The future of on-demand valet parking services... and how self-driving cars will kill off the entire valet parking industry.

"On demand" is an incredibly difficult service to operate if the goal is 100% customer satisfaction. 

The bargain-priced parking rates that on-demand valet companies are offering will not last. 

Their intention is to rapidly expand their user base, turn people into on-demand valet parking junkies, then jack the rates up to a level that makes the business, and all of its challenges, worthwhile.

The Groupon crowd will disappear. The service will morph into a premium luxury service that the well-to-do will use, (and those looking to impress others — like a date).

This will probably become the most expensive kind of parking service... because you can't pay valets $2.13 an hour (the tipped employee minimum wage in 19 states) when they may only move 1 to 4 cars per hour. The wage will need to be high to attract and retain workers.

And you can't have low staffing levels with a luxury service and keep your customers happy. So wow... labor costs will be high with this business...

OR getting an on-demand valet will be like trying to get online in the nineties, when sometimes you had to dial-in with your modem over and over again FOR AN HOUR just to see if anybody sent you email. Successfully getting a valet to meet you upon arrival will be a matter of luck, if you are willing to risk a long wait to get your car back.

OR they will invent robotic mini-parking garage trucks that scoop up your car and drive around the city until your car is summoned. (This might work better.) 

It's a problem for these services when use surges and there are not enough workers to handle the surge. Customers can suddenly have their service cancelled when they thought they had a rock-solid commitment for a valet to meet-up with them. This kills off loyalty pretty quickly, not just with that particular on-demand valet service, but with all of them.

Same thing when it's time to leave and the on-demand valet service has the customer 100% shackled to the outcome. You just have to wait for as long as it takes, whether it's 5 minutes or an hour.

Tip: If you need to catch a plane and are using a valet service of any kind, give yourself an extra hour.

There seems to be some excitement going on among angel investors and venture capital firms about on-demand valet parking. The word "bubble" comes to mind. If you're an accredited investor, I guess you can afford to gamble. In their current form, I'm having a lot of difficulty with seeing these start-ups becoming serious money making enterprises.

When it comes to this industry, I see the money being made through innovation in the regular style of valet parking. It is an area that is ripe for re-invention.

I think that finding suckers to work for a below market-value wage, and forcing them to rely on the whims of their customers in whether they make an equitable income or not... is all wrong.

The traditional valet service needs elevation.

It needs higher standards and people who take the work seriously. I'm talking about everybody. The valet workers. The valet companies. And the venues that hire them.

All you have to do is cruise on Twitter for a little while and you will see the issues. It's a very flawed business.

My recommendation is to have elite career valets, where there is no tipping. They get paid a fair wage and get a piece of the parking fee. The parking fee income is divided equally among all the valets once a week based upon the number of hours they worked that week. 

This would eliminate a lot of issues. It would also give the workers a degree of income stability. And it would be enough to make it a serious job that workers would stick with, which would raise the quality of service and reduce glitches, including claims.

But venue operators have to want and be willing to pay for elite valet services. And right now they generally want their costs as low as possible, which forces the current low standards upon the public.

Getting back to on-demand valet, it has a cannibalistic element...

I think of my city... Philadelphia.

An on-demand valet parking service has yet to arrive here. Street parking? Fuhgeddaboudit! There's limited supply and crazily efficient parking enforcement with costly fines. Not worth the risk.

Our parking garages are expensive on weekdays, thanks partly to the 20% parking tax. And then we have a surge of development going on and the parking lots are beginning to disappear, bringing price pressure to parking rates.

Of course we have many places to valet park your car too.

Sunday mornings in Center City are busy times at the hotels. The weekend visitors are going home. And when the rush happens, sometimes people have to wait a long time for the valet service to bring their cars out. In fact, just this past Sunday a Philadelphia hotel guest complained on Twitter how "about 80 guests" were waiting "over an hour" for the valets to bring their cars out.

Can you imagine simply whipping out your smartphone and summoning an on-demand valet company to bring out your car? You'd make all those other guests look like fools as you jump the line by using an outside valet company.

When more and more people get that same idea, the loss in parking revenue to the traditional valet parking companies will begin to add up.

Traditional valet companies: just keep screwing up like that, making your customers wait an hour to receive their cars, employing valets who play with the radios and steal the spare change out of the cup-holders. If the people behind the on-demand valet movement can figure out the right formula to make their companies work, they will start taking bites out of you unless you fix your flaws.

As for the long-term picture...

The day that people no longer own passenger cars may be approaching. There could be giant fleets of self-driving cars (sorry Lyft and Uber drivers). When you need one, you summon it to your location. Then you tell it where you want to go.

No need for car insurance. 

No need for traffic law enforcement. Drunk drivers become a rarity.

Accidents happen rarely, and mainly involve only the scarcer operator driven vehicles, like delivery trucks. 

No need for many local repair shops anymore. Instead there will be giant service centers somewhere that you never have to deal with. Tire shops, gas stations, parts shops like Pep Boys... they all begin to disappear. 

And valet parking services will become scarce. 

The business of automotive valet parking services has a lifespan, and it is entering its high point. 

The rumor is that Apple is working on making a self-driving car. With their vast resources, I wouldn't be surprised if these vehicles were available for purchase 5 years from now. And fifteen years from now these vehicles could be very common. 

Will people opt for "use-as-needed" cars that they can summon and pay for with a phone instead of buying their own self-driving car?

And even if they did have their own self-driving car, why would a valet be needed? You could tell it to go to that cheap parking lot across town instead of using the expensive garage next to the hotel. When it is time to go, you wake it up with your phone and tell it to be at your location at exactly 10:15. Boom. Done!  

No need to worry about valet inflicted damage. There's no joyriding. No abuse. No theft of contents. No smartphone photos of your house key. No body odor from a sweaty valet.

To investors in valet parking businesses: buy in if it make sense. But keep your eyes on the development of self-driving cars. Because they are going to one day kill the valet parking industry.