Cleantech Market Intelligence
Ride-Hailing Is a New Tool in the City Planning Toolkit, but Can It Be Managed?
Washington, D.C. underwent an accidental experiment in new mobility in March when the city’s subway system shut down for 24 hours for safety inspections. Usually the Metro only closes down in bad weather, but the D.C. system is in a rough state (a subject that could itself be the topic of a weekly series of blogs). Though service interruptions are now the norm with the Metro, shutting down the entire system for a day came as a shock and was only compounded by the short notice given to riders.
Riders had an array of alternatives, most of which are not new: private cars, buses, bikes, and telecommuting. But one thing the shutdown confirmed is that on-demand mobility services have to be seen now as an established modal option in a multi-modal city transportation plan. On-demand services reported significant increases in business on the Wednesday that the Metro shut down. Zipcar had a 50% increase in reservations compared to a typical Wednesday morning, and Lyft reported a 65% increase in ridership. Since carsharing has been around much longer than ride-hailing—and because setting up carshare services requires parking permission from the city—it is already integrated into many cities’ transportation planning. To some degree, working with public officials is built into the carsharing business model.
Flexibility Is Key
Ride-hailing businesses have grown astronomically in a short amount of time, and city officials and regulators have yet to catch up. In addition, ride-hailing’s DNA is that of a Silicon Valley startup that works outside the conventional government/industry nexus. This has fed these services’ rapid growth and helps make them dynamic and flexible. Indeed, Uber and Lyft responded to the shutdown in ways you’d expect from flexible, market-based transportation services. There was a surge in supply, with Uber saying it had 50% more drivers available for service during the morning rush hour than on a typical Wednesday morning. The expected spike in rates charged to riders was muted thanks to this increase.
This flexibility is something that city planning and transportation agencies should take into consideration when evaluating how to prepare cities for spikes in travel demand. Ride hailing will be an important new tool for cities in transportation planning. Of course, cities don’t control this tool, which leads to tension between city officials and the ride hailing companies.
Cities are also legitimately wary that ride-hailing simply shifts travel back to single-passenger vehicles, worsening traffic congestion. The D.C. Metro shutdown also illustrated how that might look, with reports of massive congestion outside Union Station due to taxis and pickup services. However, if ride-hailing affects traffic significantly, it will increase the cost of using the service for riders and make options like public transit and bikes more attractive. Carsharing will be affected by this as well, even though it’s less likely that carsharing could drive an exodus from transit. A hopeful sign of how increased demand may alter the ride hailing market: Uber reports that 1 in 4 customers used UberPool, the carpool version of its service, on the day of the Metro shutdown.
If ride-hailing is now a part of the city’s mobility landscape, it is not likely to remain outside the conventional regulatory system. In our upcoming Transportation Outlook: 2025 to 2050 report, Navigant Research predicts that ride-hailing will become a much more regulated industry over the next 10 years. This will make it less nimble and innovative but will help services grow by ensuring that companies act as good citizens in the cities where they operate.