Drive up to Dallas/Fort Worth International Airport, and for $21 a day you can drop your car with a valet and have it waiting for you when you fly back.
It’s a must-have feature for any world-class airport, and D/FW is the world’s third-busiest airfield. But D/FW’s own airport valet had a problem in its first 18 months, a recent consultant’s report found: The airport would have made more money by just shutting it down.
That brow-furrowing conclusion is at the heart of a debate over the valet service provided by Parking Concepts Inc. and the special privileges granted to it by the airport.
The private companies that operate parking lots outside the airport – FreedomPark, the Airport Valet and the Parking Spot – say they’ve been put at a competitive disadvantage.
“We’re just asking for a level playing field,” said Ken Kundmueller, owner of FreedomPark.
“I think there’s been enough data provided to the airport staff to show this isn’t making money, but they’re going to continue to try it,” said Kundmueller, who has urged his customers to express their displeasure with airport board members over what he sees as unfair treatment.
PCI counters that it launched the valet service at great risk to the company’s bottom line and, though it has lost at least $2.5 million on the venture, believes it can be successful with the airport’s help.
“We assumed huge risk when we took this,” said PCI vice president David Mueller. “We wouldn’t have done it if we didn’t think there was also a large upside to the business.”
Irvine, Calif.-based PCI also disputes the consultant’s conclusion that the airport could earn more total parking dollars by terminating its valet operator’s business.
For the airport’s part, spokesman David Magaña said it will study “all of its parking products” in coming months to determine whether changes need to be made.
“We continue to believe that D/FW Airport valet is providing what customers want in the marketplace,” he said.
D/FW is the only airport in the country to let off-airport valet operators compete for business inside its terminals. (Las Vegas lets off-site valet companies compete, but they can only take customers from an off-site location to the airport.)
But with five large terminals, D/FW isn’t the easiest place to run a valet operation. PCI has a staff of 175 to man 14 drop-off points; smaller airports have just one or two drop-off areas.
As part of its contract with the airport, PCI has been granted several advantages over its off-site competitors. Among them:
•Only PCI can take “walk-up” valet customers; competitors must rely on reservations only.
•Only PCI has branded podiums in the short-term parking space.
•Only PCI avoids fees for bringing cars on and off the airport property.
In addition, PCI gets to use 1,300 spaces at Terminal D to park cars, and the airport pays for its marketing. Competitors must pay for their overhead to store cars in lots outside the airport.
With its advantages, PCI has 27 percent of the D/FW valet market, compared with FreedomPark’s 54 percent, according to a report issued Nov. 24 by the Jacobs Consultancy. But PCI’s Mueller said his company is performing better today than when the study was completed last summer.
According to the Jacobs report, D/FW Airport received about $900,000 from PCI in the first full year of its contract. But the report also concluded that the airport would have netted as much as $857,000 more without the contract.
D/FW now gets 22 percent of the valet money collected by PCI. Without the valet service, the Jacobs report said, most valet customers would pay $17 a day to park in lots near the terminals – 100 percent of which would go to the airport.
But PCI believes those valet customers would not park at the terminals and instead would use one of the off-site valet companies that pay the airport only 10 percent of their fees. Thus, Mueller said, the airport would fare worse.
Having lost nearly $2.5 million in the first 15 months of its contract, PCI asked in May for its contract terms to be eased. The contract called for PCI’s fees to increase to 35 percent of its revenue; the airport board agreed to keep it at 22 percent indefinitely.
Magaña said the airport expects to address PCI’s contract in coming months and is considering all options, including the possibility of reworking the terms.
While acknowledging its start-up losses, PCI sees its business at D/FW now as “nearly break-even” and is committed to making the contract work, Mueller said.
Under the terms of its contract with the airport, PCI must double its number of customers in the next two years; the Jacobs report notes this will be difficult and suggests mutually terminating the deal could be an option.
“We’re going to continue to work with the airport on it,” Mueller said when asked whether PCI will either seek different terms or permission to charge customers higher rates.
PCI has lowered its daily valet rate to $17 for some corporate customers in an attempt to win more business; detractors say that tactic will simply cost the airport more money as it encourages travelers to bypass the airport’s most-profitable terminal parking.
Remote lots
Along with its struggling valet operations, the airport is also losing money on its remote parking lots, the cheapest of three options it offers customers who choose to park on airport property.
The North and South remote lots lost D/FW $1.3 million in 2008 and $1.9 million in 2009 when local airport traffic fell as much as 20 percent from the year earlier. The airport raised the daily rate on the remote lots to $8 a day from $7 last fall.
It has held off increasing the top $17-a-day self-park rate despite research showing that rate to be a bargain among big airports. Chicago’s O’Hare International Airport charges $51 a day to park in its international terminal; its valet rate is $46 a day. Los Angeles International Airport charges $30 a day for terminal parking and $38 a day for valet.
Nearly $2 of every $3 spent for parking at or around D/FW goes to terminal parking. D/FW‘s express parking – where passengers are picked up by a shuttle bus at their car and driven to terminals – is marginally profitable, airport documents show.
Off-airport parking competitors question why the airport subsidizes its money-losing parking service while three off-airport self-parking companies offering the same service have failed in recent years.
“They’re willing to lose money on their products, but meanwhile four of the seven off-airport parking operators have failed in the past five years,” FreedomPark’s Kundmueller said. “We provide the service at much lower costs than the airport can.”
Despite the stiff competition, the off-airport operators, whose valet fees range from $15 to $22 a day, aren’t in danger of going out of business.
Kundmueller and John Biebighauser, who owns Airport Valet, said their operations are profitable. Officials at the Parking Spot, where valet service is a fraction of its much-larger self-parking business, declined to comment.
Although valet service has been among the airport board’s most contentious issues over the last two years, it’s hardly a threat to balancing its books.
Airport valet – both PCI’s operations and the off-airport competitors – rang up about $12 million a year. Meanwhile, overall parking revenue approaches $100 million in an average year for D/FW, which collects nearly $600 million in total revenue in a given fiscal year.
“This has never been primarily about revenue for us,” said Magaña. “We think it’s about providing a better passenger experience.”
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