Parking price elasticity

Wednesday, 27 September 2017

by: Sacha Oerlemans

An average utilisation rate of about 80% means that parking spaces are well-used and traffic cruising for a place to park is limited. An average utilisation rate of < 60% is often considered a sign that parking is ‘too expensive’, or that there is overcapacity. An average utilisation rate of 90% is often considered a sign that parking is ‘too cheap’.

Motorists' sensitivity to parking tariffs is expressed in terms of price elasticity. Experts often refer to an average elasticity of around 0.3 (i.e. inelastic). However, price elasticity is determined by a number of factors:

  • Price elasticity is highly dependent on the parking purpose. Motorists with a business purpose are much less sensitive to tariff differences than shoppers and people on a day out.
  • The parking purpose differs considerably per location, time of day, and day of the week, so the price elasticity also differs considerably per location, per time of day, and per day of the week.
  • Price elasticity is highly dependent on the parking duration. The longer a motorist needs to park, the more sensitive they will be to tariff differences. As the time parked increases, so does the price difference.
  • Stated Preference (expected behaviour) studies regarding parking price elasticity generally find greater price elasticity than Revealed Preference (actual behaviour) studies.

In addition, sensitivity to tariffs depends on:

  • Whether parking is paid for in advance or on leaving. Practical research shows that motorists who pay for parking on leaving (pay by mobile, for example) are less sensitive to tariff changes than motorists who pay for parking in advance (Pay & Display ticket machine, for example).
  • Other research also shows that motorists respond differently in the medium term to the introduction of paid parking than in the short term.

The effect of increasing parking tariffs also depends on the initial situation. So, introducing paid parking at 50 cents per hour has a greater effect on parking demand than an increase of 50 cents when the parking tariff rises, for example from € 1.80 to € 2.30.

The following practical and useful insights come from publications about parking tariffs:

  • Price elasticity is considerably greater for long parking durations than for short-term parking. After all, if you park for longer, you pay more anyway. Also, by making parking at some distance from the final destination (P+R, P+W) cheaper than parking in the city centre, those parking all day can be lured away from city centres.
  • This encourages a good turnover of parking spaces in the centre. The same principle applies to on-street parking compared to parking in purpose-built facilities. On-street parking spaces are usually spread throughout the city and therefore on average closer to a visitor's final destination. By making on-street parking a little more expensive than parking in a purpose-built facility, the turnover of on-street parking spaces increases.
  • Parking tariffs can encourage short-term parking, for example if the first two hours is free. People will then park more often for short stay at that particular location. This promotes turnover of parking spaces and encourages car traffic.
  • Parking tariffs can also encourage longer parking durations. This reduces the amount of traffic to and from city centres and encourages longer average parking durations. Motorists will drive to the city centre less often, but when they do, will stay for longer.
  • Paid parking as measure to influence behaviour is sometimes considered unfair for motorists with a low income. This argument can be called into question. In his well-known book, Donald Shoup argues that those with lower incomes use their car less frequently, but do implicitly contribute to parking subsidies when parking is ‘free’.

Extract from the Dutch CROW report 'Parkeren en gedrag'.