Los Angeles International Airport

Non-Aeronautical Revenue Development:Public Parking

Board of Airport CommissionersNovember 16, 2009

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LAX Non-Aeronautical Revenue Initiatives

• In-terminal concessions

• Car rental concessions

• FlyAway fare adjustments and cost management

• LAWA employee vanpool program cost recovery and bidding of new service provider

• Airport-employee parking revenues and bus costs

• Improved cost recovery from updated roadway circuit charges

• Other business-opportunity privilege fees (e.g., shared ride vans)

• Public parking in the CTA and long-term lots

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Public Parking Performance – Initiatives

Recent

• Acquisition of Park One

• Consolidation of public and employee lots - Annual savings of $540K

• Increase in daily rate for remote lots – Annual revenue of $2.5mm

Potential

• Adjustments to CTA parking rates, both short-term and long-term

• Improved customer service

• Management of exit plaza and other operating costs within the CTA garages

• Management of bus costs for remote lots

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Asset Utilization is Below Benchmark Targets

• LAX assets are underutilized in comparison to other airports

• Despite higher prices than peer airports,

– LAWA parking revenue per passenger is $2.86

– Sample of 30 comparable airports averages $5.73 per passenger

0%

10%

20%

30%

40%

50%

60%

LAXTerminal

DENTerminal

DFWTerminal

ORDTerminal

PHXTerminal

PITTerminal

Avg. Daily Terminal Parking Utilization During Peak Month

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Long-term Performance Erosion

• Parking revenue has lagged growth in other revenue sources at LAX

– Low utilization– No change in product or service– Parking revenue has fallen from 16% to 10% of operating revenue

since 2001 Revenue Comparison

$-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

FY2001

FY2002

FY2003

FY2004

FY2005

FY2006

FY2007

FY2008

FY2009

Operating Revenue Parking Revenue

Competition at LAX is a Performance Factor for LAWA

• Private supply at LAX is higher than most airports

– Industry average is estimated at about 25%

– Before Park One acquisition, LAX was 41%

– With Park One LAX is 31%

• LAWA’s remote lots are under greater competition

– Pre-Park One LAWA had 42% of the remote space supply

– LAWA is now at 55% of the remote spaces

– Operations struggle to break even

• Private remote lots provide much higher service levels than LAWA

– LAWA remote lots are 40% occupied

– Private lots are 65% occupied

LAX Parking Supply

LAX CTA

LAX Remote (pre-consolidation)

LAWA's Park One

Private Remote

Hotels

Performance Evaluation

• LAWA has received five studies in the past five years that evaluate public parking performance

• Evaluations included both quantitative work and customer opinions

• Conclusions and observations about LAWA parking performance

– Some share common characteristics

– Distinct differences exist between CTA parking business and the remote lot parking business

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Performance Evaluation

• Common Observations

– Customers report greater concerns about automobile security than desire for proximity

– Amenities such as car washing are perceived advantages

– Promotions such as advertising and coupons are factors in market share shifts, particularly to private operators

– Perceptions about personal security are a factor

• CTA Parking

– Pricing strategies alone will not be sufficient to address the performance shortfalls, given the service level gaps

– Increasing parking rates as patronization drops in order to preserve gross revenue has been proven to be unsuccessful

– Longer stay discounting (or coupons) are needed to attract a missing segment of users

• LAWA Remote Parking

– Service differences are a fundamental factor

– LAWA’s remote lots have few advantages given the choices available to customers

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LAX Issues are Not Limited to Pricing

Services offered in LAX parking lots:

–Parking space for hourly/daily rate

–Location and proximity for CTA parking

Services offered at other airports/off airport operators:

− Valet Parking

− Quality bus services

− Car Wash/Detailing

− Promotions/Coupons

− Frequent Parker Programs

− Air conditioned waiting areas and bottled water for remote lots

− Luggage Assistance

− “Car to Curb” Service (minimal customer walking)

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Defining the Opportunities

• Required Investment

– Parking Revenue Control System

– Pay-on-foot systems

– Credit card in-and-out

– Changes to exit lanes to increase efficiency and reduce wait times

• Pricing Strategies and Revenues

– Seasonal pricing

– Weekly rates, not just daily rates

– Non-parking revenue generating services

• Product Selection and Choice

– Differentiation in parking products and services across LAWA’s various parking locations

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Alternatives for Implementing Change

1. Hire industry consultants to assist LAWA staff in developing improved business/operations plan and implementation of strategy

– Slowest to market

– Highest level of control/risk

– Likely a “trial and error” based strategy requiring institutional responsiveness and agility

2. Turn parking into a concession (all or remote-only)

– Fastest to market

– Reduced level of risk, but with some loss of control

– Shared upside from improved performance

3. Privatization/Long-term Lease

– Slow to market

– High initial payout/low long term reward

– Least control/risk

– Likely leaves money on-the-table given underperforming baseline operations

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Next Steps for Concession Approach

• Define criteria for contemporary airport parking operation

• Identify risks to be managed

• Develop and release parking concession RFP

• Review proposals:

– Improvement in customer service

– Plan for investments

– Proposed services

– Financial offer

• Select new concessionaire

• Implement new parking operation before 2011