Ground transport is very often overlooked for savings and for safety although it is the most dangerous part of any trip. The odds of dying in a motor vehicle of any type are 1/112 compared to 1/8,015 by airplane according to the National Safety Council. Ground transport is also a large part of spend, between 5 and 10% of a travel programme.
Now that I have your attention, I have to ask whether companies fully understand what to do with the corporate travellers that want to use on-demand transportation companies (sometimes called TNCs) for business. It has not all been about Uber in 2015 but the company has been a principal ground transport name in the news; it attracts attention and debate to the entire ground space.
The growth of these on-demand ground transport providers has meant that companies and the public are looking at all ground transportation more than ever before, which is a good thing. Lyft and other players are growing but not as global and at the pace of Uber. It has not been without backlash either; some major cities in the world are pushing back and even banned the services. Uber is facing legislation that is looking to regulate the entire industry.
TNCs and liability in the corporate world
Apps and services like Uber offer multiple types of service: the largest and most used are for a taxi journey or ridesharing. The most commonly used service is ridesharing, such as Uber X, which competes heavily with taxis. These ridesharing services are cutting into other categories of ground transportation such as high-end limo companies, which is of concern to travel programmes and traditional providers.
Part of the confusion from corporates is how these work with liability coverage. Safety and risk levels are the main difference between the traditional and new providers and it is a substantial potential problem. There are possible issues with the age and condition of the fleet, training and the quality of background checks including a lack of finger printing with no formal review process. The TNCs will argue that their process for background checks is as safe as others but, for some, the lack of safety procedures, no formal drivers training and no drugs and alcohol testing is a dilemma as more companies prioritise duty of care.
An example to make the point that safety is important is the movements of the Pope in Philadelphia. One of the largest ground transportation specialists, Go Ground, moved the masses to see the Pope in downtown Philadelphia. All drivers and vehicles were vetted prior to the event and had to clear the FMCSA requirements which include medical clearance and drug and alcohol testing. They moved more than 60,000 travellers during the weekend of the event without incident and post- satisfaction surveys rated the movement very high.
Employees are using these on-demand services because of the convenience, so companies must try to understand what the company's risk and liability is if an accident occurs. Currently, from my experience, there are very few major corporate departments that are approving and promoting these services. The few large major corporations that are promoting the TNCs are the ones that want to be a part of investment opportunity or are the technology companies that want the TNCs to use their technology. Most companies are allowing travellers to use them while figuring out how to address the issue within policy, or will not allow them to be used for company business at all. However sometimes it's likely their use is undetected until the expense form comes in.
There is an evolution going on within TNCs and they will be sooner or later be affected by legislation and lawsuits. This will change their profitability, how they conduct business and pricing. Companies need to develop a policy that addresses the risk and/or come up with a technology solution. What is the price of a deceased or injured employee and a lawsuit that follows? Companies who ignore this are putting their company at risk.
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New app entrants have caused the traditional players to make their own moves. ©urbancow/iStockGround transport landscape and how they are making moves to compete
The TNCs have brought the spotlight to this space and it is changing how all categories are operating. The disruption has forced upgrades in technology to offer a faster experience and all the different categories of ground transportation are reviewing how they can be compete in the on-demand world.
A major area of change in 2015 is that limo companies have formed consortiums to offer an app to compete for the on-demand traveller needs. Several have been announced in the last several months and I understand a few more partnerships will be announced soon. At this point their effectiveness is unknown and untested as it is too early to tell if the technology works or if there is a sufficient amount of suppliers participating. Also the corporate traveller may say they want and need on-demand technology but statistically the use is very minimal. Most corporate travellers book their ground at the same time as the rest of the trip, or a smaller percentage wait until they are at the airport or hotel.
The limo and black car industry was hit very hard by the financial industry meltdown and then by the emergence of TNCs. Unlike the consolidated car rental market the limo and black car industry is very fragmented and many smaller companies have been hit hard. But while the larger full service, highly-vetted chauffeur transportation companies have felt the presence, it is not the massive erosion once thought. The main reason for this is the duty of care practised by most large companies where finger printing background checks, drug and alcohol testing, fleet and drivers training are still held in high esteem. What has impacted the industry is the shortage of drivers due to the TNCs.
The taxi industry is being hit incredibly hard and they are scrambling to add technology and apps to compete with the on demand needs. This is a positive development to aid travellers, although travel managers will want to ensure that these are visible in travel spend.
Rent-a-car companies are also seeing the erosion and getting in to the game, such as Hertz's partnership with Lyft to rent cars to Lyft drivers at a discount. This move comes during difficult times for Hertz (including the Dollar and Thrifty brands), which recently announced disappointing and lower than earlier stated results after auditing. The initial results were announced under Mark Frissoura's management and an investigation is on-going. The new CEO and team, now headed by ex-United Airlines John Tague, aims to cut approximately US$300 million in 2015 and just recently laid off a large number of tenured sales staff.
Hertz has added 250,000 new vehicles to its fleet, which was needed as it lagged behind the industry in average age of fleet. The new team has its work cut out for them; they are learning the difficulties of the competitive car rental environment. It is a difficult task to be profitable and price competitive while at the same time offer the excellent service travellers have come to expect.
Avis Budget Group has been going very steadily forward with a more European focus. It has recently been trending towards 'tuck in' acquisitions such as Avis Sweden, Avis Denmark, Avis Norway, Avis Poland and Maggiore (the fourth largest car rental company in Italy) as well as Americas-based Budget Southern California and Avis and Budget Brazil.
Enterprise Holdings is the fastest growing rental company and has concentrated on growing organically especially through global expansion in Europe, Middle East and Asia Pacific. Across the Enterprise, National and Alamo brands it has the most fleet by far with 1.7 million corporately-owned vehicles, which gives it a competitive edge.
Despite these updates, and while many travellers feel they need to have on-demand capabilities in the traditional limo industry, less than 5% of all rides go through an app. Corporate travellers plan most of their rides, but typically through other tools.
2016 issues for ground transportation
Cheaper fuel prices have helped every category. Other factors such as fleet-related costs continue to rise and will do so in the future as this is a very capital-intensive business. Fleets are changed out yearly in the car rental industry and in the chauffeur driven industry it is yearly or much longer depending on the type of supplier.
TNCs and the like continue to push its growth, for example a few airports have voted to allow TNCs to pick up at terminals. Their business practices are challenging the rules and laws, dealing with the consequences later. There are many lawsuits against these suppliers, such as one that could force them to treat their drivers as employees, which would sharply raise their cost of doing business.
There is and will be change happening. How the TNCs operate and how the entire ground transportation industry operates will be different going down the road into the future. They are opening eyes of the public and corporate buyers to duty of care and the whole ground transportation industry. New and exciting changes are coming.