Fast Follow: Chicago Business Follows Us On Parking Startups

Who would have thought that the very same week that I was writing a post about parking reservation systems here in Chicago, Chicago Business would be working on a series on the same topic? One of the nice things about this coincidence is that the article provides some numbers to help validate (or maybe refute) some of the things I said.

Starting with event parking, I considered the United Center in Chicago, assuming a 5% commission on 10% of 10,000 spaces per event, but the article suggests a commission rate of 15%. This means the market opportunity is not $600K annually for a venue like the United Center, as I suggested, but $1.8MM. If you controlled 1,000 venues at that rate, you would have a market opportunity of $1.9B, and that would be impressive. But that assumes 1,000 venues are busy 365 days per year; this for example suggests the United Center is busy 200 days per year, and not all events will sell out. So at 75% of capacity and 200 days, it would project to $780MM. Still a lot of money, but those assumptions seem generous, so I suspect the market opportunity would be considerably lower. And of course split between the multiple players in this space.

Looking at general off-street parking, I suggested the revenue opportunity for reservation businesses for this space was about $300MM, assuming generally that they controlled 5% of the spaces in the top 20 US markets at a 5% commission. Under this scenario that projects total market volume at about $6B. The article suggests that the U.S. market for off-street parking is about $20B, so my estimate was quite a bit low, although I was thinking only about the most sizable markets. The article further suggests that they take a commission of 15%, suggesting a market opportunity of $3B. Of course that assumes that 100% of parking spaces eventually are reserved, which is unlikely. If you assume they could grow to control 10% of the market at a 15% commission rate, that projects the market opportunity to be… $300MM!

Same result, different way to get there… but any way you slice it, there are a lot of players chasing a limited amount of revenue. The cost to build awareness and consumer acceptance can't be trivial, not to mention the cost of signing up lot owners across the country, and I can't imagine the lot owners are going to willingly give up this revenue. Once they hit a tipping point, they'll have to build their own tool to maintain margin, and these startups will lose leverage.

Posted by jkeenan on 02/20