Airport parking strategy might cut garage rates while still boosting revenue

July 28, 2008

Busy touting restaurants, artwork and other luxuries of the $1.1 billion midfield terminal, the Indianapolis Airport Authority is still grappling with a few details arguably more important to passengers.

Among them: How much will it cost to park? The answer might be among the more surprising aspects of midfield. Officials are considering slashing rates for the 5,900-space successor to Indianapolis International's existing 1,776-space garage.

A finance committee is weighing advice from consultants who say midfield garage rates should be as low as $16 a day--27 percent below the $22 a day it costs to park in the garage now.

It's not that airport managers want less money. The new rates are part of a carefully considered strategy to wring more cash out of parking operations--a strategy that will rely on the public's changing its airport parking habits.

For years, airport managers have tried to discourage long-term use of the often-overflowing garage by charging upwards of $20 a day to park. The authority effectively ceded some parking customers not just to its own, lower-priced surface lots, but also to privately managed lots nearby.

It won't be willing to do so come Oct. 28, when midfield opens. The goal then will be to fill the mammoth garage, whose 11-acre rooftop alone can hold nearly as many vehicles as the entire existing garage. The challenge is to fill it up even though surface lots will carry a cheaper daily rate.

"For the first time, the airport is in the business of competing [in parking]. We want to capture the market," said Ron Deer, director of ground transportation at the Indianapolis Airport Authority.

Parking is moneymaker

There's a lot riding on the parking strategy.

The subject itself might be as dull as a flight to Des Moines, but parking is hugely important for the airport. It's the largest source of revenue behind airline rents/landing fees.

The nearly $30 million the airport expects to rake in from parking fees this year is double the airport's cut from food, alcohol and merchandise sales.

Airport officials expect to generate even more cash from parking next year--a nearly $11 million increase, to $40.7 million, according to a preliminary 2009 budget presented to the airport board this month. They're counting on more despite predictions that passenger traffic will be virtually the same as in 2007. The budget assumes a $16 day rate for the parking garage and roughly the same fees now charged for surface parking lots.

How does the airport make dramatically more money with roughly the same number of passengers, all while slashing rates?

Simple: Get more people to use the parking garage, said Airport Director Bob Duncan.

Even though it's likely to be priced lower than the existing garage, it has thousands more spaces.

Not so simple is what daily rate to assign the new garage.

Earlier this month, in a sixth-floor conference room at the airport, members of an airport finance committee went round and round over pricing and usage data provided by a consultant.

How about $18 a day? Or $20? How much can the airport charge without scaring people away from the garage?

Airport board member Stu Grauel, especially mindful of the millions in debt issued to build the new terminal, wondered aloud whether $16 a day was leaving too much money on the table.

"I don't think we even know what the current demand is, do we?" asked another committee member.

Airport authority Executive Director John Kish said he was more concerned that passengers would opt for an off-airport lot than he was about charging too little to park in the garage.

Still unknowns

In the end, the committee agreed to have the consulting firm run more scenarios before making their rate recommendation to the airport board by Aug. 1.

There are other unresolved issues involving parking, such as whether the authority should continue to contract with private firms to run certain parking lots.

For example, the airport's "Premier" business-class lot is operated by locally based Global Parking System. Ditching the middleman would allow the airport to capture more revenue from midfield's 18,268 total spaces. By contrast, the current terminal has 10,812 garage and surface spaces.

Also unknown is how private operators with lots just off airport property will respond.

They're at a bit of a disadvantage with midfield, which is self-contained between the airport's two main runways. Currently, private operators are virtually next to the airport's surface lots.

The biggest private competitor, Park Ride & Fly USA, recently received zoning approval to open a parking facility on the back 25 acres of a parcel along Ronald Reagan Parkway.

"So, yes--we, too, will be moving west," said Peter Wertheim, director of business development at Park Ride & Fly.

Garage an attraction?

Much rides on the garage, which might be enough of an attraction itself to draw parkers--at least initially.

In sheer volume, the garage is at least as large as the terminal and nearly eclipses its curving, graceful lines. As at the existing terminal, both structures face each other nose-to-nose. But the new garage and terminal are connected by a moving walkway. It runs the entire length of the garage and passes by a large lobby with eight kiosks where exiting visitors can pay for parking before getting into their cars.

Beyond the lobby is a large atrium that bisects the garage. Each floor of the garage is exposed at the atrium. Railings are made from stainless steel fashioned into a grid-like pattern.

"It's more like a hotel lobby. It's soothing," Deer said, peering upward.

The ceiling of the atrium is a Teflon-coated, translucent fabric, reminiscent of the RCA Dome. The canopy also helps shelter several rows of parking spaces on the garage roof.

The first floor of the garage will house about 1,200 rental cars in spaces that aren't part of the 5,900-space total. By contrast, rental cars today are spread out over several remote parking lots and are accessible only by shuttle.

The other four floors are for public parking. Even these are an improvement over the current garage, with ceilings painted white to improve visibility.

The new garage borrowed a design feature from the old one--the oft-cursed helical ramps. The equivalent of a spiral staircase for cars, the new ones are much wider and less claustrophobic.

As with the existing garage, there's a ground transportation center where passengers can fetch a bus or limousine. But the new center is much larger and also houses rental car counters that currently reside on the lower floor of the terminal.

A covered motorway that runs alongside is dedicated to ground transportation vehicles such as limousines and IndyGo buses. Sidewalks are wide, allowing large groups of passengers to wait for pickup.

"When I came here 19 years ago, the number of conventions was minimal," said Deer, noting how the new center was built to handle large crowds.

On the other side of the center, facing the terminal entrance, is vacant space that could be used for future light-rail vehicles. For now, it will be landscaped.

Even the surface parking lots, just west of the garage, are a dramatic improvement over the acres of endless pavement today.

The new lots are divided into boulevards and peppered with trees. The edges of surface lots are bordered with earthen berms, so those driving up to the terminal won't see parking lots.

The bus shelters are made of glass, including opaque glass roofs. But they are cool, attests Deer, recalling how he was forced to sample one while waiting for help after a tire went flat on his staff car.

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