Return on investment (ROI) is a measure of profitability that compares the gain from an investment with its cost, usually expressed as a percentage: ROI equals net gain divided by cost.
A PARCS upgrade that costs $400,000 and adds $100,000 a year in net revenue and savings returns 25 percent a year on the investment, and pays back in four years. ROI is simple and widely understood, which is its value and its limit: it ignores the timing of cash flows, financing and the life of the asset.
Where it is used in parking
- New garages and acquisitions, alongside the cap rate and pro forma.
- Equipment and technology: PARCS, LED retrofits, LPR and EV chargers.
- Operating changes such as rate adjustments, validation programs or staffing models.
Better tools for bigger decisions
- Payback period, for quick screening.
- Net present value and internal rate of return, which account for timing and the cost of capital.
- Life-cycle cost, which compares options over the full life of the asset, including maintenance and replacement.
The Parkonomics view
ROI is a good first question and a poor final answer. Use it to screen; use cash-flow analysis to decide. And count what the vendor’s ROI sheet leaves out: software fees, maintenance, downtime and the cost of the next replacement.
Related terms: Pro Forma, Cap Rate, Life Cycle Cost, Financial Feasibility Study, First Cost