With the rising number of personal vehicles roaming the streets, starting up a parking lot business in the United States can be quite profitable.
Parking has a significant impact on the growth of cities. The availability and quality of parking options affect the way businesses and individuals choose their location and where promoters build new real estate projects. According to reports, there are over US $10 billion in revenue earned each year from parking lot operations.
Also there are over 10,000 parking lot businesses in the USA that employ close to 160,000 people. The top three companies in this industry control a large share of the total market, earning 37.6 percent of the total industry revenue each year.
Small operators make up the remaining 62.4 percent of the industry and mostly cater to the local market demand for parking.
How Do Parking Lot Businesses Make Money?
Most parking lots in the United States generate revenue by filling up the empty spaces with cars that pay an hourly rate or flat rate for the parking. Parking lots are believed to be more profitable during peak traffic in larger cities. For instance, many lots leverage the number of drivers in town during sports games.
For a parking lot company that offers parking lot management services, they are paid a monthly fee that is based on the revenue produced by the parking lots they manage for other owners. Have it in mind that the price charged by parking lots in the United States tend to depend on the demand for parking and the nearby competitive prices.
How Much Money Do Parking Lots Make?
In rural areas, $1 per hour is quite acceptable. While in major metropolitan areas that are very congested, with extraordinarily high real estate prices, such as New York City, it is easy to charge up to $15 for fifteen minutes ($60 per hour).
One small lot with 20 spaces that earns, on average, $10 per space, per day will have $200 per day in gross revenue and earn $73,000 in gross revenue per year. Also, if the lot is outdoors and 4,000 square feet at $0.50 per square foot per month rent, the annual rent will be $24,000.
Wages paid at minimum wage level for parking lot attendants will be about $20,800 per year, leaving about $28,200 in gross profit before tax from a single, small parking lot. Note that larger parking lots can have hundreds of parking spaces, which is a multiplication of these basic profit estimates.
Meanwhile, the initial start-up costs will more or less include the rental or purchase of the lot/garage, purchase or lease of equipment, such as transaction machines, lift gates, and security cameras. Have it in mind that garages are more expensive, and costs tend to be much higher for multilevel garages equipped with elevators.
In some small cities in the United States, it is possible to start a single small outdoor lot for less than $10,000 if the land will be leased. However, an indoor garage can cost hundreds of thousands of dollars and upwards to millions depending on its size and location.
Parking lots are relatively low-maintenance businesses but can be very profitable when managed very well. The good portion of work that goes into maintaining a parking lot involves repainting lines, replacing signage, and paying for lighting (and possibly heat) if it is a garage.
What is the Business Model of Parking Lots
One of the most important aspects of running a parking lot is figuring out how to best monetize your new business venture. Most parking lots in the United States generate revenue by filling up the empty spaces with cars that pay an hourly rate or flat rate for the parking.
There are three ways you can go about this problem: 1) a self-service ticketing machine, 2) pay at the building, and 3) having a manned parking booth.
1. Self-Service Ticketing Machine Model
One of the most modern methods of collecting money in a parking lot is to have an automated ticket machine where people pay for parking.
Note that this model can work in many ways. The first option is to have the people pull into the lot and park, without paying; then, upon leaving, they reach a machine where they have to pay a set parking fee in order for the gate to open and allow them to pull out of the lot.
Also, another option is to have machines located within or near the lot where, immediately after parking, the customer goes to the machine and pays for parking. Note that these machines can be set to charge a certain amount per hour or a set rate.
These machines can also be set to produce a ticket that the customer is expected to put on their dashboard so it is visible, or parking spaces can be numbered and the computer can simply track which spaces are paid for and which are not.
This automated machine that will more or less look like an ATM machine won’t require a human to operate it, so no payroll and the onus is on the customer to do the work.
2. Pay at the Building Model
In United States, using this model that lets customers pay at the parking lot building can have benefits. But it only works if you own and run the lot as well as some attraction right nearby. Attractions like zoos, aquariums, and theatres where people are expected to pay their parking fee at the booth.
This can be on the “honour system”, where you trust people to say how many cars their group arrived in and then pay the fee.
In some situations, the car is given a parking ticket by a human or machine when they enter, and they must take the ticket to a ticket booth near the building, pay the parking fee, and have it validated, then show the validated parking ticket to exit the lot.
The advantage of this model is that you can have the same staff selling event tickets and collecting parking fees, minimizing staff.
3. Manned Parking Booth Model
This third model involves having a fully manned parking attendant booth located inside or at the entrance or exit of your parking lot, and has an employee who collects payments. Note that having one or two employees right onsite whenever the lot is open can offer a variety of benefits.
First, it provides one layer of security and deterrence. In addition, it provides customers a place to go with questions. Third, it ensures that payment collection is easy and guaranteed. However, if you choose to leverage this model, there are few tips to consider:
- You can have customers pay as they enter the lot, which is ideal if you charge a set parking rate. Additionally, you won’t have to worry about cars left in the lot when it closes because they are free to leave any time.
- You can have customers pay as they leave. Also this can be a set rate (but if you are doing a set rate, have them pay as they enter is really better). Or, it can be a variable rate depending upon how long they parked. But it entails that a person or machine will have to provide a ticket on entry. Indeed you may find it easier to simply charge a flat rate which cuts the work in half, really.
- Remember that providing shelter for your parking attendants is paramount, so get a parking attendant booth. Aside that fact that it offers your employees a place to stay out of the weather, but it also gives them a place to safely store the money they take in, and it provides visibility so that customers know where to go to pay.
4. Online Payment Model
This is another model option that is beginning to make its way into the parking world – paying by Smartphone app. Note that some local municipalities in high traffic areas have started letting people pay for numbered spaces right online using their cell phone.
Indeed, it is newer technology, and has many of the same positive and negatives of a ticket machine that lets you pay by space, but if you enjoy trying out beta technology, it is a business model you may want to look into. If you go this route, consider still having a live person on site to help those who are struggling to pay.
In the United States, the parking lot business became more profitable through economies of scale. Have it in mind that owning more parking lots that use the same back office and support services is the key to growth and increasing profits. Also, coupled with management of parking services, the business can expand to offer other support services such as energy monitoring, facilities engineering, HVAC, janitorial, maintenance, and landscaping.