There is almost nothing in life worse than driving aimlessly around a major American metro area in search of a parking spot. And there is no pain like the pain that exists for drivers in Boston, and some of its most conveniently situated neighborhoods.
“I think there are about 9,000 residents in Beacon Hill and, at last count, 1,600 parking spaces. So, yes, there is clearly a supply and demand issue there,” Braden Golub, founder and CEO of SPOT, told Karen Webster in this week’s edition of The Matchmaker Is In.
And while Boston’s parking supply-and-demand issues are particularly legendary, the “wonderful world” of finding a place to park – whether it’s in a garage or on the street – is a stressful, tedious, expensive and unpredictable process in any American city. One never knows just how long they will have to spend circling the block in desperate search of a meter to feed or, often as a last resort, a pricey garage in which to park.
But what if, instead of spots with meters, unoccupied – but legal – places to park behind homes and offices could be turned into meters? Enter SPOT, a digital platform that matches the owners of such spots with harried drivers who need a place to park their car for an hour or two.
Golub told Webster that his background in commercial real estate gave him the idea. In driving around cities, no doubt looking for his own places to park, he observed some expensive but unoccupied real estate: private parking spots that sit empty while their owners (and their owners’ cars) were off doing other things.
What the world needed was a way to connect those owners of this in-demand real estate with drivers willing to pay for a chance to use it.
In 2014, SPOT was launched to make that connection.
How It Works
SPOT is a pretty simple. Legal owner of unoccupied parking spot makes it available for SPOT app users looking for a place to park. Once they find a match – time, place and price – they click Purchase and claim the SPOT. The spot’s owner gets 85 percent of the rental price, and SPOT collects 15 percent as its fee.
Currently, SPOT services Boston, New York, Los Angeles, Washington DC, Chicago, Miami, Philadelphia, San Francisco and Seattle, offering spot rentals under a variety of terms. The platform allows users to rent spaces for as long as a month – but the vast majority of the firm’s business, by design, is built around hourly uses.
“On the platform, about 92 percent of our transactions are hourly. We have actually worked very hard pushing that from early on,” Golub said.
He also explained that monthly parking is one of the main factors for why parking is such a problem in so many urban areas. People rent a spot for a month because they feel they have to, but then don’t use it 100 percent of the time. That creates unit economics that are totally out of step with how pricing normally works, and gives parking garage owners an awful lot of power to set pricing at terribly inefficient rates.
“The reality,” Golub told Webster, “is that when you are moving spots at an hourly rate, you are driving higher yield per hour and pushing people to use resources more efficiently.”
SPOT’s goal, he noted, is to replace the public meter by essentially allowing private space owners to “turn on a meter themselves” when they’ve never been able to before.
So, who wants to do that?
The SPOT Owners
When it comes to the individuals renting out spaces on SPOT, the profile can vary somewhat. Perhaps the user parks in their private spot at night, but leaves it open all day while they are at work. Maybe they work in the city during the week, but leave their spot available from Friday evening until Monday night. Perhaps they own a condo with a private space deeded to them, but they don’t actually have a car.
Generally speaking, Golub told Webster these space owners are free to do what they wish with those parking spots – usually with a vague caveat that they are responsible for it. Some small municipalities, he noted, might have rules about parking space subletting, but on the whole no-one is really looking too closely into this area.
Most owners can sublease their parking spaces if they chose to, but don’t – for the very simple reason that, until very recently, there hasn’t been a great mechanism to do so.
“What we have learned is people are happy to rent out an asset they aren’t utilizing,” Golub said. “And what we have seen, particularly with our specific demographic of tech-savvy 18-38-year olds, is that we gave them a tool to monetize that asset, and they took it from there.”
But, he noted, those individual owners weren’t the only ones who took it from there – or even the primary category of their parking space supply providers.
And that, Golub noted, did come as something of a surprise to the SPOT team, who had assumed in their early days that getting inventory would look an awful lot like Airbnb’s person-by-person model.
“Think of every single possible recruiting method for bringing owners onto our platform – knocking on doors, emails, direct mails, we have tried it.”
Tried it, he noted, and realized that going person-to-person was not the most efficient way to bring all the spaces they needed onto their platform. Those private owners, he noted, have increasingly become fill-in inventory in their major cities, with larger landlords and commercial real estate owners now providing over 50 percent of their inventory for rental.
“We are now really managing parking as another revenue stream in the real estate business,” Golub said, noting that this had ended up being one of the surprises they’d encountered as they’d gotten their system up and running.
And it wasn’t the only one.
Building the Better Option
When the firm was first founding, Golub told Webster, they braced themselves for renters who would try to game the system in some way – overstay their parking term, say, or figure out where private spaces were and attempt to sneak into them during the day without paying for them first.
“And we built out a lot around sort of preventing that bad behavior,” Golub said.
It turned out, though, to be mostly unnecessary work, because simply creating a five-star rating system – a la what Uber has for its drivers – created the right conditions for people to regulate themselves. People who really do need parking didn’t want to risk being cut off from the service by trying to sneak in a free hour and getting a bad rating, and space owners didn’t want to take a risk to their revenue stream by gaming the system.
The app, Golub noted, also has features that make it easier for everyone to succeed – like a mechanism for the renter and the owner to directly message each other or SPOT through the app – and those tools have turned out to be mostly sufficient to prevent free-riders (or free-parkers, in this case).
So far, he noted, the app has been powered largely by word of mouth – noting that in cities like Boston, “parking is a hot topic” and one doesn’t have to say much more than “I might have a solution” to get people to come running.
But getting them to stay – and expanding , he told Webster – has really been a story about the triumph of using and interpreting data.
“When we first started out, we really were guessing about how to price these spaces. Now, we have lots of very specific data about how pricing works, and how it works on demand – and we can apply that playbook as we go forward.”
Every city is different, he noted, and every new expansion involves extensive testing to figure out the right parking price “sweet spot.”
And, he noted, SPOT still has a lot of work to do capturing parking spaces in the cities where it currently operates – because the goal is ambitious, if deceptively simple-sounding – and making it so no-one ever has to spend an hour fruitlessly searching for a spot ever again.
“There are roughly 100,000 private parking spots in the greater Boston area,” said Golub. “We have roughly five or six thousand of them. We have barely scratched the surface.”