From unmanaged
to unmanageable?

Anne Mellano on why ridehailing is going pro

In November 2018 ridehailing startup Alto surprised many when it introduced a new service with professional drivers and a private fleet of branded vehicles to compete with giants Uber and Lyft on service and safety, not price alone. Alto embraced two costs, the lack of which were thought to be the keys to Uber’s and Lyft’s success: vehicles and drivers.

What has happened? While much has been written about how new mobility services will improve the quality of life in cities around the world by making car ownership optional, cutting the cost of transportation for consumers, reducing traffic and pollution, creating more open space previously devoted to parking, and more. So far, it hasn’t happened. In fact, in many cities traffic has got worse since the advent of ridehailing services.

A 2017 study of traffic in New York City by analyst Bruce Schaller found that from 2013-2017, a 15 percent increase in ridehailing trips led to a 59 percent increase in the number of vehicles on the streets. Another report from the New York City Department of Transportation found that New York traffic speeds have declined some 20 percent since 2010.

San Francisco transit authorities recently released a similar study that blamed ridehailing for a 51 percent increase in traffic and a 22 percent increase in travel times in the city.

Schaller’s research found that peer-to-peer ridehailing vehicles add 2.8 new vehicle miles for each mile of personal driving they eliminate, and the pooled services adds 2.6 new miles for every mile of personal driving reduced. That’s because most users are hailing rides instead of taking public transit, walking, or staying home, Schaller found. Miles are also added when drivers are searching for the next rider after dropping someone off.

No wonder Uber and Lyft lose money in such prodigious amounts.

No Incentive to Optimize

The problem with ridehailing in its current form is that the travelers are the dispatchers and drivers don’t know where the demand is until a request shows up on their smartphones. As a result, the drivers tend to congregate near the places where the highest demand is expected—train stations, downtowns, and entertainment venues, for example - to be close to hailers in order get the business. This is a recipe for gridlock that results in too many vacant vehicles on roadways.

This oversupply isn’t important to the ridehailing companies because empty vehicles don’t cost them anything. The businesses are more incentivized to put as many vehicles and drivers to work as possible to increase revenue with little added costs. Oversupplying the market doesn’t have a negative impact on the bottom line.

Unintended Consequences

More unintended consequences of ridehailing have emerged. Personal safety has also become a concern for customers, with inappropriate behavior, assault and robbery being reported. In China, a traveler was killed by a ridehailing driver. There have also been devastating impacts on traditional taxi businesses, with drivers unable to make a living. A recent study found that after expenses, ridehailing drivers take home less than US$10 per hour. The traffic, crime, and taxi driver displacement has grown so bad in New York that the city has halted issuing new ridehailing licenses.

A New Breed of Ridehailing

What is likely to happen is that cities will partner with a new breed of ridehailing businesses with their own vehicle fleets and that hire professional drivers, with centralized dispatching to evenly distribute vehicles based on historical and real-time demand profiles. These businesses do not want vehicles all in the same places, empty much of the time, looking for riders. That’s not economically viable.

Professional ridehailing services will be more interested in vehicle utilization and revenue per vehicle than in flooding cities with cars that they don’t own, manage, or maintain.

In addition to allowing more efficient use of vehicles, ridehailing services with trained, professional drivers will likely improve the safety of passengers from accidents and from driver misbehavior.

"Alto has launched a ridehailing service that uses a private fleet, professional drivers, and that allows users to select the “vibe” they want for their vehicles - music, lighting, even scent..."

Alto Reaches Higher

Startup Alto has launched a ridehailing service that uses a private fleet, professional drivers, and that allows users to select the “vibe” they want for their vehicles - music, lighting, even scent. The company believes the big ridehailing businesses are missing a tranche of users, especially women, who want a safer, cleaner, more bespoke experience. The company’s message to its customers is, “you drive us.”

BMW introduced ReachNow Ride in Seattle, a professional (its own vehicles, with professional drivers) service to complement its ReachNow care sharing service. “Ride is a great option for those times when you don't want to drive yourself, like going to the airport, or when you need a safe alternative after a night out,” Laura Gonia, a representative from ReachNow, said. 

“The ridehailing industry is booming, and while it is marked with well-recognized brands, it is also ripe for disruption by savvy tech brands that have seen the gap in vehicle efficiency and rider experience and safety, and can fill that with innovative new services,” said Roger Lanctot, Director of Automotive Connected Mobility at Strategy Analytics, at Alto’s launch.

“While the incumbents have captured at most about two percent of vehicle miles traveled in the US,” Lanctot said, “newer services entering the field are poised to capture and capitalize on the customer experience and improved vehicle management, something that riders and cities continue to demand.”

Working with Cities, Not Against Them

Where today’s ridehailing services work independently of transit operators, public transit utilization has decreased, as it has across the board in the US (down 2.9 percent in 2017). A University of California Davis study of ridehailing usage found that 49-61 percent of passengers used the service in place of public transit, corroborating Schaller’s findings that 60 percent of ridehailers use the service in place of public transit or other non-auto mode of travel. A subsequent study of 1,000 ridehailing users in Boston found that 42 percent of the users used the services in place of public transit.

Professional ridehailing services that work with cities will coordinate with public transit to smoothly deliver the first-mile/last-mile services that make longer-haul transit options like buses, trains, and ferries more convenient than driving. This is another area where cities will be able to make overall mobility more convenient by working with accountable service providers to manage the vehicle distribution scheduling.

Issues are the Same for Autonomous and Driven

While many predict that the wide-scale adoption of electric autonomous transit will make the problems created by peer-to-peer ridehailing services disappear, it’s not likely because some of the challenges are the same. If multiple robotaxi or autonomous shuttle businesses enter the same markets and target the same high-demand areas and routes, congestion will remain.

What is likely to happen is that cities will transition to professional ridehailing services to similarly managed autonomous alternatives, with some measure of control over how many robotaxi or shuttle services will be allowed and where they will provide services. A transition period of hybrid autonomous and driven fleets will also need to be accommodated.

Various predictions have been made about the impact of new mobility services on cities. Some say there will be chaos in the streets, while others present visions far fewer vehicles in cities, cleaner air and more open space on land that was previously dedicated to an auto-centric infrastructure. While many stakeholders in the mobility industry promote the latter scenario, how fast and how smoothly that future arrives will depend on how well services are managed and distributed. Achieving the vision of full vehicles and sparsely used streets, and the improved quality of life promised by this vision, will require city-wide mobility management with cooperative, accountable partners.


Anne Mellano is Co-Founder and VP of Operations EMEA at Bestmile.

To listen to Anne Mellano talking about Alto and the rise of ridehailing with Thinking Highways editor-in-chief Kevin Borras, click the play button.

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