Lucky for the parking industry, you don’t need to be trapped in a time loop to discover the power behind a true demand forecast.
If I could tell you how today will pan out, would it change any of your decisions? Does the thought of knowing what tomorrow will bring fill you with dread or hand you a secret power?
For anyone out there unfamiliar with the legend that is Groundhog Day, it’s a popular American tradition where a groundhog forecasts the remaining length of winter and arrival of spring each year based on whether it sees its own shadow on the 2nd of February. Seems reasonable.
It also happens to be the premise of a classic movie in which Bill Murray plays a character who wakes up over and over to Sonny and Cher playing on his alarm clock radio, endlessly stuck in a time loop repeating the same day.
It just so happens that on 02.02.2020 the Super Bowl was played on Groundhog Day for the first time in over 50 years. In a remarkable feat, Jeep persuaded Bill Murray to star in his first ever national TV ad just two weeks before game day. Fox squeezed the ad into a packed schedule that sold out several months earlier, and Jeep’s ad became the hit of the Superbowl. No one saw it coming.
Demand for Parking
This got me thinking about forecasting and how it impacts our decisions. The parking industry is undergoing significant change as technology converges and consumer behavior adapts, or rather, dictates this transformation.
Often not associated with cutting-edge technology, parking has moved from a traditional brick-and-mortar business to an industry dominated by digital platforms with the connected consumer at the heart. I can now use my phone to find the cheapest parking space near my destination, navigate my way there and use the same app for entry and payment. Some vehicles already let you do the same.
Analytics & AI
To be successful in today’s digitally-driven parking industry, operators need a true demand forecast supported by revenue science to provide the foundation for optimized capacity and maximized revenue. Thankfully, most operators don’t rely on groundhogs to tell them what the demand for their parking spaces will be. (Spoiler: Punxsutawney Phil, the most well-known groundhog, has been correct only 39% of the time.) The best approach to forecasting demand comes from applying advanced predictive analytics and AI to the right data to determine true demand.
3 things groundhogs don’t consider when forecasting:
Uncertainty. A certain amount of unpredictability exists for any given day, for any given segment such as pre-booking, in relation to the number of days to arrival. More so for drive-up business. Good forecast performance factors in a scientific approach to managing uncertainty.
Price Sensitivity. Understanding and accounting for price sensitivity in your demand forecast is essential. Demand will change as a result of increasing or decreasing a rate. And to go even further, price elasticity can vary by product (i.e., a premium location versus a remote location), market segment, the time to arrival, the day of the week, season, or many other factors.
Duration of parking. Understanding what the true demand is for all the variable lengths of stay means we are in a position to optimize the facility’s utilization and maximize profits.
Be Like Bill Murray
Having a forecast that’s reliable and knowing future demand does give me some of that secret power, but how do I use it to make better decisions?
Bill Murray’s character was in the unique position of living the same day over and over, and he started the story from the position that nothing he does makes a difference. Except it does. Knowing what is most likely to happen provides a valuable tool in deciding what to do next.
Dynamic pricing, when tied to true demand forecasting using optimization modeling, can be the difference in your business’s profitability. And I am not talking about variable pricing—the kind that is applied with rules, such as, decrease the price of all of my inventory by 25% until I am 50% full, then reduce the discount to 10%. That type of variable pricing relies on guesswork and leaves significant opportunity behind.
Using analytics to match the best price with forecast demand for every segment, for every product, for every day in the future allows you to harness the power of revenue science. Use your knowledge of future demand to execute pricing strategies that will drive top revenue performance.
Spoiler #2: Bill uses the power of his forecast to get the girl in the end and find true love. Use yours to find true demand. I got you babe!