by WEX Travel
Ground transportation players have something to prove in 2017. The end of 2016 saw ridesharing surpass traditional ground transportation for the first time ever among business travelers. While rideshares have become a solid go-to for business travelers, the space is still ripe for competition and waiting to be defined.
According to Deloitte’s 2017 Travel and Hospitality Industry Report, “The ridesharing economic model is a complex balance that connects a healthy supply of non-contract, transient labor looking for the highest wage with demand from consumers looking for the lowest fare. Inevitably, ridesharing companies continue to battle for the long-term sustainability of the economic model while still navigating a complex regulatory environment involving labor and public safety.”
Ridesharing brands have no doubt established as a formidable contender in the space of ground transportation, but don’t think that rental and taxicab companies will bow down without a fight. In fact, Phocuswright research shows the US car rental market will grow 3-4% for the next five years and surpass US$20 billion by 2018. Making the race ever more exciting is that ground transportation is feeling the impact of enabling technology like few other industries to date.
Rideshares Lead the Pack
The rideshare industry started in 2012 from zero and is now a billion-dollar industry. Today, ridesharing apps have over 8 million worldwide users with a net value of US$51 billion. Uber and Lyft prove to be the choice of corporate travelers in 2016. Q3 2016 numbers released by online travel and expense management service provider Certify reveal that 52% of those using transit for work-related purposes opted to use a ride-hailing service. This is the first time such a company has made up the majority of ground transportation expenses for business travelers. Q4 numbers showed 48.7% of business expenses came from rideshares.
Time reveals that Uber owns this space, dominating the market with 75% of travelers choosing them over Lyft, which earned 6% of the market. Taxis were factored into these figures, with ridership continuing a decline of more than 3% sequentially.
There are other rideshares fighting for a piece of the pie. For instance, Austin’s SXSW turned to Fasten, a local rideshare company for its 2017 event. The SXSW website stated that Fasten’s “progressive, people-first approach shows that ridesharing doesn’t just have to be black and white, or pink”.
Traditional contenders continue to implement technology at key pain-points, in an attempt to win back customers who have new expectations of what ground travel feels like. There is an increasing uptake of pre-booked transfer services, limousines and car hire. Transfer and limousine services are benefiting travelers with improved comfort and productivity, while car rental is proving more viable for travelers needing to travel further distances.
According to the Global Car Rental Market – Forecasts from 2017 to 2022 report, the global car rental market is projected to grow at a compound annual growth rate (CAGR) of 9.18% during the forecast period to reach US$106.211 billion by 2022, increasing from US$68.463 billion in 2017.
Market expansion will require development of new and value added services to enhance the performance of car rental services. Partnerships with customers to create win-win situations and the development of low-cost solutions for customers will help to grow this industry.
The Cost of Business Ground Travel
Business travelers saw their travel costs go down in the past year. Uber’s cost dropped 10% to $22.91, while taxis fell approximately 9.8% to $35.91 quarter over quarter. Lyft, however, saw the average cost rise nearly 5% to $21.80 during the same time period.
Deloitte’s study concluded that 2017 is a year when ground transportation tackles a pivotal question with sector-wide relevancy, “Can a low-cost customer experience be a profitable business for all?”
We will report on the industry’s progress. For now, explore more in Ride-Sharing in Corporate Travel Slowly Accelerates and Sharing Economy Continues to Shape Business Travel.