Pop quiz – put your books and pencils away. There’s just one question…define Revenue Management.

zzzz….boring! Yea, the topic of revenue management may be the perfect cure for your latest bout of insomnia, but it’s also a critical cog in many industries today. Revenue management, also known as yield management, is the process of understanding, anticipating and reacting to consumer behavior in order to maximize revenue or profits (see Figure 1) . In other words, by manipulating price, companies can maximize their profits.

Robert Oberwetter’s article on Building Blockbuster Business states there are 6 characteristics to determine if revenue management is appropriate for a particular product or service. They are:

1. The product or service is perishable. Parking spaces are a perishable commodity – if a space sits empty, the lost income cannot be made up.

2. Capacity of the product is limited. A parking facility has a certain number of spaces and more cannot be added without great costs or construction.

3. Market segmentation. There are discounts and early bird specials, but with RM technologies, the potential for parking facilities to increase revenue is even greater.

4. The product or service can be sold in advance. Often done through reservation systems, to enable forecasting and manipulate demand and pricing.

5. The variable costs of the product are low. The main parking variable costs are for parking attendants and maintenance. If a space is sold that would otherwise have gone empty, then there is additional revenue gained that goes directly to the bottom line.

6. Demand for the product varies over time. Demand for parking varies throughout the day. RM can smooth the demand curve by stimulating demand during low demand times and increasing revenue during high demand times.

RM is a key factor for succeeding in the airline and hotel industries. Their success is encouraging other industries, such as movie theater and rental cars to mull the adoption of RM as a core business practice. The parking industry is a prime candidate for RM techniques as well. Oberwetter states that, “companies that have adopted revenue management as part of their corporate culture have seen their revenues increase from 3 percent to 7 percent a year, with 80 percent of that going directly into profits.”

The Internet is the tool that makes RM practical for the parking industry. The ParkWhiz Marketplace can provide parking facilities the tools to implement RM technologies to enable more market segmentation combined with reservation and Web sales systems. Currently, only early bird specials are being offered as a way for the parking industry to offer market segmentation. With the ParkWhiz Marketplace, multiple price segments can be created. Parking facilities could offer reduced rates via the ParkWhiz Marketplace during low demand periods, for example between 3 PM and 5 PM on a weekday. Conversely, during high demand periods, for example during a sporting event, full priced market segments would be enabled. By monitoring historical sales figures and other factors, these segments could be automatically opened and closed on the ParkWhiz Marketplace interface.

Like any business, parking facilities are trying to maximize their profits. Using RM techniques, this is possible. ParkWhiz and the ParkWhiz Marketplace provides the tools necessary to successfully implement RM in the parking industry. As Oberwetter concludes, “tremendous profits await the company that gets there first, with revenue management assuming a starring role.”