Last week, I received an GBP 60 parking violation ticket while parking at a museum, even though I paid for parking in advance and displayed my ticket on the dashboard as instructed. The charge is still being disputed, but the private parking company (PPC) involved has a good incentive to deny my appeal, however logical. That's because penalties can be hugely profitable for this unregulated industry. Let's look at the numbers.

Below is an interactive "dashboard" of the possible economics for one parking lot run by a PPC. The numbers are for example only, and are not based on real data yet. The idea of the dashboard is that you can play around with the assumptions by moving the sliders, and see the impact of your changes on the economics. Please add comments below if you'd like to discuss the assumptions.

NOTE: THIS DASHBOARD WORKS BEST IN A MODERN BROWSER THAT SUPPORTS STANDARDS, SUCH AS FIREFOX, SAFARI, CHROME AND OPERA. IT MOSTLY WORKS IN INTERNET EXPLORER, BUT WILL BE SLUGGISH.

Capacity

Parking spaces:
Hours per day:
Days per year:

Number of Stays

Average stay (hours):
Utilization:

Parking Revenue Drivers

Price per hour:
Percent kept by PPC:
Annual fee:

Penalty Parameters

Percent receiving:
Penalty amount:
Percent who pay:
Percent kept by PPC:

Cost Drivers

Legal cost per penalty:
Staff, per lot:
Annual pay per employee:
Overhead, per lot:

The basic assumptions are as follows, and apply to a single parking lot for a whole year:

What is striking on the graph is the size of the penalty revenue -- under these assumptions, it is a third of total revenue, even assuming only 2% of visitors are given a ticket.

Some of these ticket recipients will appeal, but anecdotal evidence on internet forums (perhaps one-sided) suggests that PPCc rarely back down, even when presented evidence such as copies of tickets, resorting to legal intimidation and repeated, increasing claims.

If 10% of recipients feel the ticket is unjust and appeal, and 50% of the disputed charges are subsequently withdrawn, that's equivalent to watering-down the percent infringing by 5%, or 19,000 per day in lost revenue, or over 4 million per year.

Penalties charges are virtually pure profit, and probably account for most if not all of the profits for the PPCs. They may well be a core component of the business model for these companies.

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