Limousine Finder: Uber Impact Study Reveals Wide Range of Opinions

The rapid and global growth of Uber quickly muscling in on the private transportation industry — legally and illegally — is the most disruptive force to ever affect traditional limousine companies, taxis and black car services.

However, reactions to Uber, the leader among transportation network companies (TNCs), is mixed. Opinions from individual operators are all over the map. At the extreme ends, operators assert that Uber is the Dark Force that will kill off the entire industry, while others shrug and don’t see any harm to their businesses. Between those two polar opposite viewpoints stand most operators who are trying to sort out this new competitive world of technology-based, on-demand seamless transportation services.
Given the wide-range of operator opinions, LCT commissioned a survey, conducted by Bobit Business Media research, in December 2015 to take the collective pulse of the industry to find out where operators stand on TNCs and related issues. Respondents included a cross-section of large, medium and small operators with 64.6% reporting fleet size from one to 10 vehicles.

The results of our exclusive survey, “LCT Magazine Industry Uber Impact Study,” are presented in this article complete with charts and graphs that provide the industry its first true analysis about the effects of TNCs.

The survey results are presented in categories gleaned from respondents’ answers to an array of diverse questions addressing specific TNCs, as well as ancillary results stemming from on-demand technology and subsequent competitive and financial effects.

TNCs and Your Business
Looking at the big picture, when asked what effect TNCs have had on operations, the results were mixed: 35% of respondents cited “mostly negative” viewpoints; 32.5% had a “mixed” response; 16% reported no effect on their business; 9.2% “can’t tell” at this point; and 7.4% cited a “mostly positive” experience.

However, when asked questions about their attitude toward the spread of mobile on-demand reservation apps, 84% responded that advancing technologies are inevitable and our industry needs to adapt, and are a positive development that will drive more people to use chauffeured transportation. About 25% responded that “it’s the beginning of the end of the livery business as we know it.”

Underscoring the majority opinion, almost 70% agree that corporate customers could benefit from mobile on-demand app technology, and 73% believe their retail business can benefit from the technology.

Financial Effects of TNCs
No other issue surrounding the spread of TNCs has created more discussion — and angst — among operators than TNCs’ financial effects on their businesses. The survey results give the industry its first hard look at revenue lost. About 23% reported no loss of business; 39% said less than 10%; 18% reported 10% to 20%, and 20% reported a loss of more than 20% of business.

Operators who lost business to TNCs overwhelmingly reported (almost 90%) a decrease in airport runs and evening/nights out and weekend business. Realizing the impact of TNCs on that portion of their business, 74% of operators indicated that they believe mobile-app technology can help their retail business while 26% said it could not.

To counter market pressures from TNCs, some operators have changed their pricing structure, but most (66%) have not. Those who did reported using more flat rates and few hourly rates (24%), while others lowered rates across the board, introduced tier pricing, or added surge pricing.

Further, when operators were asked if they varied/adjusted their fleets due to TNC competition, 63% said no, but 25% said they have bought or plan to buy newer, more expensive vehicles to distinguish their operation from TNCs. 12% reported they plan to buy cheaper vehicles to lower their overhead.

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Uber Pals
Here’s another interesting financial finding reported from operators who participate in TNC/Uber as part of their business: Some 20% of respondents indicated they averaged about 21% of their fleet/chauffeur time working as a TNC. Profit margin? Responses were indeed mixed: 41% reported 1-5% profit margin; 21% reported 6-10% profit margin, followed by 18% reporting 11-15%, and 12% reporting 16-20%. About 9% reported 21% or greater profit margin.

Competing In The On-Demand World
When asked if they have their own mobile on-demand reservation app to compete with TNCs, almost 86% or respondents said no, citing that on-demand brings prices down for everyone, lower profit margins, and a safety risk for drivers. However, on the flip side — and reinforcing the “mixed” theme of the survey results — 51% of operators who do not have their own app plan to add an on-demand app in the future; 17% within two years and 25% have no interest in adding an app to their operations.

Industry On-Demand Solutions
Within the last two years, numerous vendors have launched, or plan to launch, universal private transportation apps that will compete with Uber and other TNCs. No question that operators are interested, but they are still on the fence and doing their homework on the solutions offered — or are not interested.

When operators were asked if they are considering joining a partnership with mobile app providers to capture more on-demand business in their service areas, operators were split — 51% said yes and 48% said no.

When asked if they are evaluating any of those service providers (Asteride, Blacklane, Deem, iCars, MiRide, Whisk, etc..), 63% said yes and 37% said no. Asked if they had signed up with any service provider, 78% responded no and 22% yes.

In addition, when asked if all limousine operators should participate in just one industry-wide app, or multiple apps, 63% reported that operators should be able to choose/partner/cooperate in multiple alternative chauffeured service apps, while 36% responded that the industry needs to agree on one universal app to compete effectively with TNCs.

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Operators chime in on survey results and TNCs

Diane Forgy, president, Overland Chauffeured Services, Kansas City, Mo., and NLA board director: “The feedback is really all over the place which just means the industry is still trying to figure out what the future holds. The TNC impact is there in varying degrees, but not many operators are making immediate changes in their operations. Generally, the industry feels the need to adopt similar technology to TNCs but is not ready to make a move too soon because the marketplace is confusing and fragmented.

Operators recognize the need to aggregate the supply of vehicles through universal connectivity, ideally without watering down their brands or being restricted on how they obtain “on demand” work. There is a great deal of frustration with TNCs not playing by the same rules or being subject to labor compliance standards. Concerns about lower pricing and profit margins are also significant.
To sum it up, I would say we are in a state of frustration, uncertainty and confusion. Recognizing our industry is changing, we will have to evolve, invest in, and experiment with new technology platforms, but we are uncertain how profitable the “on demand” work will be in the end. It’s a new frontier.”

Sami Elotmani, vice president operations, Destination MCO, Lake Buena Vista, Fla.: “Just like everyone else in our industry, I try to keep up with TNC news with an eye towards the future. Obviously, I think that attempting to forecast how the TNC challenge will play out in the industry two to five years down the road is a futile exercise, but my company isn’t standing still until it plays out. We are focused on what WE can control: our existing client base and keeping a competitive advantage within our target markets. From a macro perspective, my personal view is that, for all the doom and gloom talk, and while their effects tend to be market-specific, TNCs overall have expanded the pie while gobbling up market share.”

Carla Boccio, co-owner, Buffalo Limousine, Buffalo, N.Y.: “Uber isn’t in Buffalo — yet. However, we do have a fair amount of farm-out work, and I think Uber has hurt us a little bit. I have noticed less work from some customers who have used us to provide transportation for their travelling college-age children, and I’m sure they just ‘Uber it’ now. We don’t use a mobile app. We’re mostly a corporate business and specialize in personal service. Our high-end executive clients want reservations in advance, know who their chauffeur is, and expect all the personal services that we provide. In general, I think it’s the smaller operators who are most affected by Uber.”