Parking Startups Are Cashing In on America’s Traffic Surge
(Bloomberg Businessweek) -- During the depths of the U.S. coronavirus pandemic, cars sat idly in driveways, city streets were deserted, onetime commuters worked from bed—and it was much, much easier to find a parking spot.
All of which was devastating news for the small cadre of tech startups dedicated to helping people find and reserve places to park. For SpotHero Inc., which makes an app that helps drivers locate parking spaces, business was down 90% in April 2020 compared with February. The company laid off half its employees. “It was a really hard time for us,” Chief Executive Officer Mark Lawrence says.
Now, at last, drivers are back, and so is the familiar American pastime of hunting for a parking spot. In the U.S., traffic was up 55% in April from a year earlier, according to the Federal Highway Administration. And although urban roads were slower to refill than their suburban counterparts, traffic in such cities as Chicago, Los Angeles, New York, and Washington, D.C., finally touched pre-pandemic levels again in June, according to Inrix, which analyzes mobility data.
The result has been a wave of new customers for SpotHero and companies like it. SpotHero bookings started to come back in January, then accelerated. “It was slowly, then suddenly,” Lawrence says. Now the startup is profitable for the first time in 10 years, he says, thanks in part to a surge in car ownership spurred by people avoiding public transit. At FlashParking Inc., which makes two spot-finding apps and helps event companies and garages coordinate availability, demand is higher than it was before the pandemic in some cities. Meanwhile, SpotAngels, which uses crowd input to create maps of nearby open spaces, says monthly revenue since its previous high in February 2020 had tripled by May 2021. “It’s interesting to see how dark it was, and can get,” SpotHero’s Lawrence says, “and then have such optimism now.”
Before the pandemic, the industry was in crisis, says Eran Ben-Joseph, a professor of urban planning at the Massachusetts Institute of Technology and author of ReThinking a Lot: The Design and Culture of Parking. The rise of such ride-sharing services as Uber Technologies Inc. and Lyft Inc. had meant that many parking garages at stadiums and the like were forced to retrofit their spaces for other uses, such as mini-distribution centers for packages.
Post-pandemic, though, parking companies are benefiting from a renewed love of personal space. “I do think right now there’s a little bit of a psychological issue with taking public transit or taking Uber,” Ben-Joseph says. He also thinks parking apps in particular may be benefiting from the lack of desire to touch kiosk screens or hand over cash to an attendant.
Investors are ready to bet that tech-enabled parking is sticking around. SpotHero, which makes money by taking a cut of garage fees, has raised about $120 million. Arrive, which also takes a cut of fees, raised $68 million before it merged with FlashParking earlier this year. And SpotAngels, which brings in revenue through subscriptions, has raised $3 million.
The nature of the competition for parking spaces has shifted post-pandemic. “Traffic is back, but it’s very different in its shape and form,” says Dan Roarty, president of the Arrive division of FlashParking. For example, demand for parking in New York now exceeds its pre-pandemic levels, but it’s spread throughout the day instead of at peak commuting times, Roarty says. Inrix found that in the U.S. people are traveling more among suburbs around cities, instead of from the suburbs to downtown—indicating that remote work is still having an impact on traffic patterns.
People are also ordering more items online, leaving a larger share of shopping trips and food runs to delivery drivers. That’s led Arrive and FlashParking to work on a service to find delivery drivers a spot in a garage where they can park the car, use the restroom, and charge their vehicle during breaks. Demand for those amenities is “at a scale that was unheard of because of Covid,” says Neil Golson, an executive vice president at FlashParking. Those services will be layered on top of the company’s technology that helps drivers locate spots and garages manage lots. A small patch of asphalt is just the beginning.
Read next: Seven Ways to Ease Your Fears About Commuting Again
©2021 Bloomberg L.P.