate more efficiently.

Luxe – Valet Parking Solution

Luxe is a valet parking app and service that is operating in a half dozen U.S. cities. The concept is that the driver uses the app to indicate where they are driving to and the company’s valet meets the driver and takes the car to be parked. Luxe has focused on commuters, a segment that regularly needs to park their cars and is likely to have repeat use for the service.

Rates may vary by locale and the amount of demand, but the company claims that the average cost for the user is $5 per hour. Rates have been reported as $7-8 per hour, and $25-30 maximum per day in San Francisco, Luxe’s home city.

Luxe leases parking spaces in various lots, typically on a monthly basis. So its profitability is directly linked to the amount of utilization it gets per parking spot. Profitability is also determined by the cost of the valets, which the co-founder has stated is $12 per hour. Obviously, productivity of the valets – number of cars they can service per hour or per day – is an important factor.

Our Take

Streetline has undertaken an extensive development program, which apparently heavily taxed its cash resources. According to parent Kapsch (90% owner), Streetline contributed over a €2.8 million loss (about $3.2 million) to corporate results from the date of the acquisition in April 2015 to year end 2015. Streetline should receive substantial support from its parent, a €500+ million revenue company. Kapsch has adopted a Strategy 2020, which calls for the creation of an “intelligent mobility solutions business.” This new strategy includes a Smart Urban Mobility segment and Smart Parking is one of the key parts of this segment. Streetline sees smart parking as an element of smart cities and has commented on using “sound level and road surface temperature sensing capabilities” as part of its smart city development program in the future.

We encountered Luxe as a presenter at the M1 Summit in New York this spring, which labeled it as a promising venture-backed company. However, valet apps have had a choppy history with some abandoning the market. (See: Bloomberg’s “On-Demand Valet Parking Seemed Like Such a Great Idea. It Wasn’t,” 3/14/16.) The jury is out on applications that demand large volunteer or contractual workforces, especially in light of Uber’s reported steady losses, including a loss of $1.2 billion in 1H 2016. Luxe appears to have a good grasp of the issues in their business, however, scaling will be necessary to prove out the viability.

SpotHero appears to have the simplest business model of the three: no noticeable major investment in technology other than software for its app; no investment in parking spaces; and no workforce out on the street. The company told Fortune early this year, that while it wasn’t profitable overall, it had reached profitability in Chicago, Washington, D.C., Newark, N.J. and was looking forward to getting there in New York and Denver.

A key factor for all of the parking app companies is the ability to negotiate with parking lot owners. This would appear to be a difficult chore in any situation where parking spot supply is limited in big cities (Boston has been cited as an example of a city that deliberately limited parking spot supply.) It should work well anywhere that spaces are in less demand and the app providers have value through their ability to steer customers to favored lots.

The profit mechanics for the apps providers are, we believe, a tricky business, as far as the parking operators go. Granted that parking is a big business, with parking lots and other off-street sites estimated at 25,000-40,000 in the U.S. and parking garage revenues in the U.S. estimated in a wild range, starting at about $9 billion annually. For most lots in desirable big city locations, we believe it is questionable how much value added the apps providers can supply. After all, the business is all about the perennial critical factor, location. Anyone who has used parking garages in New York, for example, can testify that customer service is hardly a major consideration. We can, however, see where cities will increasingly welcome the parking solutions since they alleviate nagging problems that affect quality of life and costs. As with so many of the mobile cloud apps we’ve covered, profitability is the key question.

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