While ridesharing has gained solid traction in corporate travel, the business model of traditional car services providing ground transportation to companies is still strong. What remains to be seen is whether car services will widely adopt more user-friendly interfaces for hailing cars on demand.
If all you did was read news reports and listen to the raves of fellow travelers, you would probably think that ridesharing services like Uber and Lyft are rapidly putting traditional car services out of business.
The reality, however, is more complicated.
The “Taxi & Limousine Services in the U.S.” report from IBISWorld shows that luxury and sedan corporate car services account for 13.9 percent of the total ecosystem, while taxis account for about two-thirds of the market.
Car service use is on the rise in general, after losing ground to ridesharing services from 2012 to 2015, according to the report. Regardless, revenue and employees grew over the same time period when car services and taxi companies lost market share to ridesharing. It pegs the segment’s revenue at $19.6 billion with a $1.7 billion profit, showing how expensive it is to run a car service company.
“Over the next five years, industry performance will continue to depend on rising corporate profit and consumer spending on domestic travel,” states the report. “Ride-hailing apps will continue to represent the bulk of industry growth as they expand to new regions. However, IBISWorld expects greater legal and regulatory scrutiny of these transport networks over the next five years, as certain local governments attempt to curb their expansion. Over the five years to 2021, industry revenue is forecast to grow at an annualized rate of 3.8 percent to $23.6 billion.”
So how do you square up the emergence of Uber and Lyft at a time when car services have fallen out of the limelight, but appear to be growing steadily in terms of financials?
The primacy of car services in the corporate travel space could have something to do with it, and they’re not happy about the near-daily reports on ridesharing drivers being involved in crime and other mishaps.
One of the biggest groups of car service companies in the country will soon roll out on demand technology similar to Uber, in order to appeal to business travelers and others who are fans of the new model.
“People that matter in corporations are following the liability trail,” said Scott Solombrino, president of Dav El / Boston Coach and co-founder of the National Limousine Association. “The problem with Uber and Lyft is that they think private greed is more important than public safety… It’s going to be more expensive on demand; we’re going to do the same thing they’re doing in our own pricing structure, then we’ll see what happens in the corporate world.There’s nothing wrong with innovation. We can’t compete on a pricing model, because we’re restricted to pay people properly.”
When asked, Solombrino says he doesn’t regret not thinking up Uber’s on demand interface years ago. But he is certain that car sharing’s marketshare in the corporate space will begin to rise once again.
“I don’t know how it plays out, but I know they’re not going to go unchallenged much longer and they only have market share to lose,” said Solombrino. “The clients who use us today want to use us. I don’t worry about losing business to Uber, it already happened. Now, Uber drivers come to us to be professional chauffeurs. The battle we haven’t won is the battle of public opinion, where people think car services are stodgy and for really rich people.”
Ridesharing does have a formidable foothold in corporate travel. Certify’s newly released report on ridesharing shows that services like Uber and Lyft may now control more than half of the national corporate ground transportation market, a mammoth increase from eight percent in Q1 2014. Taxi expenditure is down 63 percent over the same period.
(Certify’s numbers don’t include traditional car services, due to the difficulty of categorizing the fragmented group of providers around the country.)
“People are already overwhelmingly choosing ridesharing in their personal life and we see this consumerization of people’s professional lives,” said David Baga, chief business officer of Lyft. “They’re favoring Lyft for the flexibility, the convenience and a better customer experience. Companies are hearing that loud and clear, and they’re trying to get out in front of it. We’re seeing a relative increase in the velocity in how quickly decisions are being made around corporate travel.”
Fight for the Future
Solombrino and Baga squared off on the conflict between car services and ridesharing at this year’s GBTA conference, with the travel managers on hand expressing support for ridesharing’s ease and tracking features. Baga says that companies are now more comfortable with making ridesharing a party of their corporate travel policy, despite questions remaining surrounding exactly how drivers are vetted from a security standpoint.
“Just like the same way that they evaluated traditional ground transportation, they have a lot of questions about understanding who the drivers are, how they’re selected, what criteria we use to ensure we have the right people in the Lyft platform, and how insurance works,” said Baga. “There’s a lot of misconceptions around ridesharing and these questions open them up to seeing that in most cases you’re actually getting more consistent coverage around the company [using ridesharing] than sending employees out in taxis, making it a choose your own adventure.”
The next step for ridesharing services to become further embedded in corporate travel is baking access into corporate travel management apps on the API level.
“One thing that I’m excited about is we have a vision of transportation that is delivered as a service, so one of the critical underpinnings of that is our tech platform being developed to be really accessible for a variety of different use cases,” said Baga. “We are extending that API to be able to really deliver on that promise by allowing other third party apps to consume the Lyft API and create a service where travelers are already working.”
Photo credit: Morning rush hour commuters line up for cabs outside Grand Central Station. Ridesharing services are now a legitimate competitor for car services in the corporate travel space. Mary Altaffer / Associated Press