Rethinking Airport Parking Facilities to Protect and Enhance Non-Aeronautical Revenues (2021)

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5 Current and Future Risks to Public Parking and Ground Transportation Revenues and Facilities Together with Chapter 3, this chapter addresses the question, “What methods are there to forecast future parking demands given the ongoing and future uncertainty regarding passenger propensity to park?” Airport passengers have numerous options for access between an airport and the place where their journey to the airport started or ended, such as their place of residence or place of work. Prior ACRP reports, including ACRP Report 40: Airport Curbside and Terminal Area Roadway Operations and ACRP Report 146: Commercial Ground Transportation at Airports: Best Practices, describe these options: • Private vehicles driven by the airline passenger (long-duration park- ing) or the airline passenger’s friend or relative, who is not flying (short-duration parking or curbside pickup and drop-off ); • Rental cars leased from businesses located on or near the airport or through peer-to-peer providers; • Commercial vehicles that offer transportation between the airport and the passenger’s origin or destination within the region for a fee, such as taxicabs, limousines, scheduled buses and vans, and public transit; and • Commercial vehicles that offer transportation between the airport and a company’s place of business (e.g., a hotel or parking facility), where the cost of transportation is considered part of, or incidental to, the primary service being provided. Passenger propensity to park (versus use other access services) reflects each passenger’s perception of a combination of factors, including, but not limited to: • The round-trip travel cost between the airport and the passenger’s destination within a region for each access mode option (depending on the passenger, this calculation could include the value of the passenger’s time, vehicle operating and depreciation costs, tolls, and parking fees; some passengers traveling for business purposes may receive reimburse- ment for some of these costs and thus, not consider them); • Travel time and reliability of travel time between the airport and the passenger’s destination within a region for each access mode option; • Number of mode changes required during a trip (such mode changes include transfers between public transit routes as well as the use of shuttles between the airport terminal and remote parking facilities); • Unassisted walking distances and availability of weather protection; C H A P T E R 2 Chapters 2 and 3 focus on the current and potential future risks to passenger propensity to park for long durations (i.e., local passengers parking at the airport for the duration of their trip). While the number of short-duration parking transactions (i.e., family or friends parking while picking up or dropping off airline passengers at the airport) is usually higher than the number of long-duration transactions, parking facility requirements and revenues are typically dominated by long-duration parkers.

6 Rethinking Airport Parking Facilities to Protect and Enhance Non-Aeronautical Revenue • Availability and reliability of each access mode option (depending on a passenger’s origin or destination within the region, certain access modes may not be available at the passenger’s desired travel time or not available at all); • Familiarity with the available access options (many airline passengers are infrequent travelers, traveling one or two flights per year, and may not be familiar with the available access options to and from their home airport); • Availability of parking in the passenger’s preferred parking facility at the airport; • Vehicle ownership (some passengers may not own a vehicle or own a vehicle that cannot be parked at the airport for several hours or days because others in the passenger’s household require the vehicle); • Number of passengers traveling together; • Amount of luggage; and • Personal comfort and safety (some passengers may be uncomfortable traveling in unfamiliar vehicles, others may be uncomfortable using parking structures or other facilities with limited visibility). This chapter focuses on two key transportation options that have recently impacted airport passenger propensity to park or are expected to significantly impact airport parking in the future: TNCs and AVs. This chapter also describes four other transportation options that create risks to airport parking demand and revenues: subscription-based car rentals; Park for Free/Rent Your Car businesses; peer-to-peer car rentals; and off-airport parking businesses. These services offer airline passengers an additional airport access option that, due to a combi- nation of cost, improved convenience, enhanced reliability, and other aspects, may reduce an individual passenger’s propensity to park at the airport. As such, airline passengers, who previously used airport parking and other traditional airport access modes, are increasingly using these newer services. The introduction of AVs into the vehicle fleet is expected to create additional challenges to airports in that AVs could substantially reduce the costs of TNCs and other services, which could further impact airport parking demand and the associated revenues. 2.1 Historical Impacts At many U.S. airports, fees generated by airline passengers parking at the airport and fees paid by commercial ground transportation services represent a significant source of revenue. For many airports, it comprises the highest share of non-airline revenues. In addition, parking, rental car, curbside pickup and drop-off, and roadway facilities are fundamental components of an originating or terminating passenger’s airport experience and airport operations. Parking is one of the few services impacting a customer’s airport experience that is directly controlled by the airport operator (unlike airline services, concessions, or security screening). Since the late 1990s, four ground transportation services have emerged that, especially since 2012, have significantly impacted ground access, parking, and rental car activity at airports: • Subscription-based car rentals, such as those offered by ZipCar since 1999, that increase the ability for customers to do one-way, short-duration rentals; • Peer-to-peer car rental services, such as Turo (starting in 2009); • Park for Free/Rent Your Car businesses, such as TravelCar (starting in 2012); and • TNCs (e.g., Lyft and Uber), which rose to prominence starting in 2012. Each of these services has, to varying extents, impacted airport revenues while TNCs have also increased traffic using airport roadways and curbsides.

Current and Future Risks to Public Parking and Ground Transportation Revenues and Facilities 7 2.1.1 Impacts to Airport Revenues While these services have all potentially impacted airport revenues, almost all the impact appears to have been due to TNCs. As described in ACRP Research Report 215, once TNCs were permitted to operate, many U.S. airport operators received revenue from TNCs that were similar to or higher than the revenue previously received from traditional commercial vehicle services. Airports also benefitted from the new or additional revenues received from TNCs transport- ing customers who chose to use TNCs instead of being picked up or dropped off by private vehicles, which typically pay no curbside fees or pay short-term parking fees that could be less than TNC per-trip fees. Many airports, however, experienced lower parking and rental car revenues (per airline passenger) because customers are choosing to use TNCs instead of parking at the airport for the duration of their trip or renting a car. Figure 2-1 summarizes revenues to all U.S. commercial airports for three selected years: • 2011, the year immediately prior to the introduction of TNC services at U.S. airports; • 2015, a year by which TNC services were substantially established (and authorized) at major U.S. airports; and • 2018, the most-recent year for which 12 months of data were available. As shown, the parking and ground transportation share of non-aeronautical revenues remained relatively unchanged from 2011 through 2018, increasing from 41% to 42%. Conversely, the rental car share of non-aeronautical revenues (excluding any fees paid as part of customer facility charges) decreased from 20% in 2011 to 18% by 2018. These results reflect all commer- cial airports in the United States combined and do not necessarily mirror the experiences of individual airports. The impacts to rental car revenues are highlighted on Figure 2-2, which shows that rental car revenues (paid to all U.S. large- and medium-hub airports) per enplaned passenger remained flat or declined year-over-year since 2014. When compared with inflation, which averaged 1.6% from 2011 through 2018, these revenues lagged behind inflation starting in 2015. Figure 2-3 demonstrates that while nationally, parking and ground transportation revenues comprised a relatively constant share of non-aeronautical revenue, revenues per enplaned pas- senger did not remain constant. At medium-hub airports, it appears that parking and ground transportation revenues per enplaned passenger continued to increase until 2015 (the year by which TNCs were substantially operational at most major U.S. airports), after which growth in revenue per passenger flattened. When adjusted for inflation, the parking and ground trans- portation revenues per enplaned passenger at medium-hub airports started declining in 2015. Until 2018, large-hub airport parking and ground transportation revenues per enplaned pas- senger consistently increased, but were relatively constant when adjusted for inflation. During this period, however, many airports implemented TNC trip fees that likely offset reductions in revenues generated by parking facilities and other commercial ground transportation services. In addition, due to the impact of TNCs on parking revenues, many airports increased their parking prices and adjusted their parking products and services to both recover market share and increase revenues per transaction. For U.S. airports with residual ratemaking methodologies, such declines in non-aeronautical revenues are offset by increased airline payments. These higher airline payments, typically measured as cost per enplaned passenger, may become an obstacle to an airport attracting new air service, or may even push existing airlines out of the market. For the airports with compensatory ratemaking methodologies, the potential decline of parking and rental car revenues is a direct challenge to the airport’s finances. Parking, ground transportation, and

8 Rethinking Airport Parking Facilities to Protect and Enhance Non-Aeronautical Revenue Figure 2-1. 2011, 2015, and 2018 revenues, U.S. airports, in $ millions.

Current and Future Risks to Public Parking and Ground Transportation Revenues and Facilities 9 Source: Respective fiscal year data from FAA Form 5100-127. Figure 2-3. Year-over-year change in parking and ground transportation revenues per enplaned passenger, U.S. airports. Source: Respective fiscal year data from FAA Form 5100-127. Figure 2-2. Year-over-year change in rental car revenues per enplaned passenger, U.S. airports.

10 Rethinking Airport Parking Facilities to Protect and Enhance Non-Aeronautical Revenue rental car revenues accounted for approximately 28% of the total U.S. airport operating revenues in the fiscal year 2018. If those revenues are significantly reduced, those airports would need to operate with an undesirable margin. Those airports would also need to reduce investments in capital projects and operations, which could impact their ability to maintain and improve facilities. Therefore, regardless of the ratemaking methodology used, airport operators have incentives to maintain and enhance non-airline revenues by mitigating the current and future impact of TNCs and other disruptors such as AVs. 2.1.2 Impacts to Parking Activity and Other Ground Transportation Services In addition to the impacts on airport parking and ground transportation revenues, the increase in TNC activity has impacted the demand for parking and ground transportation facilities. As described in ACRP Synthesis 84: Transportation Network Companies: Challenges and Opportunities for Airport Operators, following the introduction of TNCs, airports experi- enced the following impacts on a per-passenger basis when compared with the prior year: • A 10% to 30% decline in the use of taxicabs; • An 18% to 30% decline in the use of shared-ride vans; • A 4% to 13% decline in rental car transactions; and • Up to a 13% decline in public parking transactions (it is not known what proportion of the reduction was related to pickup/drop-off parking versus long-term parking). In addition, ACRP Synthesis 84 identified that in 2017, 46% of airports reported increased roadway and/or curbside congestion, particularly at airports with increasing TNC volumes and limited curb capacity. Many airports have reported similar declines in subsequent years as well. As of the time of preparing this guidebook, TNCs continue to gain market share at U.S. airports though at gradually decreasing rates. Thus, as described in Chapter 3, estimating the future requirements for ground transportation facilities used by TNCs (such as airport curbsides) and impacted by TNCs (such as parking facilities) is subject to increasing uncertainty as tradi- tional mode shares continue to change. 2.2 Transportation Network Companies TNCs are businesses offering prearranged or for-hire ground transportation services for compensation that connects drivers of personal vehicles to prospective customers using a smartphone-based application (or “app”) provided by the company. While the service can match passengers with licensed commercial vehicles, such as limousines, most matches are with drivers using their own personal vehicles. Instead of calling a taxicab or driving to the airport and parking, a passenger may elect to use the mobile app to request a TNC vehicle, which is often more convenient and less expensive than using a taxicab or parking at an airport (depending on the parking duration). TNCs are typically regulated by states whereas taxicabs are typically regulated by a local municipality. As state regulations of TNCs do not address fares (whereas taxicab fares are typically regulated by the local municipality), TNCs can easily increase or decrease fares, including the use of surge pricing that increases fares during periods of high demand. Table 2-1 summarizes taxicab and TNC one-way trip standard fares for January 2020 (i.e., exclusive of any surge pricing) from four U.S. airports to destinations within their catchment areas. As shown, for shorter trips, TNC fares are 75% to 104% of taxicab fares. As travel dis- tances increase, TNC fares can be less than half the fares for taxicabs. While TNC and taxicab

Current and Future Risks to Public Parking and Ground Transportation Revenues and Facilities 11 Los Angeles (LAX) Las Vegas (LAS) Dallas/Fort Worth (DFW) Grand Rapids (GRR) Taxicab (a) TNC Taxicab (a) TNC Taxicab (a) TNC Taxicab (a) TNC Base fare / flag drop charge $2.85 $2.80 $3.50 $4.81 $2.25 $3.85 $3.30 $3.65 Cost per mile $2.70 $1.07 $2.76 $0.83 $1.80 $0.80 $1.80 $0.85 Cost per minute (b) $0.00 $0.17 $0.00 $0.22 $0.00 $0.16 $0.00 $0.16 Airport fees $4.00 $4.00 $2.00 $2.25 $4.00 $5.00 $0.00 $0.00 Assumed tip (c) 15% $3.00 15% $3.00 15% $3.00 15% $3.00 Total cost 5-mile, 15- minute trip $23.40 $17.50 (75% of taxicab cost) $22.20 $17.51 (79% of taxicab cost) $17.54 $18.25 (104% of taxicab cost) $14.15 $13.30 (94% of taxicab cost) 10-mile, 25- minute trip $38.93 $24.30 (62% of taxicab cost) $38.07 $23.86 (63% of taxicab cost) $27.89 $23.85 (86% of taxicab cost) $24.50 $19.15 (78% of taxicab cost) 25-mile, 30- minute trip $85.50 $37.70 (44% of taxicab cost) $85.68 $37.41 (44% of taxicab cost) $58.94 $36.65 (62% of taxicab cost) $55.55 $32.70 (59% of taxicab cost) Note: TNC fares do not reflect potential impacts of surge pricing. (a) Fare reflects metered rates. Depending on the airport, some fares between the airport and selected areas may be subject to a flat rate. (b) Assumes no significant periods of traffic delays or waiting. (c) As of January 2020, typical taxicab tips in the United States appear to be between 15% and 20% of the base fare whereas TNC tipping practices appear to not yet have a standard. The assumed $3.00 TNC tip reflects conclusions regarding average (mean) TNC tip, as documented in National Bureau of Economics Research Working Paper No. 26380, “The Drivers of Social Preferences: Evidence from a Nationwide Tipping Field Experiment,” October 2019. Source: Taxicab fares, https://www.taxifarefinder.com/rates.php. TNC fares, https://estimatefares.com. Accessed January 2020. Table 2-1. Fare comparison: taxicabs and TNCs, January 2020. costs vary among airports, TNC costs as a share of taxicab costs at other airports are generally similar to those described in Table 2-1. For example, analysis of taxicab and TNC fares to Los Angeles International Airport (LAX) by zip code indicated that the average (mean) TNC fare paid (with no surge pricing, but including tip) would be approximately 70% of the total amount paid (including tip) for the same trip in a taxicab. The large fare difference between TNCs and taxicabs has been a key contributor to the signifi- cant reduction in taxicab activity at U.S. airports since the introduction of TNCs. Lower TNC fares (when compared with taxicabs) have also impacted airport public parking activity and revenue. This is primarily due to the significant gap between the typical fees paid to the airport by parking customers versus the fees paid by TNC operators. Table 2-2 summa- rizes the average (mean) daily close-in parking price versus TNC airport fees at large-hub U.S. airports in 2019. As shown, the average (mean) daily close-in parking price was $28.97 while the average (mean) TNC round-trip fee paid to the airports was $5.53. This difference is compounded by the fact that customers paying the daily rate in these airport parking facilities are typically parking for multiple days. The potential impact of TNCs on airport parking revenues and demands may be masked by the increasing number of airline passengers and changes in parking rates. While per-passenger

12 Rethinking Airport Parking Facilities to Protect and Enhance Non-Aeronautical Revenue parking demand may be declining due to TNC use, the number of passengers may be growing at rate that results in increased parking demands and revenues, but at a lower growth rate than was experienced prior to the introduction of TNCs. In addition to the negative impact on airport parking revenue, increased TNC activity is impacting airport curbside operations and parking facilities as TNCs shift vehicular traffic from parking and rental car facilities to curbsides. Thus, many airports have experienced increases in curbside volumes and congestion that have outpaced growth in originating passengers. As a result, several airports have relocated TNC pickups from the terminal curbside to an alternate location. As shown in Table 2-3, while many airports allow TNCs to pick up passengers on the arrivals curbside (often in a demarcated area) or on a commercial vehicle curbside, several require that TNC drivers meet their passengers in a nearby parking garage. While such TNC pickup policies can reduce curbside traffic and congestion, they increase the volume of vehicles TNC fee paid to airport (June 2019) Daily parking fee – typical close-in parking facility Airport Airport code Pickup Drop-off Round Trip Atlanta ATL $3.85 not charged $3.85 $36.00 Baltimore/Washington BWI $2.50 $2.50 $5.00 $22.00 Boston (as of October 2019) BOS $3.00 $3.00 $6.00 $35.00 Charlotte CLT $1.00 $1.00 $2.00 $20.00 Chicago (Midway) MDW $5.50 $5.50 $11.00 $40.00 Chicago (O'Hare) ORD $5.50 $5.50 $11.00 $40.00 Dallas/Fort Worth DFW $5.00 $5.00 $10.00 $24.00 Denver DEN $2.60 $2.60 $5.20 $28.00 Detroit DTW $5.00 $5.00 $10.00 $36.00 Fort Lauderdale/Hollywood FLL $3.00 not charged $3.00 $15.00 Honolulu HNL Charged as a percent of revenue $18.00 Houston (George Bush Intercontinental) IAH $2.75 not charged $2.75 $24.00 Las Vegas LAS $4.25 $4.25 $8.50 $36.00 Los Angeles LAX $4.00 $4.00 $8.00 $40.00 Miami MIA $2.00 $2.00 $4.00 $17.00 Minneapolis-Saint Paul MSP $3.00 $3.00 $6.00 $26.00 New York (John F. Kennedy) JFK not charged not charged not charged $39.00 New York (LaGuardia) LGA not charged not charged not charged $39.00 Newark EWR not charged not charged not charged $39.00 Orlando MCO $5.80 not charged $5.80 $19.00 Philadelphia PHL $3.00 $2.60 $5.60 $24.00 Phoenix PHX $2.66 not charged $2.66 $26.00 Portland PDX $3.00 not charged $3.00 $27.00 Salt Lake City SLC $1.05 $1.05 $2.10 $32.00 San Diego SAN $3.00 $3.00 $6.00 $32.00 San Francisco SFO $4.50 $4.50 $9.00 $36.00 Seattle-Tacoma SEA $6.00 not charged $6.00 $30.00 Tampa TPA $4.00 $4.00 $8.00 $22.00 Washington (Dulles) IAD $4.00 $4.00 $8.00 $22.00 Washington (Reagan National) DCA $4.00 $4.00 $8.00 $25.00 Average (mean) $5.53 $28.97 Source: Individual airport websites, June 2019. Table 2-2. TNCs and daily parking fees, large-hub U.S. airports, 2019.

Current and Future Risks to Public Parking and Ground Transportation Revenues and Facilities 13 and people using a parking facility for passenger pickup, a function and level of activity (both in terms of vehicles and people) for which parking structures were likely not originally designed. Chapter 4 presents strategies on adapting parking garages for use as a loading area serving TNCs. In the near term (0 to 5 years), it appears likely that impacts due to TNCs will predominantly be a continuation of recent trends, though at some airports, airport access mode shares may stabilize as each market matures and adjusts to TNC services and fares. In such cases, growth in parking demand as well as TNC and other ground transportation activity will closely mirror growth in originating and terminating airline passengers. There is also a chance, however, that TNC fares may evolve in response to changes in TNC business models and state regulations Airport Airport code TNC pickup location Notes Atlanta ATL Nearby surface lot Baltimore/Washington BWI Departures curbside Boston BOS Parking garage Charlotte CLT Arrivals curbside Chicago (Midway) MDW Arrivals curbside Chicago (O'Hare) ORD Departures curbside Terminal 5: Arrivals curbside Dallas/Fort Worth DFW Upper curbside roadway Denver DEN Commercial vehicle curbside TNCs must drop off on the commercial vehicle curbside as well Detroit DTW Parking garage Fort Lauderdale/Hollywood FLL Arrivals curbside Houston (George Bush Intercontinental) IAH Arrivals curbside Las Vegas LAS Parking garage Los Angeles LAX Remote surface lot Miami MIA Arrivals curbside Minneapolis-Saint Paul MSP Parking garage Orlando MCO Arrivals curbside Philadelphia PHL Arrivals curbside Phoenix PHX Arrivals curbside Portland PDX Commercial vehicle curbside Salt Lake City SLC Arrivals curbside San Diego SAN Terminal 1: surface parking lot. Terminal 2: Commercial vehicle curbside San Francisco SFO Parking garage International terminal: Departures curb Seattle-Tacoma SEA Parking garage Tampa TPA Arrivals curbside Washington (Reagan National) DCA Terminal A: island curbside. Terminal B/C: Departures or Arrivals curbside Source: Individual airport websites, January 2020. Table 2-3. TNC pickup locations, January 2020.

14 Rethinking Airport Parking Facilities to Protect and Enhance Non-Aeronautical Revenue (e.g., fare increases in response to increased pressure for profitability and classification of drivers as employees rather than contractors), and demand for airport parking would be impacted accordingly (e.g., increased TNC fares could increase demand for airport parking). In the long term (i.e., beyond 2025), airport parking, ground transportation facilities, and revenues will likely be less impacted by TNCs and more impacted by the introduction of AVs. 2.3 Subscription-Based Car Rentals Subscription-based car rental services, such as ZipCar (owned by the rental car company Avis), allow customers use of a shared fleet. These services allow customers easier opportunities for short-duration rentals (i.e., less than 4 hours) and one-way rentals, both of which may be discouraged by traditional rental car companies. The challenges provided by these services are that subscription-based car rentals may provide another lower cost option for airport passengers than other access modes, including airport parking. If two one-way rentals (i.e., a passenger’s trips to and then from the airport) are cost-competitive with parking at the airport for the duration of a passenger’s trip, the passenger may elect to use the subscription service. The passenger’s choice may also reflect other elements of the journey, such as the location at the airport where they would need to drop off and pick up the rental car (subscription-based car rental services offered at airports by tradi- tional rental car companies are typically accommodated as part of the existing airport rental car operations and facilities). In addition to creating a risk for airport parking demands and revenues, subscription-based car rentals may have a larger impact on an airport’s rental car revenues. Airport car rentals typically generate revenue for the airport based on a percentage of the total rental fee paid by the customer. To the extent that one-way (or short-term) rentals replace multi-day rentals, airports may experience reduced revenues as the price of two one-way rentals could likely be less that the price for one multi-day rental. 2.4 Park for Free/Rent Your Car Businesses Park for Free/Rent Your Car businesses, such as TravelCar, allow a local airline passenger to park near the airport for free (or for a very low price) in exchange for allowing their car to be rented out to a visiting passenger. The vehicle owner typically leaves their vehicle with the business at a location near the airport and is provided a ride to the terminal. Upon their return, they are provided a ride from the terminal to their vehicle. While the vehicle owner is away, the business makes the vehicle available for rental to passengers visiting the region who otherwise might rent a car from a traditional rental car company. These businesses can pose a direct risk to airport parking revenues as they provide local passengers an option for free (or very low-cost) parking near the airport. They also can pose a direct risk to rental car revenues. These companies now represent a small share of the airport parking and rental car market, but if they prove successful, they could attract customers who would otherwise park at an airport. 2.5 Peer-to-Peer Car Rentals Peer-to-peer car rental companies, such as Turo and Getaround, provide websites or apps allowing individuals to rent their personal vehicles to customers. Such rentals are typically less expensive than rentals from traditional rental car companies. Unlike the Park for Free/Rent Your

Current and Future Risks to Public Parking and Ground Transportation Revenues and Facilities 15 Car businesses, peer-to-peer car rentals exclusively target customers looking to rent cars. Thus, impact on airport parking activity and revenue has been minimal. The primary risks these businesses pose are to airport rental car revenues. As of early 2020, peer-to-peer car rental companies operating on or near airports (a) had not entered into a business agreement or signed a permit with any major commercial service airport and (b) were not paying fees similar to those airports charge traditional on- and off-airport rental car busi- nesses. At the time this guidebook was prepared, legislation defining a peer-to-peer car rental service had been passed or was pending in several states, and there were several outstanding law suits concerning an airport’s ability to require peer-to-peer rental car businesses to abide by airport regulations and pay airport fees. Thus, the primary risks to an airport due to peer-to- peer car rental businesses are (a) the non-payment of airport rental car fees by the peer-to-peer companies as well as the traditional rental car companies or (b) lower revenues should airports charge peer-to-peer rental car businesses fees that are lower than those now charged from traditional rental car companies, and then, to provide a level playing field, allow traditional rental car companies to pay the same lower fees. Another risk to airports is increased curbside activity and congestion if the vehicle owner and renting passenger choose to transfer the vehicle at the terminal curbside. 2.6 Off-Airport Parking In addition to the services described above, off-airport parking continues to provide a risk to airport parking activity and revenues. At many U.S. airports, airline passengers have the option of parking at privately-operated parking facilities located in off-airport property. While on-airport parking has the advantage of being nearest to the terminal (i.e., the customer’s ultimate destination), off-airport parking businesses often have some advantages, including cost, convenience, flexibility, and scale. Many off-airport facilities also entice patronage with level-of-service enhancements that may not be offered by the airport, such as reservations, loyalty programs, trunk-to-curb shuttle services, complimentary bottled water, and other ancillary services. Cost and Service. Off-airport parking operators almost always offer prices below those charged by the airport for the comparable product, which is typically (but not always) uncovered parking requiring the use of a shuttle service. Off-airport operators also offer frequent discounts (or coupons) available through the internet, employers, and other sources. Convenience. Compared with most, but not all, airports, off-airport parking companies are more likely to provide higher frequency shuttle services, incentivize shuttle drivers to assist customers with their bags, offer trunk-to-curb service, and clean the snow off customer vehicles. Flexibility. As private companies, off-airport parking operators may be nimbler in reacting to changes in demand by quickly changing prices, product types, and other services. Almost all U.S. airports are operated by public agencies and as such, may experience more hurdles to changing rates, services, or products due to management oversight and other required government approvals. Scale. Off-airport parking companies with operations near multiple airports can spread fixed costs, such as website operations, marketing, and technological improvements (such as software supporting a customer loyalty program) across their whole portfolio. In contrast, an individual airport (particularly a smaller one) may be constrained by similar costs at too small a scale to justify the investment.

16 Rethinking Airport Parking Facilities to Protect and Enhance Non-Aeronautical Revenue Off-airport parking operators, as direct competitors for airport parking customers, present an ongoing risk to revenues generated by on-airport parking facilities. They can also provide the needed capacity in the event an airport does not (or cannot) provide sufficient parking spaces. The owners of these private businesses, however, can quickly convert their property to other non-parking land uses if justified by the commercial real estate market. Thus, an airport oper- ator may not be able to assume that off-airport parking operators will (a) continue to remain in business and/or (b) be able to provide sufficient capacity to maintain their existing share of that airport’s total parking market. 2.7 Automated Vehicles Although not a transportation mode, AV technology is another important trend that may change the landscape of airport parking. For purposes of this guidebook, AVs are those vehicles operating at “Level 4” autonomy, as defined by NHTSA. In a Level 4 AV, the automated driving system performs all dynamic driving tasks without human intervention but may be limited to operating under certain conditions or within limited geographic areas. Such conditions and locations are assumed to be areas that are well-mapped, such as major U.S. cities and surround- ing regions, including airports. Currently, it appears that there will predominately be three different types of AVs used by the public: • Personally owned AVs, similar in capacity to current personal vehicles, that are used exclu- sively by the owner and their immediate family; • Shared ownership of AVs, similar in capacity to current personal vehicles that may be used sequentially by several individuals or parties (such AVs may be owned by groups such as a car club); and • Pay-per-trip AVs available on demand for individual trips (i.e., an automated TNC) (such AVs could be owned by individuals and made available as part of a peer-to-peer service or owned by companies such as ZipCar or a TNC business and offered as part of the services provided by these companies). In addition to the above services, which would transport individual passengers or parties (e.g., a family or a group of passengers known to each other and traveling together), AVs would be used to provide automated shuttle services. These are fixed-route, multi-stop services, similar in operation and capacity to buses and larger passenger vans, used to carry groups of passengers. Such vehicles have been tested at airports, college campuses, and other locations to carry passengers within parking facilities and between parking facilities and the airport terminal or major trip generators. Guidebook sections focusing on impacts and risks to parking facilities and revenues (Chapters 2 and 3) focus on personally owned, shared, and pay-per-trip AVs, and the guide- book section focusing on opportunities to increase net parking revenues (Chapter 7) focuses on automated shuttles. Many traditional vehicle manufacturers and technology firms are investing in AVs and are indicating that broad adoption may occur through 2030. As of January 2020, there were limited examples of fully automated vehicles operating on public streets (e.g., Waymo began At many airports, TNC impacts to off- airport parking businesses have been more severe than those experienced by airports. These impacts have resulted in closures of off-airport lots and investors increasingly considering sale of their ownership stakes.

Current and Future Risks to Public Parking and Ground Transportation Revenues and Facilities 17 operations of fully automated taxis in Arizona in December 2018), but the timeline for the rollout of customer-ready AVs continues to be uncertain. Multiple vehicle manufacturers that originally hoped to release fully self-driving vehicles in 2019 delayed their introduction to 2020 or beyond. While the technology appears to be available soon, safety, regulations, and customer acceptance represent major obstacles to the wider adoption of AVs. AVs, once they serve a significant portion of airline passengers, are expected to reduce the area required for airport parking facilities due to lower parking demand (i.e., number of spaces required) and smaller parking spaces (since there is no need to open doors, the vehicles can park closer together). AVs are also expected to reduce airport park- ing revenues as fewer vehicles will be parked for long durations once airline passengers can instruct their vehicles, when allowed to operate unoccupied, to drive back home or to another storage location instead of parking at the airport for the duration of the passenger’s trip. Even if unoccupied vehicle operations are not permitted for many years, AVs could still impact airport parking demands and revenues as AVs are expected to reduce the cost of TNCs. 2.7.1 Automated Vehicle Impacts on Parking Demand In the future, it is expected that fewer individuals will own personal vehicles; instead indi- viduals will rely upon TNCs, shared ownership models, and peer-to-peer or subscription- based car rentals. Using data from the National Household Travel Survey collected by the U.S. DOT, a University of Michigan analysis (Schoettle and Sivak 2015) estimated that nationwide, American automobile ownership could decline from 2.1 vehicles per household (the average in 2015) to, eventually, as low as 1.2 vehicles per household due to households owning completely self-driving vehicles (no estimated date was provided for when this might occur). The analysis assumed that households would own fewer vehicles because one AV could handle all household trips (i.e., drop off person A, then return home empty to pick up person B). The reduction would certainly vary by area, with urban downtown vehicle owner- ship dropping by much more than rural vehicle ownership. From an airport perspective, the impact of AVs on parking will also be influenced by the fares offered by ground transportation providers operating AVs. In 2016, a Rocky Mountain Institute report (Walker and Johnson 2016) estimated the fares associated with human-driven TNC services versus a potential automated TNC service. The report concluded that while human-driven TNC fares were approximately $2.00 per mile, an automated TNC fare would be closer to $0.80 per mile (a 60% reduction). Airport experiences with TNC impacts on parking can provide indicators of how customers may respond to another new service, such as a TNC operated using an AV. For example, prior to TNCs, the main alternative to airport parking was typically taxicabs, shared-ride vans, or public transit. TNCs provided a similar service at a lower cost and greater convenience. At most major U.S. airports, TNCs have substantially displaced taxicabs and shared-ride vans as an airport access mode. As shown in the examples provided in Table 2-1, TNC fares may be less than half of taxicab fares, depending on the customer’s travel distance. A comparison between the average fare reductions resulting from TNCs (versus fares charged by taxicabs) with the corresponding reduction in airport parking demand can provide insight into how fares for trips using AVs might eventually impact parking demand. Mobility as a Service (MaaS) is the offering of multiple forms of transportation, such as TNCs, taxicabs, car rentals, and public transit through a single gateway, such as a mobile app, and payment system. Thus, MaaS allows travelers to seamlessly plan, book, and pay for multimodal travel. The introduction of automated vehicles, which could allow a single vehicle to operate as more than one of those services (i.e., operate as an automated TNC for one trip and automated peer-to-peer car rental on another trip) is expected to further the transition towards MaaS.

18 Rethinking Airport Parking Facilities to Protect and Enhance Non-Aeronautical Revenue 2.7.2 AV Market Penetration The impact of AVs on parking demand and revenue at a specific airport will likely reflect (a) the overall rate of adoption of AVs within the airport’s region and (b) the adoption rate AVs by the region’s TNCs and car rental companies, which will likely continue to have large presences at airports and are expected to be early adopters and operators of AVs. As of early 2020, AV technology is continuing to be developed and refined, and progress varies widely among manufacturers. Thus, projections of AV adoption within the vehicle fleet vary signifi- cantly. For example, in 2016, McKinsey estimated that by 2030, AVs would comprise between 0% and 15% of new vehicle sales worldwide, and by 2040, AVs would comprise between 10% and 90% of new vehicle sales worldwide (McKinsey 2016). The wide ranges reflected the potential impacts of AV availability in popular customer models (which could increase adoption rates) and the potential for critical incidents and associated negative publicity (which could decrease adoption rates). In addition, adoption rate projections are continually changing to reflect the current state of the industry. For example, in 2018, the Victoria Transport Policy Institute estimated that by 2030, AVs would comprise approximately 20% of vehicle sales, and by 2040, AVs would comprise approximately 50% of vehicle sales (Litman 2018). By 2020, the Victoria Transport Policy Institute had revised those projections: by 2030, AVs would comprise 2% to 5% of vehicle sales, and by 2040, AVs would comprise 20% to 40% of vehicle sales (Litman 2020). The research team has identified the following phases for AV deployment and penetration at airports. These phases reflect the understanding, as of 2020, of the state of AV technology and potential adoption rates by services that typically comprise a large share of trips at U.S. airports. • Immediate term, current and imminently available AV technology (e.g., 2020 to 2025): Limited deployment of consumer-ready AVs that can operate in most environments in a The potential AV impact on airport parking demand can be described through the following example: • At a given airport, prior to the introduction of TNCs, the main alternative for customers considering airport parking (especially close-in parking) was taxicabs. • The introduction of TNC services at that airport resulted in an access service comparable to taxicabs, but with fares that were typically 40% lower. • Since the introduction of TNCs, parking demand at the airport, as measured by peak accumulations during a typical busy day, reduced by 10% on a per-passenger basis (and controlling for other factors potentially influencing parking demand, such as changes in pricing or frequently full facilities). • Thus, the 10% parking demand reduction due to a 40% drop in price of the key competing access service provides a parking-TNC price elasticity of 0.25 (10% divided by 40%). • As AVs are expected to provide services similar to TNCs, that elasticity could be applied to the fare reduction associated with AVs to estimate the potential impact on airport parking demand. Thus, with a 0.25 price-elasticity, if AVs reduce TNC fares to an airport by 60%, the airport could project that parking demand would reduce another 15%.

Current and Future Risks to Public Parking and Ground Transportation Revenues and Facilities 19 fully automated or Level 4 mode. Waymo currently operates these vehicles with an atten- dant on board. Others, including Cruise, Daimler, Tesla, and WeRide, have announced plans to deploy similar vehicles (sometimes referred to as robo-taxis) in a few urban areas. It is expected that, initially, on-board attendants will be required for such services. AV shuttle vans or mini-buses will be operating on some airports but will be restricted to AV-only travel lanes or within designated portions of parking facilities. • Near term, increased commercial availability of AVs (e.g., 2025 to 2030): Over 25% of airport trips may be made by Level 4 AVs operated by TNCs, car rental, or other service providers. The actual percentage will depend on the region, financial incentives, regulatory environment, and public acceptance. While AVs are expected to represent a small share of the new vehicles being sold (expected to be less than 20%) and a smaller percentage of the total private vehicle fleet, a higher proportion of airport trips are expected to be made in AVs. This is because TNCs and car rental companies, which will likely continue to have large presences at airports, are expected to be early adopters and operators of AVs. While these vehicles will be allowed to access many airports, they will likely be prohibited from using terminal curbside roadways. Alternative drop-off and pickup areas may be needed for airline passengers traveling in AVs. • Medium term, AV sales gradually displace non-AV sales (e.g., 2030 to 2040): AVs may comprise up to 50% of the total fleet by the end of this period, with the percent varying by region. During this period AV technology is expected to reach human levels of driving performance. Airport and regional roadways may be reconfigured to allow for AV-only lanes benefitting from their improved performance (e.g., due to intra-vehicle communications), ability to use narrower lanes, and other features. • Long term, AV sales dominate the market (e.g., beyond 2040): AVs may comprise close to 100% of vehicle sales and over 85% of the fleet. By this period (if not earlier), empty vehicles would be permitted to operate on public roadways.