In defense of malls' parking fees

tue13feb2007—07w044d12%— 03h12m00s—0utc

Above, Plaza Galerias, one of
Guadalajara’s newest plazas

Fees in malls’ parking lots are a recent development here in Guadalajara WP that has been welcomed with the fervent outrage one would have imagine reserved for true wickedness. It is all the more interesting then how quickly the new mode swept the city — I can only think of two malls that remain complimentary, Plaza Acueducto and Plaza Outlet, and it’s clear that they refrain from charging only to attract customers to their rather forlorn premises.

Despite the somewhat frequent calls that something should be done about this, that some new law should be passed to protect us customers from yet another new instance of capitalistic rapacity, I take them as nothing but inconsequential bursts of anger at the inconvenience. I take it as a given that we can all see clearly that mall owners have the obvious property right to charge whatever they want for the use of their premises. We, in turn, have the corresponding right of shopping wherever we want.

So instead I want to discuss here the deeper question of whether or not these parking fees better society. Is the money Parking Lot Operators (PLOs) earn the reward for a valuable service or ravenous plunder hiding under the banner of property rights?

To begin with, I think we can all agree that the cost parking fees represent is not invented outright by PLOs. If you’re a mall owner and, say, 40% of your 100 million pesos lot is dedicated to parking, you will not only charge your tenants the admittedly minor costs of administering the parking lot and keeping it in good condition, you’ll also charge them for the nontrivial opportunity cost of employing all this space in a fashion that serves their interest. It couldn’t be otherwise. And since ultimately it is you, as the customer, who ends up paying the shops’ rents, it isn’t like you weren’t paying parking fees before — you only paid them indirectly.

Either this now direct cost is more than the indirect one you had always paid, or you’re paying less or the same as you used to, in which latter case it’s clear how PLOs benefit you. So let’s run instead with the first case: suppose you’re paying more than you used to; suppose PLOs, as most intermediaries, demand their own cut. Our task is now to find justifications for this premium.

I can think of two. First and most obvious, parking space is better employed. Suppose your office building was near the mall and you used to freeload when parking was free. If now, given your circumstances, the cost is still less to you than the value you obtain from having a convenient parking space, then you will keep parking there. At a benefit. With the PLO’s blessing. (This last point, peace of mind, is no small thing for a wary, but I guess substantial minority of us that have had bad parking experiences — I for one have been stoned for misparking.) If the parking space is not worth the fee to you, then you’ll walk a little more and park it somewhere else — thereby freeing up valuable space for paying customers. In either case, parking space is more optimally allocated — and where before mall’s patrons had to pay for freeloaders’ use of the parking lot, now everyone contributes their fair share.

The second reason is related but more subtle: parking fees are more equitably charged. How would you pass the cost of the parking lot to your tenants if you were a mall owner? Would you charge them a percentage of their rent? But rent usually depends of many factors that have no bearing on how many parking spaces a tenant’s customer occupy — there could be rent-paying business, say, an Office Depot Express, whose customers don’t use the parking lot (because they all happen to be bus-riding penniless students). Would you charge them a percentage of their sales? But then the movie theater would be getting a much better deal than the department store, the latter in effect subsidizing the first. And of course everyone would have an incentive to misrepresent their sales. (Not to mention that it is none of your business knowing exactly how much your tenants sell.) Would you come up with a fancy formula? Implement some cumbersome monitoring and customer tracking? It is not an easy problem to solve and I welcome you to try to come up with a better way that doesn’t involve direct parking fees. (This is not a facetious remark, I think that there may well be one and would join you in a heartbeat if you found it — there would be untold profit to be made.)

The magical thing is that the problem disappears when parking users are charged directly. Patrons are given accurate information about what their choices cost and no one needs subsidize some groups anymore — because, again, make no mistake about it: customers were the ones who ended up paying the subsidizing. More accurate information, additionally, is the best defense we all have against rapacity. We were much more vulnerable to exorbitant prices when they’re hidden under indirect, unaccountable pooling. Only if we know exactly how much an expense parking is can we act accordingly — shopping where the parking fees are lower or deciding to take the bus or ridesharing.

For all these reasons, parking fees are not only a more efficient arrangement but also a fairer one. And of course equity, like every other service, has a price. Which is the marginal premium the PLO keeps.

Parking fees replace indirect, ultimately detrimental charging with direct, ultimately beneficial charging. We all tend to resent the bluntness and minor inconvenience of directness without realizing it is ultimately to our benefit.

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