Industry Strategic Outlook

Rick West www.WestFSI.com

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Overview

• Last Five Years

• What has changed the most in the past 5 years

• What hasn’t change which has implications to the future

• Next Five Years

• Will pace of change continue

• What are some of the changes we can anticipate

• Where could we be surprised

• How Are You Positioned

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What are some of the things that changed fast in the last five years

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Consolidation

• Valuations • Valuations for parking for companies, off-airport parking businesses / real estate

and urban parking real estate are at or close to all time highs

• The value of valet hospitality companies grew the most

• Don’t forget the value of higher education and municipal concessions

• Transactions have been many • ImPark 2011 sold and is acquiring

• SP+ / Central merged 2012

• Park n Fly Canada 2014 sold and eyeing the US

• Citizen Parking 2014 acquired Lanier followed by Icon, AmeriPark, Park One

• Towne Park majority stake sold 2014 and is acquiring

• Many off-airport locations have transacted

• Many urban parking garages / lots have transacted

• OSU parking concession $483 million; City of Harrisburg parking concession $281 million

• International investment likely was at an all time high 4

PARCS and Parking Technology

• PARCS consolidation, closure and start ups • 3M / FAPD closure

• Flow startup

• Park Mobile transacted

• ParkMe sold to Inrix

• T2 bought Digital

• Parking technology starts with angel or venture capital backing went from essentially 0 to over 200 • Smarking (data mining)

• Luxe (valet logisitics)

• Spot Hero (customer aggregation and location data)

• ParkMe (location data)

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https://angel.co/parking

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August 2015: 165 companies January 2016: 205 companies

Where Is Demand Growing

• Hospitality valet (hotel and medical) is growing tied to construction and an aging population • As a staffing business model the parking contracts lead to new staffing

opportunities (front door, luggage, wheel chair…)

• On-Street parking technology • Smart meters

• Mobile payments

• Sensors

• Consumer websites and apps

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The Lower Labor Participation Rate Changed Materially

• View the labor force participation rate in the last five years vs. history

• The unemployment rate has fallen but it masks demographic trends (boomers retiring), under employment, part-time employment and people no longer looking for work all of which impact long term parking demand

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Rise of the Next Working Generation Accelerated

• Millennials now hold 1 in 3 jobs and have their own view on job quality, company loyalty, pace of advancement and use of technology

• Millennials are the largest US population segment and are still entering the workforce

• By 2020 Millennials are expected to hold 1 of every 2 jobs

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The US Became a Sharing Economy

• Shared jobs • Fractional employment, permanent loss FT jobs, lower demand for monthly parking

• Shared cars • Zip Car, personal car rental, 1 car replaces multiple

• Shared driving • Uber, Lyft… changing mode of transportation mix

• Shared global inflation / deflation • Downward pressure on costs, price and incomes

• Shared costs with workforce • Shifting benefit cost to workforce including paid employee parking

• Shared technology • Mobile payments, data / analytics, connected cars, sensors, integration

• Shared back office, systems infrastructure, workforce • Subcontract software, IT infrastructure

• Shared culture • Millennials (ages 18 to 34) impact as they grow to 1:2 jobs in workforce, mobile

• Shared transparency • Price, alternatives, procurement

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Did you feel like things were changing this fast?

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What didn’t change or changed slowly

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Industry Supply and Demand Dynamics

• Competition has remained high • Between parking companies, PARCS manufacturers, with the self managed parking

option and in the professional services segment

• Differentiation remains light • Parking company A or B, PARCS systems or engineer

• Expectation is all will deliver similar results

• Differentiation is the “local” hands on person which is a two edged sword

• The “pie” is growing slowly so market share “take away” continues the downward pressure on gross margins and consolidation

• Overall demand for parking remains stable with low incremental growth reflecting a slow growth economy

• Inflation remains low which impacts a historical industry driver of price escalation

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Industry Value Added Skills – My Opinion

• Commercial location revenue growth • My experience is that most of the parking industry managers responsible for

locations either never had or have lost the “commercial” skills needed to drive revenue growth

• Specialty vertical skills are better than five years ago but only modestly

• Back office technology improvement has been slow

• Parking company business proposals still don’t have much meat

• Large company culture is still “if it’s a good idea we should develop it in house and own it” (but this is wrong and they never do)

• If my opinion is correct this will become a larger issue in the next five years

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Industry Forecast – Next Five Years The speed of change will keep accelerating

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Demographic and Economic Trends Will Increase in Importance

• Cities

• Urban residential trend will continue and become more meaningful

• New floor plans pack more jobs into less space which means more people in each commercial building

• City tourism (business & leisure) will continue to grow

• Baby boomers aged 51 to 69 will continue to retire in larger numbers

• This requires private companies and the self-managed GINP organizations to focus more on succession planning or pay the price

• Retirements will also disrupt client relationships and public sector decisions to outsource

• Millennials will ascend very quickly in the industry… much faster than GenXer’s

• Low US and global growth will continue to deflate select areas, inflation will remain low and overall demand will only slowly improve

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Technology Advancement & Use Will Accelerate

• PARCS • “In the last five years we were a hardware company writing software to support

our hardware. In five years we will be a software company.” Mike Bigbee, TIBA

• Integration between technologies will continue and improve

• Winners and losers will be identified and the field will paired • Winners will take a leadership role in helping parking companies including self-

managed operations to “use” their software and its features

• Mobile • Will move from customer only centric to also include parking industry workforce

• True remote management will become a large catalyst of change

• Logistics technology will become an influential force of change

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Automobile • Cars will remain the dominant choice for personal travel

• Convenience, lack of mass transit alternatives in most areas

• New technologies will continue to be developed and added • Parking integration with vehicle navigation will take a big leap

• Car ownership model for people living in or near cities will evolve quickly

• Electric car • Slow and steady

• Autonomous car • Fast addition of features including safety, fewer accidents, impact on insurance

industry, long haul trucking and driving will come first

• Last mile issues, regulatory

18 Ford’s Chairman Is on Quest to Reinvent Auto Maker Company weighs partnerships, new business lines to address challenges of rapid urbanization. WSJ January 11, 2016

Consolidation Will Continue

• All types of companies in the parking industry will continue to be sold or will enter into strategic relationships • Outcome of boomer retirement and valuation

• Share the cost of investment

• International investment will continue to grow • Safe harbor money

• Want exposure to the US GDP growth

• Sales processes will continue to be a mix of • Investment banker off-market or public process

• Advisor off-market

• Parking real estate will remain an attractive asset class 19

Existing Hurdles Will Grow Unless Addressed

• Commoditization will remain an issue keeping a pressure on gross margins unless you break from the pack

• The overhead cost of geographically disbursed hierarchical organization structures will remain a cost issue • It is difficult to flatten an org structure without effectively using

technology

• Vertical expertise needs to be elevated

• Culture • Inward Looking: Company and US

• Initiative Flow Through: Company initiatives are not well executed in the field

• Operations: Generalist; Operations mentality “what do I have to do today”

• Focused Business Plan: Hospitality Valet - Hire right… Train right… Customer Focus

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How will you modify your business plan to take advantage of the next five years

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Business Plan

• Marketing

• Service

• Value

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Strategic Partnerships

• NPA

• Geo relevancy

• Share cost and expertise

• Share the leadership

Rick West West FSI, LLC

www.WestFSI.com Phone 201.306.7384

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