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Rental Cars Are Out Of Business As Business Travellers Increasingly Prefer Uber

Taxis are no longer an option for many business travelers around the globe. A recent report now indicates that car rental companies are also headed toward the same fate.

According to Certify, a leading North American travel and expense management software provider, business travelers are increasingly dodging rental cars in favour of ride-sharing services like Uber and Lyft.

Certify’s SpendSmart report for the first quarter of 2016 indicates that professionals are spending more of the corporate dime on Uber and Lyft while on the road.

Source: Certify, Bloomberg

The report is a quarterly analysis of Certify's latest data on business expense and vendor ratings that provide valuable insights to the agency’s clients and the entire corporate T&E industry.

The Certify SpendSmart™ report trails expenditures on business travel expense across major categories that include food, lodging, airlines and car leasing.

It highlights leading vendors and emerging trends through the analysis of data from millions of receipts and expenses processed by the Certify system. Data is compiled every quarter and at the end of each year to help business travelers, CFOs, accountants, and controllers make more informed cost management choices.

On this latest report, outlays on Uber trips alone beat the total of all expenses on rental cars. Uber accounted for 43 percent of all transactions on ground transportation as expensed by Certify during the last quarter. All rental car outlays amounted to 40 percent of the total ground transportation expenses. With Uber taking the lead, the ride-hailing industry overtook rental car services for the first time in the last quarter of 2015.

Only Boston and San Francisco reported greater percentage of rides for Uber over car rental services before the last quarter of 2015. The report by Certify that analysed more than 9 million business travel receipts showed that ride-sharing services have since broadened their lead.

Rental car transactions have dropped 15 percent over the last two years. Ride-hailing receipts, on the other hand, registered a 4% increase during the last quarter of 2015.

Taxis registered a much worse decline over the same period reported by Certify. The traditional ground transportation service had a steep decline of 23 percentage points. In total they accounted for only 14 percent of all ground transportation dealings in the first quarter of 2016.

The total for ride-sharing receipts Certify tracked in the first quarter of 2016 amounted to 46 percent. Certify also reported that Lyft, a privately owned American transportation network startup based in San Francisco claimed nearly 2.5 percent of all transactions on ground based transport. This, according to the report, represented a 44 percent growth from last year’s figures.

What’s Behind the Shift?

In his interpretation of the reported data, president of Certify Robert Neveu feels that "It really comes down to convenience”.

“The ability to hail and pay efficiently” he noted, is largely responsible for the changing habits and behaviour of ground transportation clients across the regions represented in the report.

“—that convenience factor is huge” he opined, adding that “Uber’s continued success and Lyft’s recent growth with the business travel market is really being driven by three factors: cost, convenience and customer satisfaction,”

Customers often have to reserve a vehicle ahead of time with rental car services. This is a major factor impacting the popularity of these rental vehicles.

Ride-sharing services are coming in to provide the much-needed convenience. The technology means that your transportation service is just a button away.

Think of Uber or Lyft as the best thing you may hail in the event of an emergency.

Renting a car also means that you have to hunt for a gas station near an airport to refill the tank before returning the car. Such troubles don’t come with ride hailing services. For business professionals, this convenience is everything, Certify suggests.

There’s another factor: these technology driven road transportation services are offered at much lower costs compared to the more conventional services.

In a statement that may explain Uber and Lyft’s low-cost factor, Certify’s CEO Robert Neveu said, “These ride-hailing services have perfected a model that allows employees to choose the kind of experience they want when traveling for business.” This helps save the company “a great deal of money in the process,” he added.

Repercussions to Car Rental Companies

The changes reported in this analysis has already has caused substantial financial consequences to various car rental companies.

Stocks in both Hertz Global Holdings Inc. and Avis Budget Group Inc. have considerably nose-dived for 2016.

Analysts now say the shift may have a great effect on investor decisions as many investors are already concerned.

With shares in Hertz Global Holdings Inc. and Avis Budget Group Inc. both down by at least a 36 percent margin this year, many stockholders may be forced to move their money elsewhere in the industry.

Other Businesses in the T&E Industry Remain Consistent

The report has painted that various traditional businesses sharing in the T&E corporate pie remain strong and practically unaffected by the shifting trends in the choice of transport service providers.

Airbnb, the San Francisco-based lodging services provider was also prominently featured in the Certify report. The company experienced solid growth year-over-year, both in the U.S. and on the global space.

The SpendSmart data shows that Airbnb had a 261 percentage growth in the United States and a slightly lower growth of 249 percent in global destinations at the close of 2015.  

Airbnb’s top domestic cities were San Francisco, Chicago, Oakland, Seattle and New York. Its top global cities for 2015, on the other hand, were London, Vancouver, Toronto, Sydney and Mexico City.

Certify identified WeWork, Hotel Tonight, Postmates and a few others as companies that despite representing only a small part of overall spending in the sharing economy, experienced significant growth in 2015.  

Lodging, airfare, gas, miscellaneous, meals and eight other expense categories are featured in this analysis.

Values and percentages in all these categories have remained significantly consistent since Certify began analysing the statistics in 2013.

 

Views: 42

Tags: Lyft, ride-sharing, uber

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Comment by Hanna Spence on June 21, 2017 at 2:59am

Yes that was the rationale and it was acceptable to drivers before Uber cut gross income by 50 percent while vehicle expenses remained the same. You may be in one of the highest priced Uber markets where a reasonable person could perceive the fare is high enough to include the equivalent of a tip. Those markets are few and far between. Seattle, Boston, NY are about it. Most Uber rates are between .65 to .90 per mile now. It only takes a little common sense to know that those rates are barely covering costs. Do you think there's a tip fairy for that .75 per mile ride?

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